Are We Re-Experiencing Collusion by MLB?
Is there in fact collusion going on in MLB? With all of this backlash on the various trades, it is becoming more clear to me that if the MLBPA did not have Tony Clark as the union president, the union would clean the clock of MLB and it’s own lightweight, Rob Manfred. Boston is not hurting in revenue or operating income, and can certainly afford the salaries and resultant luxury
Is there in fact collusion going on in MLB? With all of this backlash on the various trades, it is becoming more clear to me that if the MLBPA did not have Tony Clark as the union president, the union would clean the clock of MLB and it’s own lightweight, Rob Manfred. Boston is not hurting in revenue or operating income, and can certainly afford the salaries and resultant luxury tax if they had retained both Betts and Price. But their owner, John Henry, stated that the goal was to get under the CBT threshold and reset the luxury tax clock. Why? That was also the stated goal for NYY and LAD a couple years back. Why? And the Chicago Cubs are fighting the same threshold as is Boston this year, and they want to make changes that are apparently being hampered due to salary restrictions. Why? Is there an unwritten rule amongst the owners after the 2016 CBA that teams needed to respect the threshold as a de facto salary cap? While MLB cannot mandate (a word avoided by all of the big spending teams) that they reset the tax at least once every three years, they certainly seem to get teams to adhere to it. Why? Are we seeing a version of collusion part deaux? Just exactly where is Peter Ueberroth?
NYY, LAD, Boston, Chicago Cubs, Philadelphia, SF, and NYM are not small market teams and none should be trying to back away from the luxury tax if their team is helped. No team (business) wants to pay unnecessarily a tax, but if it is an investment in winning a WS, then these teams should not shy away from exceeding the CBT threshold, even for three consecutive years. The tax should not be an impediment to investing in one’s team. If the team can afford it, go for it.
That is why I believe that MLB is an accessory to this debacle (as Mark calls it). John Henry would not be trying to trade Mookie Betts if there was not some outside pressure to get under the threshold. If he could not afford it, he would never have agreed to the excessive contracts he has already inked for David Price, JDM, Chris Sale, Xander Bogaerts, and Nathan Eovaldi. Mookie has never said that he wanted out of Boston, just that he wanted to test free agency. Henry should have kept Mookie and then told his agent to come back with the best offer and we will see what we can do. If he wanted to sign Mookie the ballplayer, he should never let the tax dissuade him, because he can afford it, UNLESS someone else is saying to do otherwise.
Since 2011, Boston’s operating income has been:
2011 – $25.4MM
2012 – $23.9MM
2013 – $25.3MM
2014 – $49.2MM
2015 – $43.2MM
2016 – $78.6MM
2017 – $86.0MM
2018 – $84.0MM
That is an eight year average of more than $50MM annually. Boston was over the threshold in 2018 and still made $84.0MM in operating income. We do not know what the 2019 operating income was, but by winning the 2018 WS, I would imagine the bottom line did not go down, even if the payroll went up (slightly).
The new CBT threshold began in 2016 and lo and behold, the operating income increased nearly 82% for Boston. Both NYY and LAD were over the threshold in 2016 and 2017, and they felt it necessary to be under the threshold in 2018, and both teams did. I do believe that the Dodgers had an extra incentive because of the debt service concerns and not knowing what MLB would do if they did not get under the threshold. But NYY had no such concerns and that was a goal of theirs as well. Now Boston’s owner says that the goal is to get under the CBT threshold to not exceed the threshold for the third consecutive year.
Doesn’t it seem odd that each of the three supposedly wealthiest teams work feverishly to get below the threshold so as not to exceed it three consecutive years, but then come back and say they will be able to go over the threshold again after they reset the penalty? Doesn’t it also seem odd that each team stated it was a goal, but they were under no MANDATE to do so? I am generally not a conspiracy theorist, but it sure seems like someone from MLB is telling them to get below, without saying it out loud. There is no way the Yankees, Red Sox, or Dodgers are worried about a tax if they believe they can win with players that exceed the threshold.
