2. 2 SPORTS LAWYERS JOURNAL [Vol. 23
G. Free Agent Reform: Why Starting Free Agency
Sooner Will Benefit Both the Players and the
Owners in the Next CBA....................................................35
IV. CONCLUSION ...................................................................................... 37
I. INTRODUCTION
Dating back to the 1870s, in professional baseball’s infancy, the
relationship between the owners and players was quarrelsome.1
Over the
years, that relationship has not materially changed. Notably, more labor
disputes have emerged in Major League Baseball (MLB) than in any
other professional sport in the United States.2
The tension between the
players and owners is the product of almost a century of absolute owner
control over the players through the use of the notorious reserve clause.3
The reserve clause gave the owners the unilateral ability to renew a
player’s contract into the next season.4
Given the restraints the reserve
clause imposed on employment mobility, players continually fought for
better employment conditions through the legal system.5
However,
despite the players’ efforts, three distinct Supreme Court decisions
spanning from 1922-1972 held that MLB and its owners were exempt
from federal antitrust laws.6
Effectively, these decisions reinforced the
reserve clause by recognizing that MLB was not a monopoly.7
In the 1970s, the players were ultimately successful in overthrowing
the reserve system through a determined campaign that involved
litigation, collective bargaining, and ultimately prevailing through
arbitration.8
The players’ ability to improve their employment conditions
1. See Richard L. Irwin, A Historical Review of Litigation in Baseball, 1 MARQ. SPORTS
L.J. 283, 284 (1991).
2. Jeffrey S. Moorad, MLB’s Labor Turmoil: The Failure of the Counter-Revolution, 4
VILL. SPORTS & ENT. L.J. 53, 53-54 (1997).
3. Id. at 54.
4. JAMES DWORKIN, OWNERS VERSUS PLAYERS: BASEBALL AND COLLECTIVE
BARGAINING 41-44 (1981).
5. See Irwin, supra note 1, at 284-97 (discussing the history of disputes in MLB
regarding its reserve clause from the late 1800s through 1976).
6. See, e.g., Fed. Baseball Club of Balt., Inc. v. Nat’l League of Prof’l Baseball Clubs,
259 U.S. 200, 208 (1922); Toolson v. N.Y. Yankees, Inc., 346 U.S. 356, 357 (1953); Flood v.
Kuhn, 407 U.S. 258, 285 (1972).
7. See Fed. Baseball, 259 U.S. at 209 (holding that MLB was not interstate commerce
and was not regulated by federal antitrust laws); see also Toolson 346 U.S. at 357 (affirming the
precedent established in Federal Baseball); see also Kuhn, 407 U.S. at 285 (indicating that
professional baseball was interstate commerce but holding that MLB was exempt from federal
antitrust laws).
8. See Irwin, supra note 1, at 293-97.
3. 2015] FREE AGENCY IN MLB 3
by eliminating the reserve clause led to a remarkable period of salary
gains and employee mobility.9
Since 1976, the owners and the MLB Players Association (MLBPA)
have collectively bargained for the terms and conditions of the players’
employment.10
Despite the owners’ fight to abrogate the players’rights to
free agency, collective bargaining has galvanized MLB and benefited
both the owners, through increased revenue, and the players, through
increased salaries.11
As a result of the 1976 collective bargaining system,
MLB players had the ability to become free agents after six years of
service time in the league.12
The framework of that system remains in
place today.13
However, despite the improved employment conditions for
players, recent trends in baseball suggest that the current terms and
conditions of free agency are restraining trade.14
Under the present system, free agency is restraining trade because
players reach free agency when their talent peaks. As a result, the system
no longer provides an incentive for owners to bid against each other for
players on the open market. This Article analyzes the history of the labor
market in professional baseball and proposes a solution to the current
inefficiencies of free agency. In short, the next collective bargaining
agreement (CBA) should allow players to reach free agency after four
years of service time in order to improve their employment rights and to
ensure that the owners are wisely investing their financial resources.
The Overview of this Comment is split into eight parts and
discusses the history of the labor market in professional baseball. Part
II.A analyzes the history of the reserve clause. Part II.B focuses on the
players’ initial—and largely unsuccessful—attempt to challenge the
reserve clause through the legal system. Part II.C discusses the players’
novel argument that the owners operated a monopoly over the players,
which violated federal antitrust laws.
Significantly, Part II.D discusses how the Supreme Court, in three
separate opinions spanning from 1922-1972, rejected the players’
argument that the MLB owners operated a monopoly over professional
baseball in violation of federal antitrust laws. Part II.E analyzes how the
players were able to improve their employment rights in the 1970s
9. See Moorad, supra note 2, at 66-67.
10. MARVIN MILLER, A WHOLE DIFFERENT BALL GAME: THE SPORT AND BUSINESS OF
BASEBALL 264-67 (1991).
11. See Moorad, supra note 2, at 59-60.
12. See id. at 66-67; see also Susan H. Seabury, Comment, The Development and Role of
FreeAgency in MLB, 15 GA. ST. U. L. REV. 335, 355-56 (1998).
13. See Moorad, supra note 2, at 66.
14. See infra Part III.
4. 4 SPORTS LAWYERS JOURNAL [Vol. 23
through arbitration. Part II.F considers the effects that free agency has
had on MLB and how that system improved the employment conditions
for players.
Part II.G focuses on how MLB inadvertently created a free agent
bubble because of the pervasive and widespread use of performance
enhancing drugs between 1994-2004. Part II.H analyzes the 2012-2016
CBA governing MLB and outlines the current terms and conditions of
free agency.
Part III explores the flaws, inefficiencies, and decline of free agency
in MLB since 2004. Significantly, Part III.A explains how age is the
fundamental flaw in free agency because players reach the open market
after their physical ability peaks. Part III.B describes how teams have the
right to extend a “qualifying offer” to a pending free agent and explains
how this practice restrains trade. Part III.C focuses on the players’
physical and statistical decline as they reach thirty. Moreover, it argues
that since the end of the steroid era, the players’ physical ability has
declined earlier as a result of MLB regulating and enforcing testing for
performance enhancing drugs.
Part III.D analyzes the effect that advanced statistics has had on
evaluating the labor market—particularly by explaining that teams have a
better understanding of quantifying talent by determining a player’s
worth. Part III.E indicates that the CBA does not govern international
players that have professional experience outside of the United States. In
turn, teams have more incentive to invest in international free agents
because they tend to be younger. Part III.F analyzes how teams are
signing their younger players to long-term contract extensions in order to
keep them from reaching free agency at their peak. Part III.G argues that
starting free agency sooner will benefit both the players and the owners.
Finally, the Conclusion in Part IV proposes a solution to these
issues by suggesting that players should reach free agency after four
years of service time in order to improve their employment rights and to
ensure that the owners’are wisely investing their financial resources.
II. OVERVIEW
A. The Beginning of Professional Baseball
In the early 1870s, professional baseball began with the formation
of the National Association of Professional Baseball Players.15
This
league consisted of different teams from around the country playing
15. GERALD W. SCULLY,THE BUSINESS OF MAJOR LEAGUE BASEBALL 1 (1989).
5. 2015] FREE AGENCY IN MLB 5
against each other.16
Individual teams and their owners rarely profited
financially.17
To improve their financial position, in 1876, a group of
owners formed the National League.18
In doing so, they included a secret
agreement designed to restrict player mobility and limit their
compensation.19
As a result, the owners increased their revenues by
engaging in preventive practices designed to produce large profit margins
at the players’expense.20
Prior to the formation of the National League, professional baseball
players had the ability to bargain freely for their compensation and to
choose which team to play for.21
However, the National League owners
colluded to establish a reserve clause—one that gave them the ability to
unilaterally renew a player’s contract into the next season.22
In effect, the
reserve clause not only bound the player to a team for that year but also
the next.23
By 1887, every National League player’s contract contained a
reserve clause.24
Additionally, by 1889, the owners implemented a
league-wide salary cap establishing $2,500 as the maximum player
salary per season.25
As a result of the owners’ collusion and desire to
profit from professional baseball, the National League quickly became a
monopoly.26
16. See id.
17. See id. at 2 (indicating that the National Association of Professional Baseball Players
did not produce significant revenue and the owners believed the only way they could obtain
greater financial stability was by engaging in collusive practices, including territorial franchises,
limiting franchises to only cities meeting minimum size requirements, and splitting gate receipts).
18. See id. (explaining that the owners of the National Association of Professional
Baseball Players formed the National League primarily because they were seeking financial
stability).
19. See id. (identifying that the owners secretly agreed to implement a system to reduce
player salaries by reserving the rights to five star players per team; in essence, this allowed owners
to unilaterally restrain certain players to their team into the next season).
20. Id.
21. See DWORKIN, supra note 4, at 41-44 (explaining that players previously enjoyed a
“revolving” system, in which each player was able to sign a contract prior to each season with the
owner who offered him the most money; this resulted in a competitive bidding process for
players).
22. See id. (describing that the reserve clause gave the owners the ability to unilaterally
renew the player’s contract; in effect, the reserve clause bound the player to his team perpetually
or until the owner no longer wished for the player’s service).
23. Id. at 10.
24. See id. at 45.
25. Seabury, supra note 12, at 338.
26. See id. (indicating that alternative employment opportunities did not exist for
professional baseball players at the end of the nineteenth century and that they were bound by the
reserve clause and the owners’ implementation of a maximum salary cap); see also DWORKIN,
supra note 4, at 45 (suggesting that the National League owners’ collusive practices created a
monopoly, and the players did not have any alternative employment options because there were no
competitive leagues).
6. 6 SPORTS LAWYERS JOURNAL [Vol. 23
At the turn of the twentieth century, the American League was
formed.27
The American League posed a threat to the monopolistic
control exercised by the owners of the National League.28
The formation
of the American League attracted star players from the National League,
including Napoleon Lajoie, Jimmy Collins, and Cy Young.29
These
players, greatly dissatisfied with the maximum salary system and the
reserve clause, sought to leverage their bargaining power by seeking
different employment opportunities.30
In turn, the American legal system
faced a daunting question that would haunt it until the 1970s: should the
courts limit player mobility and employment rights by enforcing the
owners’perpetual contractual control over the players?31
B. Lajoie v. Philadelphia Ball Club: Legally Enforcing the Reserve
Clause
The legal quest for player mobility and increased bargaining power
began in 1902 when Napoleon Lajoie decided to switch leagues after
agreeing to join the Philadelphia Athletics of the American League.32
Lajoie had an existing contract with the Philadelphia Nationals that was
renewable annually by the team and its owner.33
However, Lajoie decided
to breach his contract with the Philadelphia Nationals and join the
Philadelphia Athletics so he could bargain for his compensation.34
The
Philadelphia Nationals sued Lajoie, seeking a negative injunction
prohibiting him from playing in the American League.35
27. Seabury, supra note 12, at 338.
28. See id. (indicating that the emergence of the American League “posed the first real
competition to the monopolistic control exercised by the owners of National League teams”).
