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MLB collusion, explained

Everything you need to know about collusion in MLB.

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Peter Ueberroth Photo by Steve Green/Getty Images

With free agency at a standstill, the word “collusion” has made its way into Major League Baseball coverage once again. Agents are taking notes in negotiations, in case a grievance is filed against ownership and evidence is needed. Major League Baseball Players Association executive director Tony Clark is asking collusion-related questions of MLB’s leadership without saying the word “collusion” out loud. Executives commenting on the matter — anonymously, of course — all seem to be singing the same tune about the value and risk of free agency, and all seem to be offering very similar deals this winter.

It hasn’t officially been a problem in Major League Baseball since Kirk Gibson was a marquee free agent, and it hasn’t even been whispered about since Barry Bonds was still leading the league in on-base percentage. So it’s understandable if it’s a word that just isn’t in your lexicon.

What is collusion?

Collusion is, by the literal dictionary definition, a “secret agreement or cooperation especially for an illegal or deceitful purpose.” In baseball, collusion is defined as “act[ing] in concert”. More specifically, here’s what MLB’s collective bargaining agreement says about keeping collusion out of the sport:

Players shall not act in concert with other Players and Clubs shall not act in concert with other Clubs

In baseball history, however, since this sentence was written into the CBA, the cooperation has been the owners working together and with the commissioner to deflate the value of free agency and free agent contracts.

Why is it against the rules?

Oddly enough, it was the owners’ idea to outlaw collusion.

When the first labor contract between the owners and the players was agreed to in 1968 — 14 years after the Major League Baseball Players Association was formed as the representative of the players — the owners insisted that collusion be against the rules. Their fear was that the players, in a pre-free-agency world, would work together in negotiations to raise their collective salaries.

The owners’ fears were not unfounded, as just two seasons before the first CBA was signed, teammates Sandy Koufax and Don Drysdale had held out together in spring training. The pair had demanded a joint three-year, $1 million contract, split down the middle to keep Dodgers ownership from pitting the two against each other in negotiations — and the duo also told Los Angeles to speak with their agents, which was not the norm at the time.

The Dodgers, not wanting to miss out on having their two future Hall of Fame arms in the rotation but also not wanting to set a precedent, didn’t agree to those joint terms, but they did eventually sign both Koufax and Drysdale to larger contracts than they were initially offered.

Marvin Miller, the first full-time executive director of the MLBPA, agreed to the owners’ request to bar collusion, so long as it also barred owners from colluding against the players. The owners acquiesced, and the original collusion language from 1968 still appears in the CBA today.

Why would owners want to collude against players?

The goal of collusion by team owners is to keep player salaries down by eliminating bidding wars between teams.

Before the advent of free agency, the owners’ greatest enemy was the other owners. That made sense, as they were basically kings, and kings spend their time feuding with other kings over disputes big and small. Battles against players didn’t amount to much trouble in their day to day — owners had all the power in that dynamic and could crush their serfs underfoot at any time with the help of their general managers. By the mid-’80s, however, with free agency a powerful force in baseball’s economic system after it was introduced as a result of 1976’s labor dispute, that relationship had changed.

Under MLB commissioner Peter Ueberroth, who took the job in 1984, fear of losing out on profits combined with the players’ agency to decide where they were going to sign had helped to unify the owners against the players. Ueberroth convinced the owners to run their teams like their other businesses to make money while emphasizing that profits were more important than winning. Free agency was where owners’ money was being spent in the ‘80s, so clamping down on free agency and its costs was how the teams could increase their profits.

Has collusion ever happened?

Yes, it has. MLB team owners were found to have colluded against players by limiting free-agent contracts in three consecutive offseasons: 1985, 1986, and 1987. The Players Union filed grievances against ownership following each offseason — respectively dubbed Collusion I, II, and III — and an arbitrator sided with the players in each case. By the end of 1990, an overall settlement had been reached, and Ueberroth had resigned as commissioner.

As part of a new collective bargaining agreement ratified in 2006, owners paid players $12 million for damages caused by collusion during the 2002-2003 offseason. During that period, agents complained that MLB — which was run by commissioner Bud Selig, one of the colluding owners from the ‘80s — was advising teams on free-agent deals.

There is also the case of Bonds, who despite leading the league in on-base percentage in 2007, hitting like he was still at his peak, and offering to play for the league minimum, received no offers as a free agent before the 2008 season. Bonds filed a grievance against the league, but a lack of hard evidence meant MLB’s owners prevailed. Bonds’ case is still believed to have had merit, however.

How did owners actively collude against players?

In 1985, MLB’s ownership agreed, behind closed doors at one of Ueberroth’s mandatory owners meetings, that position-player free agents would receive, at maximum, three-year offers, and free-agent pitchers would receive a max of two years. Players also weren’t going to be allowed to change teams unless their previous team was fine with letting them go. This meant that players like Gibson never received an offer from anyone besides his previous club, the Tigers, despite putting up the kind of season that should have had the entire league chasing him. And it’s why George Steinbrenner pulled his offer to Carlton Fisk — Jerry Reinsdorf spoke with the Yankees’ owner, and Fisk was forced to return to Reinsdorf and the White Sox when no other offers appeared.