Tony Clark needs to give way to a more expert union negotiator because the MLBPA should be in a position to increase the CBT threshold exponentially, and install a salary floor, or teams need to lose their revenue sharing. I am not a fan of the DH, but it is not going away, so the MLBPA should be able to insist that the NL institute the DH for the NL beginning in 2022. Even with the larger FA contracts being let this year, there were only four that exceeded $100MM, and not one small market team was able to grab any of them. This year followed a couple of weak years. Even last year’s big money boys, Harper and Machado, settled for less than what was expected. Mike Moustakas had to take back to back single year contracts. Dallas Keuchel and Craig Kimbrel did not sign until June. Scott Boras’ clients are happy, but how many others? The players are in a good position to extract some favorable negotiations if they handle it correctly.
Sure the larger market teams will be in a better position to compete annually because of their revenues, but it is time to tell the Pirates ownership to spend or sell, and to see what the Marlins can now do under new ownership. The A’s and Rays are showing that they can contend without being big market high revenue teams. The A’s could very well beat the Astros for the AL West crown, and while NYY is the heavy favorite to win the NL East, Tampa could very easily move ahead of Boston, especially without Mookie. Toronto, Cincinnati, and Chicago White Sox are showing signs that they are ready to compete beginning in 2020. KC won a WS in 2015.
If the tax is not onerous for the owners of the larger revenue teams, then why the need to get under the threshold? This is where I believe that there is an unwritten rule telling teams that they need to adhere to the luxury tax (as close as possible) and for sure to get under it at least once every three years. MLBPA can stifle this collusion by increasing the threshold so it is not a de facto salary cap, and minimizing the penalty. If I were negotiating for the MLBPA, and I was advised that the owners want to stabilize the smaller revenue teams, I would counsel the union to advise the owners that they should do it in a way that does not impede player salaries.
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Discussion (150)
Disagree, not disagreeable
The CBT sets the incentives, and the teams, being rational economic actors, look to avoid the most draconian penalties (and in some cases, any penalties). I don’t think it’s collusion, just normal and predictable behavior in response to the current incentive structure. All that said, I agree that if you want to change the behavior you have to raise the threshold and lower the penalties.
Why is it collusion if the owners agree to do what is best for them, but not collusion when the players do the same? Salaries are out of control. Fans are being gouged to attend games.
Thanks AC, love hearing the business side of things, seen and unseen! What’s your prediction for the Mookie mess?
Isn’t it crazy that pitchers and catchers report in 5 days ??
Twins and Dodges are in talks and Boston and Dodges in talks as well, per Ken Rosenthal
Would be interesting to see if the threshold’s penalties were only financial
I’m obviously uninformed, and this is pure use-less speculation but I find it hard to believe there is any kind of formal mandate.
But it is gross.
Heyman, Speier and Rosenthal report positive momentum.
I haven’t posted on a Dodgers site in 18 months. (Since MLB.com removed their message boards). I’m a Dodgers fan of over 65 yrs. I don’t post much because I type so slow (two fingers, hunt and peck) and I’m not as knowledgeable as the people that post here but I do enjoy reading your comments. Hey, SoCalBum, I see that you post on this site. It’s good to see you. btw, does anyone know where most of the posters from MLB.com are now posting?
I really have no opinion on collusion. The owners are certainly capable, but I could argue it both ways. Odds are, we will never really know.
Then why doesn’t mlb institute a salary cap like the NFL? Didn’t the NFL players union push for this year’s ago? Oh and let me be the first to officially welcome Mookie and David to LA. Deal will finalize today!
I’m with Cassidy, today is good. I was thinking Sunday or Monday, but today is definitely better.
I’m guessing every team has different motivations for how they operate in terms of the cap. In Boston’s case, maybe it’s the Philly virus, management and ownership become concerned with being stuck with an aging, unproductive roster loaded with big contracts and a mediocre farm system. The Dodgers referenced that a few times when they moved toward a lower payroll. Still, they had an excellent farm system, something that the Red Sox do not possess.