29. Id.
30. See id.
31. See, e.g., Flood v. Kuhn, 407 U.S. 258, 285, 368 (1972) (deciding whether baseball
was exempt from federal antitrust laws); see also Toolson v. N.Y. Yankees, Inc., 346 U.S. 356, 362
(1953) (presenting the issue whether professional baseball was within the scope of federal
antitrust laws); Fed. Baseball Club of Balt., Inc. v. Nat’l League of Prof’l Baseball Clubs, 259
U.S. 200, 209 (1922) (determining whether professional baseball was interstate commerce and
was subject to federal antitrust regulation).
32. See Irwin, supra note 1, at 287 (describing how Napoleon Lajoie was the “highest
regarded player who made an attempt” to switch from the National League to the American
League and play for a different team despite having an existing contract and being bound by the
reserve clause).
33. Phila. Ball Club v. Lajoie, 51 A. 973, 974 (Pa. 1902).
34. Id. at 973; see Irwin, supra note 1, at 287 (indicating that the Philadelphia Nationals
filed suit seeking an injunction to restrain Lajoie from breaching his contract).
35. Irwin, supra note 1, at 287.
7. 2015] FREE AGENCY IN MLB 7
Lajoie argued that the reserve clause violated his employment
rights.36
In response, the Philadelphia Nationals argued the reserve
clause was an essential element of professional baseball and Lajoie
agreed to render his services by playing for the team.37
In Lajoie, the
Pennsylvania Supreme Court approved the injunction, holding that
Lajoie’s talent on the baseball field was unique.38
The Court determined
that
the services of the defendant are of such a unique character, and display
such a special knowledge, skill, and ability, as renders them of peculiar
value to the plaintiff, and so difficult of substitution that their loss will
produce ‘irreparable injury,’ in their legal significance of that term, to the
plaintiff.39
Moreover, the Court characterized Lajoie as a popular and distinguished
player who would financially burden the Philadelphia Athletics if he
were able to switch teams.40
By determining that Lajoie’s talent was
unique, the Pennsylvania Supreme Court approved the use of the reserve
clause to limit his mobility and bargaining power.41
Even though the
court could not compel Lajoie to play for the Nationals, it could prohibit
him from playing for any other professional team.42
In 1903, after the Lajoie decision was issued, the National and
American Leagues merged to form MLB, deciding that the champions
from each league would play each other in the World Series. 43
36. See id. (describing how Lajoie argued that the reserve clause lacked mutuality and
limited his employment rights).
37. See Lajoie, 51 A. at 975 (suggesting that Lajoie initially had the freedom to contract,
and it was the court’s obligation to enforce all of the terms of that contract).
38. See id. at 973-74 (indicating that negative injunctions for specific performance are
routinely granted when an individual’s services are unique and extraordinary and “require and
presuppose a special knowledge, skill, and ability in the employ[ee], so that in case of a default
the same service could not easily be obtained”).
39. Id. at 974.
40. See id. (holding that Lajoie would cause irreparable harm to the Philadelphia
Athletics because Lajoie is “well known, and has great reputation among the patrons of the
sport”); see also Irwin, supra note 1, at 287 (arguing that Lajoie’s status as a highly regarded
baseball player made him a “draw for the public,” which would financially hinder the
Philadelphia Athletics because fans would be dissuaded from attending games if he were able to
switch teams).
41. See Lajoie, 51 A. at 974; see also Irwin, supra note 1, at 287.
42. See Lajoie, 51 A. at 975 (“The court cannot compel the defendant to play for the
plaintiff, but it can restrain him from playing for another club . . . .”).
43. See ANDREW ZIMBALIST, BASEBALL AND BILLIONS: A PROBING LOOK INSIDE THE BIG
BUSINESS OF OUR NATIONAL PASTIME 7 (1992) (describing the formation of MLB and explaining
how the league developed financially after the inception of the World Series in 1903); see also
1903 World Series, BASEBALL ALMANAC, http://www.baseball-almanac.com/ws/yr1903ws.shtml
(last visited Oct. 15, 2015).
8. 8 SPORTS LAWYERS JOURNAL [Vol. 23
Importantly, the owners of both leagues agreed to respect a common
reserve system.44
The development of MLB and the World Series had a
profound effect on the economics of baseball, as fan interest and league
profitability soared. 45
Although the owners were profiting from
baseball’s success, the employment rights of MLB players were stuck in
quicksand; the reserve clause continued to restrain player mobility by
denying players the freedom to contract.46
C. Paving the Road to Baseball’s Exemption to the Sherman Act
The Federal League, which was formed in 1913, served as the final
threat to the monopoly that MLB owners held over players.47
The risk of
players signing with a team in the Federal League helped increase the
average player salary in MLB from 1913-1915.48
However, the owners of
teams in the Federal League could not compete to sign established
players because MLB owners threatened to blacklist players who
switched leagues.49
In March of 1914, Hal Chase, a first baseman for the Chicago
White Sox in the American League, signed a one-year contract with the
team for the upcoming season.50
Chase’s contract contained a reserve
clause, which gave the White Sox the legal right to unilaterally renew his
contract.51
Despite his reserve clause, Chase later notified the White Sox
he was voiding his contract in order to sign a more lucrative contract with
44. See Seabury, supra note 12, at 338-39 (finding that owners of both leagues agreed to
implement a structure that would be run by a National Commission, made up of presidents of
each of the leagues and a neutral party agreed upon by the two league presidents, and to respect a
common reserve system; that system continued to allow owners to unilaterally extend players
contracts into the next season). As a result of merging the two leagues and respecting a common
reserve system, fan interest in MLB soared—primarily because of the creation of the World
Series—which made the league very profitable for owners. Id.
45. Id. at 339.
46. Id. at 337-39.
47. See ZIMBALIST, supra note 43, at 8-10 (suggesting that the Federal League was a rival
league to MLB, and its formation threatened the reserve clause, players switching leagues, and a
diversion in fan interest).
48. See JOHN HELYAR, LORDS OF THE REALM: THE REAL HISTORY OF BASEBALL 5 (1994)
(explaining that MLB owners were forced to increase player salaries out of fear that players would
switch teams and join the Federal League).
49. See American League Baseball Club v. Chase, 149 N.Y.S. 6, 13 (1914) (“A National
Agreement player, adjudged to have violated his contract, shall be declared and promulgated to be
ineligible to play with or against any club in organized baseball . . . .” (quoting MLB National
Commission, rule 19)). In effect, by declaring players ineligible within the National Agreement,
players were blacklisted and could not play for any MLB team.
50. Id. at 7-8.
51. See id. at 13 (identifying that the reserve clause gave the White Sox owner “absolute
title” and control and analogizing that Chase was simply a “chattel” who was permanently bound
by the reserve clause).
9. 2015] FREE AGENCY IN MLB 9
Buffalo in the Federal league.52
The White Sox filed suit for breach of
contract and sought an immediate injunction prohibiting Chase from
switching leagues.53
Although it was a strikingly similar case to Lajoie, American
League Baseball Club of Chicago v. Chase provided a different result.54
Chase alleged that the reserve clause constituted an illegal restraint of
trade, and therefore, was a violation of federal antitrust laws.55
The court
ruled for Chase and overturned the lower court’s injunction.56
The court
held that even though baseball was an “amusement,” and not commerce,
it would not enforce an injunction which promoted a monopoly in
contravention of common law that also limited personal liberty.57
Historically, Chase served as the legal driving force behind the
players’ quest to limit MLB owners’ monopoly over the next seventy-five
years.58
Though the Chase court did not enforce the injunction, it still
determined that the rules of MLB grant each team “absolute title” to its
players.
59
As a result, Section 1, Article VI, of MLB’s National
Agreement stated, “All parties to this agreement pledge themselves to
recognize the right of reservation and respect contracts between players
and clubs under its protection.”60
In addition, Section 2 of Article VI
“recognizes the property of the club in the player as existing under two
conditions. First, under a contract; and, second, under a reserve without a
contract.”61
Therefore, the National Agreement regulating MLB bound
52. Id. at 7-8.
53. See Irwin, supra note 1, at 290 (explaining that the Chicago Cubs sought to enjoin
Chase from jumping leagues).
54. Irwin, supra note 1, at 290; see Chase, 149 N.Y.S. at 15-17.
55. See Chase, 149 N.Y.S. at 15-17 (indicating that Chase raised “[t]he novel” defense
that the reserve clause placed a restraint on trade and that MLB had created a monopoly, which
was in violation of federal antitrust laws); see also Irwin, supra note 1, at 290 (explaining that Hal
Chase was the first professional baseball player to argue that a monopoly existed in MLB, which
was a violation of federal antitrust laws).
56. Chase, 149 N.Y.S. at 20.
57. See id. (“The court will not assist in enforcing an agreement which is a part of a
general plan having for its object the maintenance of a monopoly, interference with the personal
liberty of a citizen, and the control of his free right to labor wherever and for whom he pleases
. . . .”).
58. See Irwin, supra note 1, at 290 (explaining that Chase “served as the impetus” for
antitrust litigation against MLB and its owners).
59. See Chase, 149 N.Y.S. at 10-13, 17-20 (describing how the reserve clause creates a
system of servitude because players are bound to their team without any right to solicit
employment; in turn, the reserve clause limits the players’ ability to earn, to choose their
employer, and to choose their home).
60. Id. (quoting MLB National Agreement art. VI, § 1).
61. Id. at 12 (citing MLB National Agreement art. VI, § 2).
10. 10 SPORTS LAWYERS JOURNAL [Vol. 23
players to their teams perpetually and shackled their ability to play for a
different team within MLB or for a team in a different league.62
Chase presented the idea that, under the rules and regulations of the
National Agreement, the reserve clause was an unlawful restraint on
trade.63
As a result, the players argued that a monopoly existed in
professional baseball, which denied player movement, limited
compensation, and violated free market rights—a clear violation of the
Sherman Antitrust Act.64
However, the holding in Chase suggested that
baseball could not violate the Sherman Act because it did not fit a
traditional business model.65
D. Baseball’s Supreme Court Trilogy: The Aberration of the Sherman
Act
Shortly after Chase, in 1915, the owners of MLB and the Federal
League signed a “peace treaty.”66
The agreement was reached because
the Federal League was floundering financially and MLB owners were
fearful that Chase would pave the way for player mobility.67
Shortly after
signing the peace treaty, the Baltimore Federals became disgruntled
when MLB prohibited the team from buying the St. Louis Cardinals and
moving the team to Baltimore.68
As a result, the Baltimore Federals sued
representatives of MLB and the Federal League, alleging that a
62. See id. (finding that if the player does not wish to be bound by the reserve clause,
their only opportunity for alternative employment options is to enter “some other trade, calling, or
profession”).
