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From BR Bullpen
Collusion is a business term that describes a situation where the few owners artificially limit the salaries of the workers in the industry through concerted action. Major League Baseball went through a period of collusion during the off-seasons of 1985, 1986, and 1987.
After the 1985 season, at the urging of Commissioner Peter Ueberroth, owners came to an unwritten agreement not to compete with each other over the services of free agents, and to reduce significantly the length of contracts they would offer. As a result, free agents were forced to re-sign with their original teams for little or no pay raise, unless their team indicated that it was not interested in their services. Thus, players who should have been highly sought after, such as Detroit Tigers outfielder Kirk Gibson, who had hit 29 home runs and driven in 97 runs in 1985, found that no team was apparently interested in their services and had to stay put. Things got even worse after the 1986 season, when a number of top-notch players like outfielder Tim Raines of the Montreal Expos, pitchers Ron Guidry of the New York Yankees and Doyle Alexander of the Atlanta Braves, and catcher Rich Gedman of the Boston Red Sox found absolutely no takers when they hit the free agent market after the season. Not only were they forced to sign back with their original teams, but they had to miss the month of April before doing so, as they had waited past the final deadline for re-signing with their original teams in the vain hope of being offered a contract by anyone else. Others like All-Star pitcher Jack Morris were forced to accept salary arbitration as no club was ready to bid for their services.
Expos' outfielder Andre Dawson was so disgusted by the situation that he basically offerred the Chicago Cubs a blank check to sign him: desperate to get out of Montreal because of the pounding his knees were taking from the rock-hard artificial turf at Stade Olympique, he told the Cubs he would play for them in 1987 for whatever amount they were willing to pay him. Unable to claim poverty, the Cubs offered the ridiculously low one-year salary of $500,000 (less than a third of what Dawson would have been worth in a fair market), and Dawson signed. The Major League Baseball Players Association was furious about these shenanigans and filed a formal grievance in February 1986 (it would do likewise in February 1987 and January 1988).
The cases took a while to be heard by arbitrator Thomas Roberts and his successor George Nicolau, and generated a very large body of evidence over 71 days of hearings. The players' case was based on the fact that in the 1977 Collective bargaining agreement, they had agreed not to work together to put pressure on an owner, in order to avoid a repeat of the situation in which Los Angeles Dodgers pitchers Sandy Koufax and Don Drysdale staged a joint walk-out in the spring of 1966. In return for this, the owners agreed not to act in collusion themselves. On September 21, 1987, arbitrator Roberts handed his decision in the first grievance and found in favor of the players. The two cases presented to George Nicolau over the next two years were decided in a similar manner. Overall, $280 million was awarded under a Global Settlement Agreement negotiated between the MLBPA and the owners, to be split among the players who had filed claims. These were only actual damages, i.e. the difference between the value of the contracts the players were forced to sign and what they would have been worth in a free market - there were no punitive damages awarded. The players affected by collusion were also given another shot at free agency as so-called "free look" free agents.
The question of which players were to be compensated from the fund established under the Global Settlement Agreement caused another legal battle. Steve Garvey, a first baseman for the San Diego Padres, filed a claim for damages of approximately $3 million alleging that after the 1985 season, his contract was not extended into the 1988 and 1989 seasons as a result of collusion. His claim against the Major League Baseball Players Association was rejected by an arbitrator in 1996 because he had failed to present sufficient substantiating evidence. This decision was appealed by Garvey, and the Court of Appeals for the 9th District overturned the arbitrator's decision and ruled that the only decision that the arbitrator could have taken, in light of the evidence submitted by Garvey, was to award him the amount claimed. This decision was then in turn appealed to the Supreme Court by the MLBPA, on the basis that according to numerous precedents in the field of labor law, the Appeals Court should not have reviewed the merits of the arbitrator's decision, but should simply have demanded another ruling if it had found a flaw in the procedure (which was not the case). In 2001, the Supreme Court found in favor of the MLBPA, letting the original arbitrator's decision against Garvey stand. In fact, the last payments made under the Settlement Agreement were made in 2005, some 20 years after the first grievance was filed.
The shadow of collusion was raised again after the 2002 and 2003 seasons, when players alleged that there were improprieties in the negotiation of certain free agent contracts that pointed to collusion among owners. In the fall of 2006, the owners agreed to make a lump-sum payment of $12 million, to be taken from luxury-tax funds, to settle some 40 claims and pending grievances.
Talk of collusion resurfaced at the beginning of the 2010 season, when new MLBPA President Michael Weiner told the media he had concerns about the operation of the post-2009 free agent market, in which a number of solid major league players failed to find employment, and said the union was investigating. Nothing specific came of those allegations.
 Further Reading
- Steve Beitler: "The Empire Strikes Out: Collusion in Baseball in the 1980s", in The Baseball Research Journal, Number 36 (2007), SABR, Cleveland, OH, pp. 58-60.