I wouldn’t call it collusion. If a team pursues a full rebuild, trades key players to acquire prospects and moves up in the draft, then they win … that becomes the hot new idea and owners hire GMs to attempt to duplicate the success. It’s kinda trendy, nothing more. Obviously won’t work for every team. It’s like the draft and trends toward acquiring college players over high school players. Then others notice and do the same thing. Then somebody goes the opposite direction, more good prep players available. Over the years the Dodgers have done a bit of both.
Then there is analytics. Red Sox ownership has long been fond of the notion of paying less for more production. Of course, who wouldn’t want that? Look at all the bad contracts teams are saddled with these days. How many $300 to $400 million contracts can a team carry?
It will be interesting to see if the players pursue getting rid of the cap and penalties. I certainly would. I’m sure they will also pursue forcing teams to carry a minimum payroll.
Excellent column, AC.
One man’s collusion is another man’s smart business practices.
Aren’t there other penalties besides money for teams that exceed the CBT?
If Boston believes some team will offer Betts 12 years at $35M+ AAV and know they won’t match such an offer then why not get as much for Betts now instead of nothing next year?
Maybe Price and Betts are unhappy living in Boston and as Casey Stengal said we have too many Yankees that aren’t Yankees.
How sad is it for Yasiel Puig? The two teams that were supposedly remotely interested were Tampa and SFG. Tampa just traded for Manuel Margot, and the Giants just signed Hunter Pence and Billy Hamilton and are no longer considering Puig. Will Puig be willing to sign a Minor League contract and a ST invite? Or will some team offer him a guaranteed contract. Will Mattingly bury his feelings for Puig and let him go home? Will Detroit step up? Indians? They have all said that Puig is not on their radar and they have made other arrangements. Is his attitude that caustic?
The one that surprises me is Brock Holt. Why he has not been signed is very curious. Hopefully if this deal with Betts/Price goes thru then Boston will re-sign him. If he were not LHH, I would have been a big advocate for Holt to be the new David Freese.
Puig has done this to himself!! The Dodgers got his best days. They held on too long because nobody wanted his drama. The fact the giants were considering him shows you desperation has no bounds.
Some good thoughts to chew on this morning AC! Thank you.
I’m probably more of a conspiracy theorist than you are. I think the CBT might be more of a smoke screen used by the owners to divert attention from how much they actually make through revenue sharing. Under the current CBA, the Yankees in particular, as well as the Dodgers, Cubs and Redsox do quite well under this scheme. There are others who have delved into this quite deeply, and I don’t have the time this morning to do so, but I believe the real problems start there, and are built upon the federal anti-trust exemption and a (now illegal) tax preferred/free financing structure of Stadium debt. Baseball owners do not play on the same field as other business owners throughout the land. The advantages afforded them by the anti-trust exemption are competitively much different than say, for example, Mark has to deal with in running US Water Systems profitably. The exemption and revenue sharing make it easier for the owners to “hide” revenue in their related club owned enterprises. All the while complaining that it is necessary for them to stay under the CBT, to avoid the “penalties.” The alleged “penalties” are never as severe in reality as they are in principle. Just look at a different example – – the Astros are “penalized” for cheating, yet they are able to sign the highest rated player on the international market. That will easily make up for the draft choices lost.
On another note, the only thing that legally allows MLB to treat minor leaguers as a form of indentured servants is MLB’s presumed exemption from the nation’s antitrust laws. If the exemption were definitively lifted, then a minor league ballplayer could sue MLB for violation of labor laws.
So, in my mind, there may be collusion, but it goes deeper than just the owners and MLB working together. They also have to have a few congressmen or congresswomen in their pocket as well.
Finally, I totally agree that the players union needs a much stronger negotiator than Tony Clark.
One factor affecting salaries that no one has mentioned yet is the “new age “ approach to management.
Teams have gotten smarter about giving big money long term contracts to players past 30.