63. Id. at 16.
64. See Irwin, supra note 1, at 290 (explaining that a monopoly existed in MLB even
though the court in Chase did not recognize that federal antitrust laws apply to professional
baseball); see also Seabury, supra note 12, at 340-41 (explaining that Congress passed the
Sherman Antitrust Act in order to make any restraint of trade or monopoly unlawful if it affected
interstate commerce).
65. See Chase, 149 N.Y.S. at 17 (determining that baseball does not fit a normal business
model because it is “a sport, a game that comes clearly within the civil and criminal law of the
state, and it is not a commodity or an article of merchandise subject to the regulation of Congress
on the theory that it is interstate commerce”).
66. See Seabury, supra note 12, at 339-40 (indicating that the effects of this treaty resulted
in several Federal League owners being bought out and other Federal League teams folding,
which resulted in many owners of the Federal League selling their players to MLB teams).
67. See id. (explaining that the Federal League owners were bought out by MLB owners
and allowed to sell their players to other teams because the Federal League was struggling
financially); see also Irwin, supra note 1, at 291 (indicating that the Federal League was enduring
financial difficulty in 1914).
68. See Seabury, supra note 12, at 340 (arguing that the Baltimore Federals were
dissatisfied after signing the peace treaty—particularly when the Baltimore Federals were
prohibited by the other owners in MLB from buying the St. Louis Cardinals and moving the team
to Baltimore).
11. 2015] FREE AGENCY IN MLB 11
monopoly existed in professional baseball, which was in violation of
federal antitrust laws, specifically the Sherman Act.69
In 1922, the
United States Supreme Court analyzed whether a monopoly existed in
MLB and whether a sport could be recognized as interstate commerce.70
In Federal Baseball Club of Baltimore, Inc. v. National League of
Professional Baseball Clubs, the Baltimore Federals alleged that MLB
colluded to destroy the Federal League by buying up teams in the league
in order to monopolize professional baseball. 71
Although Chase
indicated that professional baseball was “big business,” 72
Federal
Baseball held that the game was made entirely of state affairs.73
In turn,
the Supreme Court held that professional baseball was a local business,
which was not involved in interstate commerce.74
Although the Supreme Court recognized that professional games
required teams to cross state lines, it noted that travel was merely
incidental and could not be governed by federal antitrust laws. 75
Furthermore, the Court held that baseball did not involve production and
therefore could not be subject to antitrust regulation.76
Because Federal
Baseball determined that baseball was not interstate commerce, the Court
allowed MLB and its owners to restrain trade through the reserve
clause.77
Despite the Supreme Court’s holding in Federal Baseball, MLB
players continued to challenge the reserve clause.78
George Toolson, a
minor league player for the New York Yankees, refused to accept an
69. Id.
70. Fed. Baseball Club of Balt., Inc. v. Nat’l League of Prof’l Baseball Clubs, 259 U.S.
200, 207 (1922).
71. See id. (explaining that the Baltimore Federals argued that MLB owners colluded in
order to buy teams in the Federal League in order to exhibit unlimited control over professional
baseball).
72. See Am. League Baseball Club v. Chase, 149 N.Y.S. 6, 7 (1914) (describing how the
game of baseball “has been commercialized and organized as professional baseball and
developed into a big business conducted for profit”).
73. See Fed. Baseball, 259 U.S. at 208 (holding that the business of baseball is made up
of “purely state affairs”—meaning federal antitrust law does not apply—even though teams have
to travel across state lines to play games).
74. Id. at 208-09.
75. See id. at 209 (“[T]he transport is a mere incident, not the essential thing. That to
which it is incident, the exhibition, although made for money would not be called trade of
commerce in the commonly accepted use of those words.”).
76. See Irwin, supra note 1, at 292 (suggesting that Federal Baseball allowed a monopoly
to exist in MLB but, it did not preclude parties from challenging baseball’s exemption from
federal antitrust laws in the future).
77. DWORKIN, supra note 4, at 55.
78. See Moorad, supra note 2, at 59-60 (describing how Danny Gardella, an outfielder,
also challenged the reserve clause after being blacklisted for playing in the Mexican League).
12. 12 SPORTS LAWYERS JOURNAL [Vol. 23
assignment from the Newark International Baseball Club to the Yankees’
Binghamton farm team.79
As a result, the Yankees placed Toolson on the
ineligible list, which in turn blacklisted him from playing for any other
MLB team.80
Frustrated with his employment restrictions, Toolson sued
the Yankees in 1951, alleging a violation of the Sherman Act.81
The
district court dismissed the case, and the Ninth Circuit Court of Appeals
upheld the decision based on Federal Baseball.82
The Supreme Court
granted certiorari to reexamine whether baseball was within the scope of
federal antitrust laws.83
Relying on stare decisis, the Supreme Court held
that the decision in Federal Baseball had been precedential for thirty
years.84
Moreover, the Court reasoned that if Congress was displeased
with the ruling, it would have brought the business of baseball under
federal antitrust regulation.85
Despite reinforcing the reserve clause,
Toolson v. New York Yankees did not completely close the door on
antitrust litigation in MLB.86
Shortly after Toolson, during the 1954 MLB All-Star break,87
team
player representatives formed a players’ association.88
The players
involved in the formation of the MLBPA insisted they were not a union.89
Upon its formation, the MLBPA functioned to negotiate small labor
79. Seabury, supra note 12, at 341-42.
80. See Moorad, supra note 2, at 60 (indicating that Toolson became blacklisted from
professional baseball after he refused to accept his assignment to the Newark International
Baseball Club and was placed on the Yankees “ineligible list,” which gave the Yankees the right to
decide when and where he played).
81. See Toolson v. N.Y. Yankees, Inc., 101 F. Supp. 93, 93-94 (S.D. Cal. 1951) (indicating
that Toolson argued that the structure of MLB and the reserve clause was a restraint on trade that
deprived him of his “livelihood”).
82. See Seabury, supra note 12, at 342 (explaining that the district court dismissed
Toolson’s case, and the court of appeals upheld the decision, based on stare decisis as they relied
on Federal Baseball).
83. Toolson, 346 U.S. at 357.
84. See id. (affirming the precedent from Federal Baseball and indicating that Congress
did not intend to include baseball within the contours of federal antitrust laws).
85. Id.
86. See id. at 358 (Burton, J., dissenting) (indicating that a monopoly existed and
professional baseball was interstate commerce because “[i]nherently, professional baseball is
intercity, intersectional, and interstate”).
87. Since the 1930s, MLB has hosted an annual All-Star Break at the beginning of July
where the best players from the National League play one game against the best players from the
American League. See All-Star Results, MLB, http://mlb.mlb.com/mlb/history/all_star.jsp (last
visited Nov. 15, 2015).
88. DWORKIN, supra note 4, at 27.
89. See id. (explaining that the MLBPA was simply an association of players—not a
union); see also Seabury, supra note 12, at 345 (indicating that Bob Feller, the first president of
the players association, did not want the players to unionize because the organization would likely
violate the Taft-Hartley Act because the MLBPA was formed from All-Star Game proceeds).
13. 2015] FREE AGENCY IN MLB 13
issues.90
However, the power and influence of the MLBPA increased in
1965 when the players hired Marvin Miller to negotiate a new pension
plan.91
Miller was an experienced negotiator who had previously worked
for the Steelworkers Union.92
The owners were upset when the MLBPA
hired Miller because of his shrewd negotiating skills and his previous
experience representing a union.93
As a result, the owners cut off funding
with the expectation that the MLBPA would cease to exist.94
Nonetheless,
because the players agreed to pay yearly fees to support the union and its
activities, the MLBPA remained in existence through the 1967 season.95
In 1966, the MLBPA agreed to a new pension funding agreement
with the owners,96
who unilaterally decided its terms.97
However, just
before the owners announced the agreement to the public, Miller
informed them that their actions violated various provisions of the
National Labor Relations Act.98
Historically, even though the owners
solely shaped the 1966 pension funding agreement, it is considered the
first CBA in professional sports.99
During the 1968 and 1969 seasons, the MLBPA and the owners
mutually agreed to the terms of a new CBA.100
Those terms included
compensation for rewards; uniform player contracts, which prohibited
unilateral changes in the terms of an individual player’s contract; and an
established grievance procedure.101
Unfortunately for the players, the
MLBPA was unable to eliminate the reserve clause from MLB’s Basic
90. See SCULLY, supra note 15, at 34.
91. See id.
92. See id. (explaining that Miller represented the Steelworkers Union and was able to
negotiate improved employment conditions for its members).
93. See MILLER, supra note 10, at 8 (indicating that MLB owners hoped that the executive
director would be more “owner friendly” by caring more about the economic health of MLB).
94. See id. at 68 (explaining that the owners originally funded the MLBPA; however, the
owners withdrew funding from the MLBPA citing the Taft-Hartley prohibition against
management funded unions).
95. See id. at 67-69 (suggesting that the MLBPA became an official union once the
players began funding the association through annual fees).
96. Seabury, supra note 12, at 346.
97. Id. at 346-47.
98. See id. at 347 (indicating that Miller informed Commissioner William Eckert that
announcing the terms of the pension plan without bargaining with the players’ representatives
violated federal labor laws because employers cannot unilaterally decide the terms and conditions
of a CBA).
99. See MILLER, supra note 10, at 95 (explaining that the pension agreement has been
viewed as the first CBA in sports even though it only covered a benefit plan and its terms were
unilaterally determined by MLB’s owners).
100. Seabury, supra note 12, at 347.
101. Id.
14. 14 SPORTS LAWYERS JOURNAL [Vol. 23
Agreement.102
Though the MLBPA was unable to improve employment
mobility, the growth of a union advanced the working conditions for the
players by providing an improved pension plan and a power in
numbers.103
In October 1969, shortly after the formation of the MLBPA, the St.
Louis Cardinals traded Curt Flood to the Philadelphia Phillies in a
multiplayer transaction.104
Flood—who was not consulted about the trade
and wished to remain a member of the Cardinals—was informed via
telephone that the trade was consummated and he was being sent to
Philadelphia.105
Frustrated with his employment restraint, Flood asked
the Commissioner of Baseball, Bowie Kuhn, if he could become a free
agent in order to negotiate and “strike his own bargain” with any other
team.106
The Commissioner rejected Flood’s request.107
Subsequently, after consulting with Miller and the MLBPA, Flood
decided to institute an antitrust suit against Kuhn and MLB, arguing that
the reserve clause was unlawful.108
Flood and the MLBPA had reason to
believe the outcome of this case would be different than the outcomes of
Federal Baseball and Toolson.109
Notably, in his dissent in Toolson,
Justice Burton argued that MLB distributed capital investments, made
large expenditures, conducted radio broadcasts, and operated minor
league baseball teams across interstate lines.110
Furthermore, Flood and
the MLBPA recognized that baseball’s involvement in interstate
commerce increased substantially during the 1960s and 1970s, which
emanated hope that the players could finally overcome MLB’s antitrust
102. See id. (indicating that eliminating the reserve clause was an important issue for the
MLBPA, but the owners were unyielding and required the reserve clause to remain in the 1968-
1969 CBA); see also MILLER, supra note 10, at 98 (explaining that the owners had decided prior
to negotiating with the players over the 1968-1969 CBA that they would not make any changes to
the reserve clause).
