Collusion IV?

Eugene outlines the ins and outs of collusion and related shenanigans.

Several media outlets have recently reported that the MLBPA is considering a collusion grievance against Major League Baseball.  Because of the baseball anti-trust exemption collusion would normally be legal among the 30 independent and competitive teams in baseball, however the Collective Bargaining Agreement between the MLBPA and Major League Baseball prohibit collusion.

This is the most relevant language in the Collective Bargaining Agreement regarding collusion and, in fact, was originally proposed, and some reports say, insisted upon, by the owners.  In 1966 Sandy Koufax and Don Drysdale held out in spring training.  They negotiated together to make sure that they received the best possible salaries.  Remembering this, the owners decided that it was entirely necessary to prevent such concerted activity from occurring in the future and they included a provision against it in their proposal for the 1976 CBA.  The players agreed as long as there was parallel language.

The first case of owner collusion, which tested this language in the CBA, occurred in 1985 right after a new Collective Bargaining Agreement was signed.  In that Agreement the players conceded one year of salary arbitration, becoming eligible after three instead of two years of Major League service, and reduced their traditional one-third payment of all television revenue toward players? pensions. 

Soon after signing this agreement the owners’ Player Relations Committee sat down with the other owners, the general managers, the club presidents, the league presidents, and the Commissioner and devised a plan that would, in their minds, ensure the death of free agency.  These people all decided that the way to eliminate the system that they had tried to negotiate out of existence for years, was to eliminate it through a gentleman’s agreement.

There were a series of meetings after the 1985 Championship Season.  The first important step involved the clubs taking an informal vote against the signing of long term contracts.  Commissioner Peter Ueberroth took up the cause calling the signing of long term contracts “dumb.”  Then, after a few more meetings, Leland MacPhail, the Director of the Player Relations Committee, distributed a list of all players who had filed for free agency.  Arbitrator Thomas T. Roberts, who was baseball?s grievance arbitrator at the time, wrote in his decision in "Collusion I":

This concerted activity against free agency went unpunished for two years, so two seasons were affected by this type of collusion.

In 1985’s free agent period, 29 of the 33 free agents went back to their old teams having received no other offers and the four who moved on were no longer wanted by their former teams.  The free agents averaged only a 5% salary increase.

In the two seasons prior to the owners’ gentleman’s agreement, 75 free agents had signed long term deals, presumably so that clubs could prevent the players from leaving after becoming free agents again.  Apparently, owners were no longer worried about these players becoming future free agency because two-thirds of the free agents signed one year deals.

In 1986 the collusion was much broader based.  It was not just a handful of free agents who were affected, and it included some of the league’s top stars.  Andre Dawson, Reggie Jackson, Tim Raines, Jack Morris, and Lance Parrish all filed for free agency following the 1986 season.  This time cracks in the owners’ armor were seen.

Andre Dawson, who wanted to leave the astroturf of Montreal to play on the grass of Chicago’s Wrigley Field, got no offers besides that of his former club.  He was forced to give the Cubs a signed, blank contract, and told them to fill in the salary.  After signing Dawson, the Cubs’ president, Dallas Green, sent a letter to the Player Relations Committee explaining his actions.  He knew he had violated the gentleman’s agreement, but felt he had no choice.

Lance Parrish’s case showed the clubs were not all completely agreed, but that an agreement had transpired.  Bill Giles, owner of the Philadelphia Phillies, expressed interest publicly that if Parrish was not signed by his former club by January 8, that he would be interested in Parrish’s services.  This led to calls from Jim Campbell of the Tigers, Parrish’s former team, Dr. Bobby Brown, the President of the American League, and Bud Selig and Jerry Reinsdorf of the Player Relations Committee.  All told Giles that he should not sign Parrish and that he should keep his “fiscal responsibilities” in mind.  (Nicolau, George. “Grievance No. 87-3” Collusion II)  Eventually, by signing Parrish against the will of the conspiracy, Giles was one of the leading contributors to the decline of collusion in that form.  Collusion could have never occurred for as long as it did if not for the compliance of all Major League owners, presidents, and general managers. Giles straying did not create serious breakage of their agreement, but it provided enough evidence of the owners’ conspiracy for the grievance process to stop the owners? violation of the Agreement.