Just four free agents switched teams during the 1985-1986 offseason, and that figure was repeated in 1986-1987. After arbitrators ruled in favor of the Players Union on its collusion grievances from those two offseasons, though, MLB owners changed the way they were colluding: An information-sharing bank was instituted so owners could know what the other owners were negotiating with which free agents, which would help keep free-agent prices down since no team would accidentally blow away the competition with any offer.

This led to a third collusion grievance in three years.

What was the punishment?

Independent arbitrators ruled on all three collusion grievances from the ‘80s and came up with the punishments as well. This was the process outlined in the 1970 version of the collective bargaining agreement: Previously, owner-player grievances had to go through the commissioner’s office.

The three grievances were initially punished separately: Collusion I resulted in the owners owing the players $10.5 million. The second collusion grievance brought on a much larger penalty of $38 million to be paid to the players by the owners, and Collusion III’s punishment included $64.5 million in damages to go along with additional penalties for the impact on multi-year deals and bonuses.

In 1990, a final punishment settlement was reached involving all three collusion grievances, and the owners were required to pay the players $280 million to be used however the players chose.

Did the players get any recompense?

In addition to the $280 million payout in 1990, players who were found to have been actively colluded against were awarded a second chance at free agency without having to give up the contract they were currently signed to. This is how Gibson managed to get out of his deal with the Tigers and make his way to the Dodgers for the 1988 season, where he would help them win a World Series.

Former commissioner Fay Vincent, who was left to clean up Ueberroth’s collusion mess after taking over in late 1989, also claimed to Maury Brown that the two rounds of expansion in MLB in the 1990s that brought the Marlins, Rockies, Diamondbacks, and Rays into existence were a direct result of collusion. Money owed to the players was, in part, used to create these new teams, which in turn created more jobs for members of the Players Union.

What are clues that collusion is happening?

The quantity of free-agent contracts signed as well as the quality of negotiations between teams and players have historically been tell-tale indicators.

Agents have been the ones to sniff out collusion on more than one occasion, as they’re negotiating with all of the teams, and it’s not difficult to see when everyone is getting the same responses from the clubs in terms of contract length and risks and dollars and so on. When there is little interest in player movement and paying players who have reached free agency, alarm bells should be going off, especially since the entire point of free agency is player movement and paying players who were previously held back by an economic system designed not to pay them until they were proven commodities.

When, universally, baseball teams don’t want to pay these now-proven commodities either, there’s reason to wonder if there’s fire to go along with all that smoke.

What can players do about it?

Players can still file grievances — that power has not been removed from the CBA — or they could strike to get their point across when it comes to collusion or any other major disagreement with ownership.

Grievances worked in the players’ favor in the ‘80s, but strikes have also helped them improve their lot within the game. One strike came in 1981 after negotiations on team compensation for losing a free agent broke down. Those compensation systems have been dismantled and rebuilt in new forms over the years, and continued disagreement over the right way to handle free-agent compensation is how MLB has ended up with a qualifying-offer system that has already seen its share of changes.

Another strike came in 1994, following the collusion of the ‘80s and the 1990 lockout. When collusion didn’t work for reducing the players’ cut, the owners moved on to proposing a salary cap that would have taken a severe chunk of revenue away from the players. The disagreements of ‘94 actually weren’t resolved until after the 1996 season — MLB players played without a new CBA in place during the 1995 and 1996 seasons after a federal judge ruled that the old CBA be used until a new one was negotiated.

That dispute went to the judge in the first place because the owners attempted to remove free agency and salary arbitration from the CBA when they couldn’t add a salary cap to the game.

Is collusion happening RIGHT NOW?

Yes. And no. But more yes than no. Let me explain.

Ken Rosenthal reported that agents are taking notes in preparation for a potential collusion grievance, but that doesn’t mean the MLBPA has a case or will make a case for collusion — the agents are just being prepared for the possibility.

The issue facing players and agents is that the league has learned lessons from the collusion scandals of the past. The current iteration of the competitive-balance tax, agreed upon in the latest CBA ratified in 2016, created what is essentially a salary cap for teams with high payrolls. The new tax threshold encourages the 30 teams to restrict spending in such a way that may not technically violate the CBA’s rules against collusion but achieves the same goals. While this won’t impact the markets for elite talent like Bryce Harper, a free agent a year from now, it has seen the markets for good-to-great players like Eric Hosmer dry up.

The middle class of MLB’s players will see salaries stagnate and drop with a de facto salary cap in place, which will then impact arbitration salaries down the line since they’re based on projected free agent values. Whether it’s because of the soft cap or because the soft cap is being used as cover barely matters. There isn’t a single free agent contract that has gone over three years yet, and the rumors for an elite hitter like J.D. Martinez all stop at five years, with a serious gap between the two parties on his worth in dollars.

You have 30 teams with the same goal of staying under the luxury tax, sharing the data provided by MLBAM’s Statcast to help inform their decisions, in a post-Moneyball world where efficiency is king and tanking is viewed as the right thing to do if there is a chance the postseason is out of reach — this isn’t a bunch of old rich guys smoking cigars in a dimly lit meeting room while Ueberroth yells at them about fiscal responsibility.

It’s the new, legalized normal -- the result of years of changing what owners should be financially responsible for, and the last ones to realize that might be the ones impacted the most by it, the ones still sitting around in mid-January waiting for a worthwhile free-agent offer.