103. See MILLER supra note 10, at 105 (indicating that union association provides a forum
in which players can discuss and formulate their concerns and exert considerable influence by
banding together in the pursuit of common employment goals).
104. Flood v. Kuhn, 407 U.S. 258, 265 (1972).
105. Id.
106. Id.
107. Id.; see Flood v. Kuhn, 316 F. Supp. 271, 275 (S.D.N.Y. 1970) (indicating that
refusing to recognize Kuhn as a free agent was “reasonable and necessary to preserve the integrity
of the game” because the reserve clause was essential to MLB).
108. Flood, 316 F. Supp. at 273.
109. See Toolson v. N.Y. Yankees, Inc., 346 U.S. 356, 357 (1953) (Burton, J., dissenting)
(suggesting that the majority decision did not close the door on MLB being exempt of the
Sherman Act because MLB was clearly interstate commerce and a monopoly existed over
players’employment rights).
110. Id. at 357-58.
15. 2015] FREE AGENCY IN MLB 15
immunity.111
Additionally, between the time Toolson was decided and
Flood v. Kuhn commenced,112
the Supreme Court recognized that other
professional sports were subject to federal antitrust regulation.113
However, the Court again ruled in favor of MLB.114
In its analysis,
the Court implied that Federal Baseball and Toolson were wrongfully
decided, but congressional action would be necessary to overrule these
decisions.115
The Court admitted that baseball was interstate commerce
and, as such, should be covered by the Sherman Act.116
The Court
indicated that since Federal Baseball, several pieces of legislation aimed
at overriding baseball’s exemption had been proposed in Congress,
although none had been passed into law.117
As a result, despite landmark
changes in the environment of professional sports regarding antitrust
immunity, Flood led to the preservation of baseball’s antitrust
exemption.118
E. Arbitration and the Road to Free Agency
Disgruntled with the Supreme Court’s decision in Flood, the
MLBPA agreed to go on strike in 1972 after the owners refused to offer
any increase in the players’ new pension plan.119
Lasting thirteen days,
111. See Irwin, supra note 1, at 296 (explaining how Curt Flood, Marvin Miller, and the
MLBPA had reason to believe that the courts would finally recognize baseball as interstate
commerce because of baseball’s increased involvement across state lines and because the
Supreme Court recognized that professional basketball and boxing were subject to federal
antitrust regulation).
112. 407 U.S. 258, 265 (1972).
113. See, e.g., United States v. Int’l Boxing Club of N.Y., 348 U.S. 236, 240-41 (1955)
(holding that the promotion of professional boxing exists over a multistate basis and is subjected
to federal antitrust regulation); see also Haywood v. Nat’l Basketball Ass’n, 401 U.S. 1204, 1205
(1971) (determining that basketball “does not enjoy exemption from the antitrust laws”).
114. See Flood, 407 U.S. 258, 284 (holding that the Court will “adhere once again to
Federal Baseball and Toolson and to their application to professional baseball”).
115. See id. at 282-85 (indicating that Federal Baseball and Toolson were wrongly decided
because baseball is interstate commerce). Moreover, the Court suggested that baseball’s
exemption to federal antitrust laws was “an aberration that has been with us now for half a
century” but Congress has been silent on the “applicability or nonapplicability of the antitrust
laws to baseball” despite legislative proposals being “numerous and persistent.” Id.
116. See id. at 282-83 (finding that MLB’s exemption to the Sherman Act is inconsistent
because other professional sports have been recognized as interstate commerce and are subjected
to federal antitrust regulation).
117. Id. at 283.
118. See Seabury, supra note 12, at 349 (suggesting that the Supreme Court in Flood was
inconsistent with other Supreme Court decisions regarding antitrust regulation in professional
sports).
119. See id.
16. 16 SPORTS LAWYERS JOURNAL [Vol. 23
the MLBPA’s strike was the first in professional sports history.120
The
MLBPA’s ability to collectively bargain and stand up to the owners
represented a drastic change in professional baseball; even if the
Supreme Court could not legally protect their employment rights, the
players were no longer willing to accept the severe restrictions that had
been in place for nearly a century.121
Arguably the most significant change in the aftermath of Flood
occurred when the owners proposed final-offer salary arbitration during
negotiations for the 1973-1975 Basic Agreement.122
The arbitration
proposal gave players with the requisite number of service time in the
Major Leagues the right to have their salary decided by a neutral third
party.123
The plan that was adopted provided that if an eligible player and
his team could not reach a salary agreement, the player and the team
each “tender[ed] their final offers to an arbitrator who, within twenty-
four hours of hearing the case, [would] select[] one proposal.”124
The
owner’s motivation to offer salary arbitration to the players was twofold:
they wanted to limit Marvin Miller’s power, and they believed that
arbitration would reinforce the reserve clause without causing a surge in
player salaries.125
However, as the owners quickly learned, this system
enabled the players to effectively challenge the reserve clause.126
In 1974, Jim “Catfish” Hunter became the first modern free agent
in professional baseball after his team’s owner, Charley Finley, breached
120. HELYAR, supra note 48, at 116-17 (explaining how the owners refused to increase the
players’pension plan and were willing to let the players go on strike); see also Seabury, supra note
12, at 349-50 (indicating that the 1972 players strike was the first in professional sports history
and it resulted in the players getting an increase in their pension plan).
121. See MILLER, supra note 10, at 220-22 (indicating that the players were no longer
willing to have the terms and conditions of their employment dictated by the owners).
122. See SCULLY, supra note 15, at 36 (suggesting that the owners understood they were
losing their control and dominion over the labor market and wanted an arbitration system in
which they would hire and appoint an independent arbitrator to ensure that the reserve clause
would remain and player salaries would not increase dramatically).
123. See id. (indicating that a player renders “service” to his team based on his longevity in
the MLB; once a player has reached six years of service time he is eligible for arbitration).
124. See id. (describing final-offer arbitration as a process in which a player with the
requisite number of service time in MLB has the right to negotiate his salary for the next season
exclusively with his team; both the player and the team submit their final offer for the player’s
salary and the arbitrator selects one proposal); see also Seabury, supra note 12, at 350 (describing
the format for arbitration in the 1973-1975 Basic Agreement and indicating a strikingly similar
system is still in place in MLB today).
125. See Seabury, supra note 12, at 350.
126. See Irwin, supra note 1, at 296 (explaining that within the contours of MLB’s Basic
Agreement, the players and owners agreed to arbitrate all legal disputes, which deprived the court
system of jurisdiction).
17. 2015] FREE AGENCY IN MLB 17
his contract.127
Hunter’s contract with the Oakland Athletics stipulated
that Finley was to pay half of his salary in cash and the other half in any
way Hunter chose.128
Hunter elected for the money to be used to
purchase an annuity.129
After agreeing to Hunter’s selected payment
method, Finley realized the payments to the insurance company were not
tax deductible, which voided the contract.130
The Uniform Players
Contract specified a straightforward remedy when an owner breached a
contract with a player—the owner must be notified of the breach and
given ten days to resolve the contractual dispute.131
However, if an owner
failed to remedy the contract breach after ten days, the team was
“deemed to have defaulted on the contract and the player was no longer
bound” to play for that team.132
The MLBPA immediately notified Finley of his violation, but he
was unwilling to cure his breach.133
As a result, the MLBPA notified
Commissioner Kuhn of Hunter’s free agent status and asked that he
inform the other teams in the league of his availability.134
Kuhn rejected
this request.135
In turn, the MLBPA filed a grievance on Hunter’s
behalf.136
On December 13, 1974, after hearing both the MLBPA and
Kuhn’s arguments to determine Hunter’s status, arbitrator Peter Seitz,
who was hired by the owners, declared Hunter a free agent.137
Hunter’s
ability to choose his employer had significant implications on the labor
market, as he was able to pick his employer based on compensation,
127. See MILLER, supra note 10, at 228-29 (indicating that Catfish Hunter was the first
modern free agent in MLB); see also Seabury, supra note 12, at 351-52 (explaining the irony that
the first free agent in MLB obtained his status through breach of contract—not by means of
successfully arguing that professional baseball violated federal antitrust laws).
128. Seabury, supra note 12, at 351.
129. Id.
130. Id.; see also DWORKIN, supra note 4, at 71 (elaborating on Finley’s breach of contract
by explaining that he voided the contract because purchasing an annuity was not tax deductible).
After Finley was notified that he breached Hunter’s contract, he refused to cure the breach, which
led to the dispute going to arbitration. Id.
131. See MILLER, supra note 10, at 228-29 (describing how Catfish Hunter was able to
become a free agent); see also Seabury, supra note 12, at 351 (explaining the terms of Paragraph
7(a) of the Uniform Players Contract, which outlined the process when an owner breaches a
player contract).
132. Seabury, supra note 12, at 351.
133. Id.; see also MILLER, supra note 10, at 229-30 (suggesting that Finley did not
understand the consequences his breach of contract would have on the player’s employment
rights).
134. MILLER, supra note 10, at 229.
135. See id. (suggesting that restraining player mobility and employment rights had been
an integral part of the business of professional baseball dating back to the nineteenth century).
136. Id. at 230.
137. See id. at 233 (stating that “the contract with Hunter was terminated and that Hunter
was a free agent who could negotiate with any major league team”).
18. 18 SPORTS LAWYERS JOURNAL [Vol. 23
geographic location, length of contract, or any other reason.138
Ultimately,
Hunter decided to sign a five-year contract with the New York Yankees
for roughly $3.5 million.139
Hunter’s status as a free agent enabled him to
make significantly more money because it meant that any team could bid
for his services.140
After gaining momentum from Hunter’s declaration as a free agent,
the MBLPA again moved to invalidate the reserve clause through
arbitration.141
In 1975, a panel of arbitrators headed by Peter Seitz heard
a three-day case involving the statuses of Andy Messersmith of the Los
Angeles Dodgers and Dave McNally of the Montreal Expos.142
Both
Messersmith and McNally had played the 1974 season without a new
contract and felt that upon the completion of the season, they had
fulfilled their contractual obligations with their respective teams.143
In essence, the arbitration panel decided the enforceability and
meaning of the reserve clause.144
The owners believed the reserve clause
gave them the perpetual control over the players.145
In contrast, the
MLBPA believed if a player played one season under his old contract,
then after such contract expired, he had played out his “reserve year.”146
Effectively, the MLBPA argued that once a player had played out his
“reserve year,” he was free to choose the team he wanted to play for and
bargain for the conditions of his employment.147
The panel ruled in favor
of the players and declared them free agents for the 1975 season.148
Notably, arbitration, not the courts, established a means by which the
138. See Seabury, note 12, at 352 (suggesting that Hunter was available to the highest
bidder and could choose his employer).