Despite Giles leaving the fold for one player, there were distinct effects of collusion on baseball salaries.  The average salary of free agents from 1986 to 1987 declined 16%, and almost three-fourths of free agents received only one year contracts.

According to the Major League Baseball accountants, 1986 proved to be the first operating profits in eight years. This, of course, is despite the fact that every season from 1984-87 attendance records were set.  Additionally, during the same period, licensing revenues grew by more than 150% to $450 million.  Regardless, in 1987 average salaries declined 2% and revenues grew 15%, raising operating profits to $103 million.

If the previous two years of collusion against free agency didn’t create enough distrust between the players and owners, 1987 marked a new strategy of collusion to reduce the effects of free agency on baseball salaries.  Instead of not signing free agents at all, the clubs decided that it would be best they set up an information bank declaring to each other what free agent offers to players were, in order to keep offers “fiscally responsible.”  Once again, this ownership strategy was to reduce the effect of the free market on free agency in baseball.

There were different reasons that this action was considered collusion.  In fact, without the previous actions, it can be theorized, that this form of collusion may not have been considered a violation of the CBA.  The form itself was different, but because the effects were similar, the arbitrator once again found the owners in violation.

George Nicolau, who took over as the baseball grievance arbitrator after Thomas Roberts was dismissed by the owners after the first collusion decision, ruled that the:

The penalties for collusion were based upon three different methods, but all of those methods were based upon a make whole remedy, and none included penalties.  It is also true that the make whole remedies were only for those players who were directly affected by not being allowed to be true free agents during the collusion period.  Marvin Miller claims that through this part of the decision, the owners wound up winning out.  He claims that because of the limited free agency, other players who chose not to be free agents, or could not become free agents suffered as well.  During the collusion years average salaries increased at a much lower rate than in previous years and in subsequent years.  In fact, in 1987 the average Major League Salary declined $66.

Through bargaining, the players have modified the potential penalties for violating the CBA collusion section.  Rather than providing only a make whole remedy, instead the CBA provides for treble damages for players who have been found to be directly affected by collusion by owners.  Damages don?t only include lost salary, but also include "lost additional contract years, lost signing bonuses, lost trade restriction provisions, lost option buyout provisions, and lost incentive bonuses (e.g., performance, awards, attendance and weight bonuses)."  Interest, attorneys? fees, and expert witness fees are all remedies included in the current CBA.  The MLBPA can also reopen the CBA if the Arbitration Panel finds a violation by five or more clubs.  If two or more clubs are found to be in violation any player directly impacted would be able to declare his free agency (although not during the season). Arbitrators also have the authority to order a non-monetary award such as injunctive relief.

All of this adds up to much stiffer penalties than those imposed upon the owners during the three collusion findings of the past.  Needless to say, it would be unwise for owners to engage in collusion again.

The main reasons collusion was uncovered previously was that certain marquis players received no offers other than from their previous teams and competitive owners could not resist bidding on players who were not given their "gentlemen?s release."  It took leaks from owners in order for the case to be made by a preponderance of the evidence.

Once that collusion was uncovered, it was again a blatant and open use of an information bank that made the case for the players in the year of collusion.

During this past year, there the owners and GMs have been very tight lipped.  It will be tough to find the smoking gun that the MLBPA found in the previous cases.  They will have to make their case through a purely economic argument ? showing that similar players were not offered similar contracts, and that those differences were not based upon individual team needs, nor the economic downturn.  It will be a very difficult case to prove.  The MLBPA, however, only takes cases that it feels it can win. Perhaps that?s why, despite much clamoring by several agents, no grievance has been filed thus far.  Perhaps they are making sure that the case is strong enough to prevail prior to filing.  And, there is also the possibility that the MLBPA or several independent agents are mounting a PR campaign to shake a few dollars more out of owners who are, for perhaps the first time in free agent history, acting independently in showing fiscal restraint.