A player’s best years are low cost years due to the 5 – 6 years of team control. A players hitting free agency at 30 might not have more than 3 really good seasons left.
Teams have finally all figured this out. It’s not collusion, it’s information.
The real problem is this business of teams tanking. No team should be losing on purpose and spending as little as possible. Teams should be fined for this.
Drugs are bad. Consider this post by someone who was evidently in a deeply psychotic state:
“I am for a reset. Dump Kershaw, Pollock, Kelly, and Jansen for some draft picks or prospects to backfill the Dodger farm. Rebuild around Belli, Buehler, Muncy, Smith, Lux. Cut the leash on May, Gonsolin, and Urias. Bring up some more top Dodger prospects to fill the voids.
Trade for a legitimate closer, and a young legitimate starter.
Eight years of playing the rental game is too long, IMO, so what is another two years of “reseting”?”
WOW!
Heymen reporting Madea and smaller piece is almost set with Graterol heading to the Dodgers. That will make our BP even better. A lot of optimism the Metts deal gets done as well.
If the Dodgers do add Graterol gotta wonder what happens to Baez. Will he be traded as well?
I like the idea of Graterol in the Dodger’s bullpen. Who would the Dodgers send to Boston instead? Gray?
I know that Graterol throws hard, but so have a lot of other pitchers who never amounted to much. He may turn out to be great, or not., or something in-between. I’ve already seen Gonsolin, and I know that I like him.
And like I posted yesterday, sweetening the pot for Boston is distasteful to me.
But at this point I’ll leave the decision to AF, because he knows a lot more than I do, and because I trust his judgment.
Olney:
Olney’s perspective:
“ There’s so much at stake for the Dodgers and Boston Red Sox in the potential Mookie Betts swap that you would assume that some way, somehow, the two sides will find a way to push the negotiations across the finish line. …
But the longer this takes to finish, anxiety within the Boston leadership seems to be building. At the time that elements of the deal were first reported, a rival executive noted that Derek Falvey, who leads the Twins’ baseball operations, has a deep understanding of pitching, and in this exec’s eyes, if Falvey is willing to give up Brusdar Graterol, the hardest thrower in the minors, then there must be some doubt about him. The Red Sox might have some concern about that, or Graterol’s medical history. Or perhaps it’s the natural revulsion some of their fans feel about trading Betts, one of the best players in the game. Or the word going around that Alex Verdugo, the big piece that the Red Sox would get, hasn’t been a perfect teammate.
But multiple evaluators with other clubs believe that Boston’s end of the proposed deal is pretty good — adding in the savings on Price’s contract, close to $50 million of the $96 million remaining. Price is 34 and pitching with some kind of mitigating condition in his elbow.
“What you have to ask yourself is, what would Price get if he was a free agent today?” said one official. Some estimates on that ranged from one year at $12 million, to $18 million over two years.
If the Betts deal with the Dodgers falls apart, then the Red Sox will be faced with exactly the same quandaries they’ve had all winter. If you start the season with Betts on the roster and the team is on the fringe of the wild-card contention in July, do you run the risk of angering the fan base even more by dealing him in the middle of a playoff race? Do you run the risk of retaining him and then seeing him walk away for almost nothing when he becomes a free agent next fall? And what do you do with the expensive group of starting pitchers — Price, Nathan Eovaldi, Chris Sale — if they struggle in the first half or break down? There are just not going to be a lot of opportunities for the Red Sox to trim their payroll in a meaningful way.”
Deals coming together.
Dodgers are in agreement with Twins, pending medical review – Maeda and cash would go to MIN for Graterol and another prospect. Other elements perhaps.
Meanwhile, per Passan:
LAD and RedSox in agreement on Betts and Price for Verdugo & Jeter Downs + more.
Jeter Downs heading to Boston
1) Did we now send less cash to Boston?
2) we basically flipped the Twins relieve for Jeter Downs
oh, and 3) F boston
What I just read does not include Price.