139. HELYAR, supra note 48, at 147-48.
140. See MILLER, supra note 10, at 237 (indicating that the Oakland Athletics only offered
$200,000 to Hunter in arbitration); see also Seabury, supra note 12, at 352 (highlighting that
Hunter’s status as a free agent allowed him to obtain a five-year contract valued around $3.75
million in comparison to the $200,000 he would have made if the Oakland Athletics retained his
rights without competition from other teams).
141. Moorad, supra note 2, at 64-65.
142. Irwin, supra note 1, at 296.
143. See Seabury, supra note 12, at 353 (arguing that Dave McNally was an ideal
candidate to test the meaning of the reserve clause through arbitration because he played out the
previous season without his contract being renewed into the next season; additionally, McNally’s
career was nearing an end and he “had no downside risk” of challenging the owners); see also R.
BERRY & G. WONG, LAW AND BUSINESS OF THE SPORTS INDUSTRIES 407 (1986) (explaining that
both Messersmith and McNally had effectively played out their option year without a new
contract and had the intent to become free agents).
144. BERRY &WONG, supra note 143, at 414-15.
145. See MILLER, supra note 10, at 41.
146. Id.
147. Id.
148. BERRY &WONG, supra note 143, at 297.
19. 2015] FREE AGENCY IN MLB 19
players could break away from the employment restrictions of the reserve
clause.149
Fearing the end of MLB’s antitrust exemption, the owners decided
to “fight the arbitration decision in Messersmith [and] McNally by filing
suit in federal court alleging the arbitration panel exceeded the scope of
its authority.”150
In Kansas City Royals Baseball Corp. v. MLB Player’s
Ass’n,151
the owners were unsuccessful in seeking to have the arbitration
panel’s decision overturned for lack of jurisdiction.152
The court held that
because the owners and players collectively bargained to establish an
arbitration panel, MLB derived its jurisdictional authority from the
agreement.153
In turn, the owners had approved the arbitration panels’
authority by supporting its formation.154
The court also relied upon
United Steelworkers of America v. Enterprise Wheel & Car Corp.,155
which held that courts have no power to overturn an arbitrator’s decision
in labor cases.156
In turn, Kansas City Royals Baseball Corp. determined
that the 1973 CBA between the owners and the MLBPA did not establish
a reserve clause that “enabled a club to perpetually control a player.”157
As a result of Kansas City Royals Baseball Corp., free agency was
established in MLB.158
Once the legal system no longer recognized baseball’s exemption to
federal antitrust regulation and enforced the reserve clause, the owners
were forced to negotiate with the MLBPA regarding the terms and
conditions of free agency.159
Initially, the owners proposed that free
agency only be available to players with nine years of major league
service time.160
The players rejected this offer.161
Further, the number of
149. See Irwin, supra note 1, at 297 (arguing that the Messersmith and McNally arbitration
hearing offered an alternative and optimistic way for the players to try and eliminate the reserve
clause).
150. Seabury, supra note 12, at 353.
151. 532 F.2d 615 (8th Cir. 1976).
152. See Kan. City Royals Baseball Corp., 532 F.2d at 629 (“The 1968 agreement clearly
permitted the arbitration of grievances relating to the reserve system. It, therefore, cannot be said
that the Club Owners never consented to the arbitration of such grievances.”).
153. Id. at 632.
154. See Irwin, supra note 1, at 297 (“The owners had, in effect, granted the panel
authority by agreeing to its establishment” and collectively bargaining to utilize independent
arbitrators instead of the court system).
155. 363 U.S. 593 (1960).
156. Id. at 597.
157. Kan. City Royals Baseball Corp., 532 F.2d at 631.
158. See Seabury, supra note 12, at 345-55 (suggesting that “[f]ree agency had come to
baseball” after the decision in Kan. City Royals Baseball Corp.).
159. See generally MILLER, supra note 10, at 256.
160. See id. (indicating that the owners only wanted players to reach free agency once they
had played in the majors for nine seasons and were no longer under contract).
20. 20 SPORTS LAWYERS JOURNAL [Vol. 23
free agents during any given year was an important issue to both
parties.162
Prior to the 1976 season, after the owners had locked out the
players for seventeen days over spring training, both parties began
negotiating the terms of free agency into their CBA.163
The successful
agreement determined that players who signed contracts before August 9,
1976, and played out their reserve year, were eligible for free agency.164
Additionally, a new procedure was developed for players who had a
contract signed on or after August 9, 1976, whereby “any Player with 6
or more years of Major League service who has not executed a contract
for the next succeeding season shall become a free agent.”165
The
MLBPA and the owners collectively bargained for and negotiated the
terms and conditions of free agency in MLB.166
F. The Effects of Free Agency in MLB
The Messersmith and McNally arbitration decision served as the
liberation of free agency and the elimination of baseball’s exemption
from the Sherman Antitrust Act.167
From its outset, free agency realigned
the employment conditions of players and forced teams to compete
against each other for players’ contracts.168
As a result, free agency
significantly increased player salaries while also affording players the
opportunity to choose their employer instead of being bound by the
reserve clause.169
Despite the improved employment conditions, recent
161. See id.
162. See id. at 259 (explaining that the owners wanted to limit the number of free agents in
a given year in order to have stability on their roster while the players knew that if too many
players were free agents, it would drive down demand and reduce player salaries).
163. Id. at 264-67.
164. See Basic Agreement Between the American and National League Professional
Baseball Clubs and MLB Players Association, Effective Jan. 1, 1976, Art. XVII-Reserve System,
sec. B., para. 1, Player Contracts Executed Prior to Aug. 9, 1976, reprinted in DWORKIN, supra
note 4, at 105).
165. Id., sec. B., para. 2, Player Contracts Executed on or After Aug. 9, 1976, reprinted in
DWORKIN, supra note 4, at 105-06.
166. Seabury, supra note 12, at 355.
167. See BERRY & WONG, supra note 143, at 407 (identifying that the Messersmith and
McNally arbitration decision has been referred to as the players “[E]mancipation [P]rocla-
mation”).
168. See Daniel C. Glazer, Can’t Anybody Here Run This Game? The Past, Present and
Future of MLB, 9 SETON HALL J. SPORT L. 339, 380 (1999) (describing how Bernie Williams was
able to leverage his pending status as a free agent by informing his employer, the New York
Yankees, that other teams were willing to offer him contracts similar to those of Gary Sheffield,
Sammy Sosa, and Albert Bell if they could bid for his services on the open market).
169. See Moorad, supra note 2, at 66-67 (explaining that immediately after free agency
commenced in 1976, the owners’aggressive nature and willingness to compete against each other
for free agents caused them to spend rampantly on the open market, which caused player salaries
21. 2015] FREE AGENCY IN MLB 21
trends in baseball suggest the current CBA provides disincentives for
teams to spend money on free agents, and teams have new methods for
allocating their financial resources.170
In turn, free agency in MLB is on
the wane, and—similar to the Supreme Court’s 1922-1972 antitrust
trilogy—the current CBA’s system for free agency is actually restraining
trade.
G. 1994-2004: The Free Agent Bubble and the Dramatic Effect of the
Steroid Era
In 1994, as a result of another long-standing labor dispute, the
players went on strike in the middle of August.171
The major point of
contention was the owners’ imposition of a cap to limit player salaries.172
The owners were unable to impose their will on the players, and the
subsequent strike was harsh on both parties because revenue and player
salaries decreased during the 1994-1995 seasons.173
After the strike
ended, however, MLB was able to rebound quickly; league revenue
increased by nearly 20% each year between 1996 and 1999.174
Baseball’s financial growth during the late 1990s is attributed
largely to heightened fan interest because the players’ offensive
production—particularly batting average, home runs, and slugging
to increase dramatically). Specifically, “the average salary jumped from $51,501 in 1975 to
$76,066 in 1976, and on to $143,756 by 1980.” Id.
170. See generally MICHAEL LEWIS, MONEYBALL 64-97 (2003) (describing the intellectual
underpinnings of professional baseball and arguing that teams use advanced statistical analysis to
find traits or statistical measurements that are undervalued on the market in order to try and gain
a competitive advantage against their opponents).
171. See Seabury, supra note 12, at 368 (indicating that the labor dispute reached a boiling
point on August 12, 1994, when the players went on strike and the season ended without the
playoffs or World Series).
172. See Moorad, supra note 2, at 75-79 (explaining that the owners wanted to implement
a salary cap to limit the total amount of money that teams could spend annually in player salaries
in order to keep their operating budget low).
173. See Seabury, supra note 12, at 370-71 (indicating that the strike ended after Judge
Sonia Sotomayor—then a Second Circuit Court of Appeals judge—issued an injunction putting
the players back to work; however, the injunction did not solve the labor disputes).
174. See RICHARD C. LEVIN, GEORGE J. MITCHELL, PAUL A. VOLCKER & GEORGE F. WILL,
THE REPORT OF THE INDEPENDENT MEMBERS OF THE COMMISSIONER’S BLUE RIBBON PANEL ON
BASEBALL ECONOMICS 15 (2000) (explaining that “[t]he years following the 1994-1995 players’
strike have seen substantially increased revenue to the industry” as MLB’s annual revenue
increased by 28.2% in 1996, 16.5% in 1997, 19.9% in 1998, and 12.4% in 1999); see also
MITCHELL GROSSMAN, TIMOTHY KIMSEY, JOSHUA MOREEN & MATTHEW OWINGS, STEROIDS AND
MLB 7 (2006) (indicating that the average value for a MLB franchise was just $140 million in
1994 and had more than doubled by 2004, up to $322 million).
22. 22 SPORTS LAWYERS JOURNAL [Vol. 23
percentage—increased dramatically.175
For example, fans were enthralled
in the 1998 season when Mark McGuire and Sammy Sosa chased Roger
Maris’s homerun record.176
With league revenue increasing substantially
because of player production, free agency at the turn of the twenty-first
century caused the prices of contracts to soar.177
This was epitomized in
the 2000 off-season when Manny Ramirez signed an eight-year, $160
million contract with the Boston Red Sox and Alex Rodriguez signed a
ten-year, $252 million contract with the Texas Rangers.178
With players signing unparalleled contracts due to the explosion in
offensive production, many questions were raised about how those
offensive statistics were being achieved.179
During Mark McGuire and
Sammy Sosa’s homerun chase, rumors began to circulate that many
players were taking performance-enhancing drugs (PEDs) to increase
their productivity.180
PEDs were not a banned substance in MLB until
1991, and the league did not begin testing players until the 2003
season.181
Moreover, when MLB initially began testing players for PEDs,
it was done infrequently and with minimal punishment.182
Evidence of PED use was both widespread and apparent; offensive
statistics such as homeruns and slugging percentage increased
dramatically between 1994-2004.183
Specifically, in 1996, the Baltimore
Orioles, Seattle Mariners, and Oakland Athletics all broke their single-
season home run records.184
Additionally, Mark McGuire surpassed
175. See GROSSMAN, KIMSEY, MOREEN & OWINGS, supra note 174, at 2 (indicating that
players’ impressive offensive statistics—particularly a league-wide increase in home runs—
attracted greater fan interest).
176. Id.
177. See Seabury, supra note 12, at 372 (indicating that Albert Belle signed the largest
contract in MLB history in 1996 when he signed a five-year contract worth $55 million); see also
Jason Reid, Dodgers Sign Kevin Brown for $105 Million, L.A. TIMES (Dec. 13, 1998),
http://articles.latimes.com/1998/dec/13/news/mn-53726 (describing the free-agent boom in the
late 1990s, which resulted in Mo Vaughn, Randy Johnson, Albert Bell, Pedro Martinez, Greg
Madduz, Barry Bonds, Gary Sheffield, and Sammy Sosa all signing contracts worth over $10
million per year because “[t]eams [were] enjoying unprecedented financial success”).
178. See Murray Chass, Ramirez Agrees to $160 Million Deal with the Red Sox, N.Y.
TIMES (Dec. 12, 2000), http://www.nytimes.com/2000/12/12/sports/baseball-ramirez-agrees-to-
160-million-deal-with-the-red-sox.html; see also Murray Chass, Rodriguez Throws $252 Million
Bat at the Mets, N.Y. TIMES (Dec. 13, 2000), http://www.nytimes.com/2000/12/13/sports/base
ball-rodriguez-throws-252-million-bat-at-the-mets.html.
179. See GROSSMAN, KIMSEY, MOREEN & OWINGS, supra note 174, at 2-3 (suggesting that
there was league-wide speculation that many players were taking performance enhancing drugs to
improve their production).
180. See id.
181. See id.
182. Id.
183. Id. at 5.
184. Id. at 2.
23. 2015] FREE AGENCY IN MLB 23
Roger Maris’s single-season homerun record in 1998, only to be
surpassed by Barry Bonds three years later in 2001.185
PED use was also
apparent in the nature of injuries; many players were put on the injured
list due to ailments resulting in “oversized muscles ripping away from
bones that could no longer support them.”186
The rampant use of PEDs added value to the players’ performance
because their subsequent strength allowed them to produce greater
offensive numbers.187
Notably, between 2001-2004, offensive players’
on-base plus slugging percentage (OPS)188
increased by .104.189
The
increase in offensive production had a significant effect on player salaries
because a .100 increase in OPS led to an increase in salary of $2 million
during the 2004 season.190
Importantly, in addition to improving player
performance, PEDs were used as an antiaging stimulus.191
Simply put,
steroid use enabled aging players to remain productive despite the natural
tendency for their athletic ability to diminish as their careers waned.192
In
effect, PEDs allowed players to remain productive as they aged and to
physically regress at a much slower rate.193
From 1994-2004, both teams
and players benefited from free agency because increased revenues
allowed teams to justify skyrocketing salaries—especially because
players were performing at a level that warranted large contracts.194
185. Id.
186. Id.
187. See id. at 4 (indicating that baseball players derive utility from steroid use because it
allows them to build muscle mass and recover from injuries at a much faster rate).
188. OPS is a statistical measurement that considers both a player’s ability to get on-base
(on-base percentage) and their ability to hit for power (slugging percentage). OPS is popular in
measuring the offensive contribution of a player because it has a strong correlation to runs
generated per game. OPS and OPS+, FANGRAPHS (Oct. 8, 2014, 4:32 AM), http://www.fan
graphs.com/library/offense/ops/.
189. See GROSSMAN, KIMSEY, MOREEN & OWINGS, supra note 174, at 4-6 (determining the
increase in offensive production as a result of PED use by comparing OPS between 1994-2004
and 1985-93).
190. See id. at 5-6 (performing a regression analysis of OPS to determine the financial
value of an OPS of .100).
191. See GEORGE J. MITCHELL, REPORT TO THE COMMISSIONER OF BASEBALL OF AN
INDEPENDENT INVESTIGATION INTO THE ILLEGAL USE OF STEROIDS AND OTHER PERFORMANCE
ENHANCING SUBSTANCES BY PLAYERS IN MLB 10, SR2-3 (2007) (explaining that PED use can
prolong player careers by artificially sustaining athleticism and reducing the chance of injuries).
192. See generally id. at 5-15.
193. Id.
194. See id. (analyzing the economic effects that steroid use had on MLB between 1994-
2004 and concluding that steroid use increased league revenue and player salaries).
24. 24 SPORTS LAWYERS JOURNAL [Vol. 23
H. The 2012-2016 Collective Bargaining Agreement: The Current
Terms and Conditions of Free Agency
Under the current CBA, players are contractually bound to their
teams for six seasons before becoming free agents.195
Eligibility for free
agency is based on service time.196
As outlined by MLB’s 2012-2016
Basic Agreement, “Major League service will be credited for each
day . . . a Player is on a Major League Club’s Active List.197
If a player is
promoted to an MLB team and remains on their active roster for the
entire season, they will have one full year of credited service at the
conclusion of that season.198
During a player’s first three seasons, he is paid the league’s
minimum salary, plus a cost-of-living arrangement.199
Once a player has
been on a roster for three successive seasons, he becomes eligible for
salary arbitration.200
A player with at least two years of experience is also
eligible, provided he is among the top 22% in cumulative playing time in
the league of players who have between two and three years of
experience and accumulated at least eighty-six days of service during the
immediately preceding season.201
During arbitration, both the team and
player each present a dollar figure to an independent arbitrator, who then
decides for the player or the team based on comparable players’ salary.202
195. See 2012-2016 Basic Agreement art. XX—Reserve System, sec. B, para. 1, at 86
(“Following the completion of the term of his Uniform Player’s Contract, any Player with 6 or
more years of Major League service who has not executed a contract for the next succeeding
season shall become a free agent . . . .”).
196. Id.
197. Id. art. XXI—Credited Major League Service, para. 1, at 96.
198. See id. (“A total of 172 days of Major League credited service will constitute one full
year of credited service.”).
199. Id. art. VI—Salaries, sec. A, para. 1, at 10-11 (indicating that players make the
minimum annual salary until they are arbitration-eligible after they have three years of service
time).
200. Id. sec. E, para. 1(a), at 17-18.
201. See id. para. 1(b), at 18. A “Super Two” player is eligible for salary arbitration when
they have at least two but fewer than three years of service time. Id. A player is eligible for
arbitration as a “Super Two”
if: (a) he has accumulated at least 86 days of service during the immediately preceding
season; and (b) he ranks in the top 22% (rounded to the nearest whole number) in total
service in the class of Players who have at least two but less than three years of Major
League service, however accumulated, but with at least 86 days of service accumulated
during the immediately preceding season.
Id.
202. See id. para. 13, at 17-22 (indicating that the independent arbitrator must choose
either the player’s salary proposal or the team’s salary proposal because he “shall be limited to
awarding only one or the other of the two figures submitted”).
25. 2015] FREE AGENCY IN MLB 25
Frequently, the arbitration process leads to a compromise salary before
the ruling.203
After three years of arbitration, any player with six or more years of
service time who has not executed a contract for the following season can
become a free agent.204
However, before a player can become a free
agent, his former team has the ability to extend a qualifying offer to the
player.205
A qualifying offer is “a one-year Uniform Player’s Contract for
the next succeeding season with a guaranteed salary that is equal to the
average salary of the 125 highest-paid Players each year.”206
If the player
accepts the qualifying offer, he is signed for the next season.207
However,
if the player rejects his former teams’ qualifying offer and elects to
become a free agent, his former club is entitled to compensation for his
loss and receives a draft choice in MLB’s amateur draft.208
III. DISCUSSION: THE DECLINE OF FREE AGENCY IN MLB
Once a player reaches the open market, he is eligible to negotiate
and contract with any team without any restrictions or qualification.209
Under the present terms and conditions of MLB’s Basic Agreement, free
agency is restraining trade because it no longer provides an incentive for
teams to bid against each other for players on the open market. In effect,
the next CBA should allow players to reach free agency after four years
of service time in order to improve the players’ employment rights and
ensure that the owners are wisely investing their financial resources.
This Part explores the flaws, inefficiencies, and decline of free
agency in MLB since 2004. Significantly, Part III.A argues how age is
the fundamental flaw in free agency because players reach the open
market after their physical ability peaks. Part III.B contends how teams
203. See SPENCER B. GORDON, FINAL OFFER ARBITRATION IN THE NEW ERA OF MLB 13
(2006) (indicating that settlement is likely in arbitration because both teams and players like the
fact that they can bargain with each other amicably because the player is still bound to the team).
Moreover, teams try to avoid arbitration because they are “forced to defend their proposals by
insulting players and presenting arguments that emphasize a player’s mental and physical
shortcomings.” Id.
204. 2012-2016 Basic Agreement art. XX—Reserve System, sec. B, para. 1, at 86.
205. Id. para. 3, at 87-88.
206. Id.
207. Id.
208. Id. para. 4, at 88-90; see also Keith Law, Explaining Type A, B Free Agents, ESPN
(Nov. 29, 2006), http://insider.espn.go.com/espn/print?id=2678840&type=blogEntry (indicating
that under the previous CBA, requiring teams to forfeit draft picks when signing free agents was
“designed to give clubs some kind of compensation for losing good players, especially lower-
payroll clubs who couldn’t or wouldn’t retain those top free agents, it was also put in place to
produce a slight drag on free-agent salaries”).
209. 2012-2016 Basic Agreement art. XX—Reserve System, sec. B, para. 1, at 86.
26. 26 SPORTS LAWYERS JOURNAL [Vol. 23
have the right to extend a “qualifying offer” to a pending free agent and
explains how this right restrains trade. Part III.C focuses on the players’
physical and statistical decline as they reach thirty, arguing that since the
end of the steroid era, players’ physical ability has declined earlier as a
result of MLB regulating and enforcing testing for performance
enhancing drugs.
Part III.D analyzes the effect that advanced statistics have had on
evaluating the labor market—particularly by arguing that teams have a
better understanding of quantifying talent by determining a player’s
worth. Part III.E indicates that the CBA does not govern international
players who have professional experience outside of the United States.
In turn, Part III.E argues that teams have more incentive to invest in
international free agents because they tend to be younger. Part III.F
analyzes how teams are extending their younger players to long-term
contracts in order to avoid them reaching free agency. Part III.G argues
that starting free agency sooner will benefit both the players and the
owners.
A. Too Long and Too Old: How SixYears of Service Time Has
Restrained Trade
The primary issue with the current system of free agency is the
requirement that players must have six years of service time before
reaching the open market.210
As players reach their late twenties, their
performance peaks.211
Moreover, as players age beyond thirty years, their
physical abilities deteriorate and their performance declines.212
Notably,
between 2005-2009, the average player making his MLB debut was over
twenty-four years old.213
Therefore, because players are contractually
restricted to a team for six years of service time, most players do not
reach free agency until after their thirtieth birthday.214
In effect, the
210. Id.
211. See LEWIS, supra note 170, at 150 (“A baseball player typically ripens in his late
twenties; as he enters his mid-thirties, he’s treated as guilty until he proves his innocence.”).
212. See J.C. Bradbury, How Do Baseball Players Age? Investigating the Age-27 Theory,
BASEBALL PROSPECTUS (Jan. 11, 2010), http://www.baseballprospectus.com/article.php?articleid=
9933 (“[T]he peak age of baseball players appears to be around 29, and possibly 30 for hitters in
modern times. Of course, some players will peak earlier and others later, but this is a general
benchmark.”).
213. Ben Lindberg, Overthinking It: Promoting Prospects, BASEBALL PROSPECTUS (Feb.
22, 2011), http://www.baseballprospectus.com/article.php?articleid=13018.
214. See id. (explaining that the average age for players to reach the MLB is 24.4 years);
see also 2012-2016 Basic Agreement, effective Dec. 12, 2012, art. XX—Reserve System, sec. B,
para. 1, at 86 (outlining the rules of free agency, which indicates that a player is bound to a team
for six years of service time before becoming a free agent).
27. 2015] FREE AGENCY IN MLB 27
current system of free agency only allows a player to choose his
employer and bargain for his salary once his ability is declining.
Aware that most players reach free agency as their talent peaks,
teams have a disincentive to spend money on the open market because
the current and future abilities of players are on the decline.215
Financially,
teams have realized it is more efficient to invest their resources in
younger and more cost-efficient players, as opposed to competing on the
open market for an aging player.216
For example, Theo Epstein, the
President of Baseball Operations for the Chicago Cubs stated:
I think baseball players have a prime age, there’s an age range, starting
somewhere around 26-27 and ending somewhere around 31-32, in which
you get the best bang for your buck with the player. If we do our jobs the
right way, we’ll have as many players in their primes . . . . That’s the best
formula to building a winning baseball club.
217
Significantly, after a player has completed six years of service time,
teams are aware his talent has peaked.218
As a result, management and
owners have a disincentive to allocate their resources on declining free
agents. Instead, teams are choosing to invest their resources through the
MLB amateur draft, on international free agents, and by signing their
young players to long-term contract extensions through their prime
years.219
Therefore, six years of service time serves as a significant
restraint on players’employment rights.
215. See Tim Reuter, The Economics of MLB Free Agency: Start It Earlier To Achieve
Fiscal Sanity, FORBES (Jan. 10, 2014, 8:00 AM), http://www.forbes.com/sites/timreuter/2014/01/
10/mlb-should-start-free-agency-earlier-if-it-wants-fiscal-sanity/ (“[A]ge is the central, and
acknowledged, inefficiency of MLB’s labor system. A glance at the list of free agents in any
winter will show that most are over thirty-years old and exiting their physical prime.”).
216. See id. (indicating that teams are hesitant to spend money on free agents; instead, they
are opting to invest in youth by “buying out their best players’ prime years with long-term
extensions”).
217. See Ricky Doyle, Theo Epstein Faces Tough Decision as Cubs Weigh Merits of
Pursuing Albert Pujols in Free Agency, NESN (Nov. 2, 2011, 11:00 PM), http://nesn.com/
2011/11/theo-epstein-in-sticky-situation-when-it-comes-to-going-after-albert-pujols-in-free-agency/
(suggesting that the Cubs would not be interested in signing Albert Pujols, a thirty-two-year-old
free agent, because his talent was on the decline and they were focused on investing in younger,
more cost-effective players).
218. See Tom Verducci, New Trend of Locking Up Young Players Changing MLB’s
Landscape, SPORTS ILLUSTRATED (Feb. 25, 2014), http://www.si.com/mlb/2014/02/25/young-
players-extensions-free-agency-mike-trout.
219. See id.; see also See Shawn McFarland, Are International Free Agents Changing the
Future of MLB?, CALL TO THE PEN (2014), http://calltothepen.com/2014/04/29/are-international-
free-agents-changing-future-mlb/.
28. 28 SPORTS LAWYERS JOURNAL [Vol. 23
B. Dragging Down the Market: The Adverse Effects of Qualifying
Offers
Free agency has restricted players’ employment opportunities
because of its compensation system, which can award teams a draft pick
for losing a free agent. Under the current CBA, a team that signs a free
agent who rejected his former team’s qualifying offer “shall forfeit its
highest available selection” in MLB’s amateur draft.220
In turn, if a player
has rejected a qualifying offer, teams face a conundrum: should they
invest their resources by refraining from signing free agents and building
their team through the draft, or should they spend money on the open
market for a more expensive player with declining ability?221
This
challenge was illuminated in the 2014 off-season when Stephen Drew—
despite winning the World Series with the Red Sox and having an
impressive season in 2013—was unable to sign with a team prior to the
start of the season because teams were unwilling to sacrifice a draft
pick.222
Effectively, qualifying offers harshly impact the value for free
agents because several teams are unwilling to surrender a draft pick for a
player they otherwise might have interest in. Moreover, the team that
extends a rejected qualifying offer is rewarded with a high draft choice.
As a result, the free agent’s former team and the twenty-nine other teams
all have a strong justification for refusing to bid against each other for the
player’s service.
C. Failed Contracts: Rapid Player Decline After the Steroid Era
Another aspect of free agency that contributes to inefficiency is the
prevalence of failed contracts. Failed contracts are a direct result of the
steroid era and are actively deterring teams from signing players.223
A
220. 2012-2016 Basic Agreement, effective Dec. 12, 2012, art. XX—Reserve System, sec.
B, para. 4(c)(i), at 89.
221. See Jon Heyman, Thanks to Free-Agency Surprises and a Bad Rule, Drew Begins
Own Camp, CBS SPORTS (Feb. 21, 2014, 4:31 PM), http://www.cbssports.com/mlb/writer/jon-
heyman/24451364/thanks-to-free-agency-surprises-and-a-bad-rule-drew-begins-own-camp
(explaining how draft pick compensation has limited the bargaining power and employment
options for Stephen Drew, Kendry Morales, Ervin Santana, and Nelson Cruz because teams were
unwilling to part with draft picks in order to sign free agents).
222. See id. (indicating that even with a World Championship in 2013, an impressive .777
OPS, and ultrareliable defense at shortstop, Drew was unable to sign as a free agent because the
compensation system was “quite the drag . . . as teams are suddenly coming to more value the
first-round pick”).
223. Compare GROSSMAN, KIMSEY, MOREEN & OWINGS, supra note 174, at 14 (indicating
that players signing contracts during the steroid era were largely performing to their contract
because “open markets nevertheless show a tendency to optimize economic outcome[]”), with
29. 2015] FREE AGENCY IN MLB 29
failed contract occurs when players have signed lucrative free agent
contracts and, largely due to the age at which they sign, vastly
underperform.224
When PED use was rampant in baseball between 1994-
2004, teams could justify signing aging players to long-term contracts
because they were performing well into their thirties.225
However, since
2005, which is considered the end of the steroid era, many teams have
poorly invested in declining players on the open market.226
Currently, this is causing many teams to reevaluate how they
allocate their resources.227
To make matters worse, when players sign
long-term free agent contracts, it is common for their annual earnings to
increase until their contract expires.228
In essence, unlike any other
profession, the current system of free agency is designed to pay
employees their highest salary when they are no longer at their best.229
Aware of their past mistakes, teams are increasingly unwilling to sign
aging players to long-term contracts.230
Joe Posnanski, The Worst Contracts in Baseball, JOE POSNANSKI (Oct. 11, 2011), http://joe
posnanski.com/joeblogs/the-worst-contracts-in-baseball/ (arguing that baseball players regress
quickly once they hit their thirties and teams can no longer justify signing declining players to
long-term extensions).
224. See Posnanski, supra note 223 (suggesting the ten worst contracts in MLB are all
players that are past the peak of their careers and are declining).
225. See Tom Farrey, HGH: Performance Enhancer or Healer?, ESPN (Sept. 7, 2006),
http://sports.espn.go.com/espn/news/story?id=2574291 (explaining that PED use allows players
to recover faster and play longer).
226. See Posnanski, supra note 223.
227. See Ryan Fagan & Jesse Spector, Money for Nothing: Pujols, Fielder Top Our List of
MLB’s Worst Contracts, SPORTINGNEWS (Aug. 15, 2014), http://www.sportingnews.com/
mlb/story/2014-08-13/mlbs-worst-contracts-albert-pujols-prince-fielder-arod-ryan-howard-upton
(explaining that teams are aware of the risk of signing free agents to long-term contracts and
massively overpaying them in the final few seasons of their deal because they can no longer
perform to the best of their ability).
228. See Jayson Stark, Phillies, Howard Have Come a Long Way, ESPN (Apr. 27, 2010,
12:02 PM), http://sports.espn.go.com/mlb/columns/story?columnist=stark_jayson&id=5138129
(indicating that Ryan Howard will make less money annually in the first two years of his five-
year extension than in his last three years); see also Ted Berg, Report: Giancarlo Stanton’s $325-
Million Deal Is Heavily Backloaded, USA TODAY (Nov. 19, 2014, 6:04 PM), http://ftw.usatoday.
com/2014/11/giancarlo-stanton-contract-marlins-backloaded-325-million-mlb (explaining that
the Miami Marlins heavily backloaded Giancarlo Stanton’s contract in order to have greater
financial flexibility and to help them contend in the upcoming season); see also Matt Sullivan,
Cardinals Flash More Genius with Peralta’s Front-Loaded Contract, SB NATION (Nov. 30, 2013,
10:00 AM), http://www.mlbdailydish.com/2013/11/30/5154748/cardinals-jhonny-peralta-front-
loaded-contract-mlb (indicating that teams backload contracts because of inflation and a desire to
allocate financial resources into other areas in the teams’immediate future).
229. See Fagan & Spector, supra note 227 (describing how several major league players
are paid their largest annual salary as their performance declines).
230. See id. (explaining that teams are avoiding the risk of signing aging free agents to
long-term deals because of the inevitability that their ability diminishes).
30. 30 SPORTS LAWYERS JOURNAL [Vol. 23
This system is at odds with the way players produce value. When
teams sign free agents to long-term contracts, they are aware that they are
buying assets that will depreciate. Moreover, because it is common to
backload contracts by increasing a player’s annual salary, the final years
of a contract are almost certain to represent a significant overpay of the
player’s worth. This structure can turn players into pariahs while fans and
management grow frustrated by underperforming and depreciating
players that are grossly overpaid. Therefore, in order to improve upon
their past mistakes with failed contracts, teams are choosing to sign
international free agents or to sign their younger players to long-term
contract extensions instead of signing aging, proven players on the open
market.231
D. Reevaluating the Market: How Analytics Are Depreciating Free
Agency
Another impediment to the current model of free agency has been
the influence of “sabermetrics” in evaluating players.232
In 2003, Michael
Lewis published Moneyball, a book that analyzed how a small market
baseball team can successfully win a financially unfair game by relying
on objective statistical analysis to determine undervalued measures
within the player market.233
As a result of the Oakland Athletics’
innovation regarding player evaluation, front office executives throughout
the league have a more objective and analytical understanding of a
player’s value.234
Quite simply, statistical advancements have allowed
teams to rethink the allocation of their resources, efficiently invest in
231. See infra Part III.E and Part III.F for a discussion on how teams are abstaining from
signing free agents and are allocating their resources towards international free agents and signing
their younger players to long-term contract extensions.
232. See A Guide to Sabermetric Research, SABR (2015), http://www.sabr.org/saber
metrics. As originally defined by Bill James in 1980, sabermetrics is “the search for objective
knowledge about baseball.” Id. Sabermetrics is a method for baseball executives and
mathematicians to question traditional methods of player evaluation, such as batting average and
wins for pitchers. Id.
233. LEWIS, supra note 170, at 119-20.
234. See Peter Gammons, Judging Defense Becoming Key, ESPN (Sept. 17, 2005),
http://www.motownsports.com/forums/major-league-baseball/21116_defensive-analysis-becoming-
key-gammons.html (explaining that the effect of Moneyball throughout MLB has teams “trying
to find the next new thing, which in this case is quantifying what heretofore was considered
incalculable–defense”); see also Jonathan Mahler, Smaller Markets and Smarter Thinking, N.Y.
TIMES (Oct, 14, 2011), http://www.nytimes.com/2011/10/15/sports/baseball/look-around-base
ball-its-all-moneyball-now.html?_r=0 (indicating that teams that focus their player evaluations
and front office management around innovative thinking and statistical analysis have triumphed
over teams with deep pockets that still invest in declining free agents).
31. 2015] FREE AGENCY IN MLB 31
players, and find cost-cutting methods to produce a winning baseball
team.235
The statistical creation of wins above replacement (WAR)
exemplifies baseballs understanding of why free agency is
ineffective.236
WAR is an attempt by statisticians to summarize a player’s
total contribution to his team in one statistic.237
WAR looks at a player
and asks the question: if this player was injured and his team had to
replace him with an average player, how much value would the team be
losing?238
This value is in a win format.239
Therefore, it determines Player
X’s value simply based on wins.240
Based on existing contracts and
market value, executives can place a monetary value on each individual
win.241
When a player reaches free agency, many teams use this metric (or
similar metrics) to determine if they are paying market value for a
player.242
Today, few teams (only the biggest markets) are willing to
overpay for players in free agency—especially if they have to give up
compensation draft picks and are contractually bound to a declining
player.243
Moreover, statistical advancements allow teams to project a
player’s performance each year.244
Since Moneyball was published, MLB
teams have tried to mirror other businesses by objectively evaluating the
performance of their employees (the players).245
As a result, with
predictive models of player performance, an understanding of player
value in a wins format, and a proper understanding of how players age,
235. See Mahler, supra note 234 (explaining that sabermetrics and the Moneyball
philosophy had proliferated around baseball to the point that the Oakland Athletics had lost their
competitive advantage because “the league had stolen” the playbook).
236. See Tom Van Riper, Baseball’s Most Overpaid Players, FORBES (July 10, 2014, 7:33
AM), http://www.forbes.com/sites/tomvanriper/2014/07/10/baseballs-most-overpaid-players-2/
(indicating that WAR is now a widely accepted statistic that analyzes both offensive and defensive
metrics to determine the number of wins a player contributes to his club and outlining the most
overpaid players in MLB based on their WAR).
237. What Is War?, FANGRAPHS, http://www.fangraphs.com/library/misc/war/ (last visited
Sept. 24, 2015).
238. Id.
239. Id.
240. Id.
241. See Jonah Keri, Is Albert Pujols Really Worth $250 Million?, GRANTLAND (Dec. 8,
2011), http://grantland.com/the-triangle/is-albert-pujols-really-worth-250-million/ (indicating that
teams can place a monetary value on wins to determine if a player is properly paid his worth and
explaining that Albert Pujols’ ten-year, $250 million contract will likely cause him to be
significantly overpaid).
242. See id.
243. See McFarland, supra note 219.
244. BRENT CULLEN ESTES, SLUGGER OR SLACKER: A SABERMETRIC ASSESSMENT OF FREE
AGENCY ON MAJOR LEAGUE BASEBALL PLAYER PERFORMANCE 3-4 (2006).
245. See id.
32. 32 SPORTS LAWYERS JOURNAL [Vol. 23
teams refrain from the economic waste of signing free agents because of
its inefficiencies.
E. Foreign Affairs: How International Free Agents Are a Better
Alternative to Domestic Free Agents
Another issue with the current system of free agency is the rules
and regulations for international players that come to America with
previous professional experience playing abroad.246
Although the current
CBA provides regulations for amateur international players, professional
players are not bound to an MLB team; rather, they have greater
flexibility to establish their availability on the open market.247
As a result,
there has been an influx of both Cuban and Asian players.248
Despite
increasing the talent pool in MLB, international free agency has hurt the
annual crop of MLB free agents.249
In August 2014, the Boston Red Sox made Rusney Castillo—a
twenty-seven-year-old outfielder—the highest paid Cuban free agent of
all time when he signed a seven-year contract worth more than $72
million.250
Castillo’s contract was spurred by the overwhelming success
of several other international free agents including: Jose Abreu, Yasiel
246. See Matthew Piehl, Double Play: How MLB Can Fix the Amateur Draft and
International Player Acquisition with One Swing, 8 WILLAMETTE SPORTS L.J. 13, 15 (2010)
(describing how foreign professional players are not eligible for MLB’s amateur draft, which is
desirable because they have the freedom to establish their free agent eligibility and negotiate and
bargain with all thirty MLB teams).
247. See Andrea Kupfer Schneider, Baseball Diplomacy, 12 MARQ. SPORTS L. REV. 473,
477-78 (2001). Cuban free agents that deport to America are eligible for MLB’s amateur draft,
but there is a loophole in the Basic Agreement that allows Cuban players to defect and establish
residency in another nation. Id. at 480-81. Once they establish residency in another country, they
can be declared an international free agent, which gives them the freedom to bargain and
negotiate with any MLB team; see also Rick J. Lopez, Comment, Signing Bonus Skimming And
a Premature Call for a Global Draft In MLB, 41 ARIZ. ST. L.J. 349, 368-71 (2009). Japanese free
agents are contractually bound to their team for eight years, but MLB and the Japanese
professional league have established a “posting agreement,” which enables MLB teams to bid for
players that are posted by Japanese teams. Id. Based on the posting system, the MLB team with
the highest bid has the sole ability to negotiate with the player. Id. at 371-72. If the MLB team
and the Japanese player agree to a contract, the bid is paid directly to the Japanese team. Id.
248. See Piehl, supra note 246, at 17-22.
249. See McFarland, supra note 219 (explaining that Japanese and Cuban free agents have
become a staple in MLB’s labor market and suggesting their influx has taken over the MLB free
agent market and hurt veteran Major League free agents who are drawing less interest because
they are competing with younger international free agents).
250. Steve Silva, Cuban Free Agent Rusney Castillo Will Sign $72 Million Deal with Red
Sox, BOSTON.COM (Aug. 22, 2014, 11:04 AM), http://www.boston.com/sports/baseball/redsox/
extras/extra_bases/2014/08/reports_cuban_free_agent_rusney_castillo_will_sign.html.
33. 2015] FREE AGENCY IN MLB 33
Puig, Yoenis Cespedes, and Masahiro Tanaka.251
Because international
players face fewer restrictions regulating their free agent statuses, they
have become the new market efficiency because they are choosing to
reach the open market in their mid-twenties.252
As a result of this influx,
and the age and success of international free agents, MLB teams have a
strong incentive to invest in younger international free agents—even if
they are paid substantial salaries—because they are getting a greater
return on their investment.253
Therefore, because the CBA only restricts
the employment conditions of domestic free agents, international free
agents are a better and more efficient alternative for MLB teams.
F. Avoiding Free Agency by Extending Players’Beyond Their Prime
Years
Since the end of the steroid era, teams have become aware of the
inefficiency of signing players to long-term contracts that last until their
mid-to-late thirties.254
As a result, signing young players to extensions
has become the new market efficiency.255
Recently, this trend has
become baseball’s equivalent of a land rush.256
Teams are now moving to
sign their players to contract extensions in order to keep them away from
the open market and having the ability to choose their employers.257
Instead of signing veteran free agents, teams are choosing to sign
their own players with fewer than six years of service time in their early-
to-mid twenties to long-term contract extensions.258
In effect, teams are
251. See Jasper Scherer, Are International Free Agents the New Market Efficiency?, SB
NATION (Aug. 23, 2014, 8:00 AM), http://www.mlbdailydish.com/2014/8/23/6059321/are-inter
national-free-agents-the-new-market-efficiency (arguing that every team “now realizes” the
importance of signing international talent and indicating that the frequency of international
signings will increase as a result of the success of recent Cuban and Japanese players that signed
free agent contracts with MLB teams).
252. See Verducci, supra note 218 (indicating international free agency “has been a much
more efficient market for prime talent” and explaining that Masahiro Tanaka, Yasiel Puig, Yoenis
Cespedes, Yu Darvish, and Aroldis Chapman were all signed well before the age of thirty so that
their respective teams would not be paying them to decline).
253. Id.
254. See id. (indicating that “[t]eams know that, in the drug-testing era, you no longer want
players aging through their mid- to late-30s” because they are likely to physically decline without
steroid use).
255. Id.
256. See id. (explaining that teams are looking to extend their players’ contracts in order to
keep them away from free agency, which has transformed the annual free agent market from a
“Rolls Royce market segment into one more akin to a Chrysler Cordoba” because free agents
come with the mileage of having played in MLB for at least six years and their physical abilities
are waning).
257. Id.
258. Id.
