Are Teams Colluding, or Just Better Using Information?

The MLBPA, it seems, loves to threaten collusion charges. We heard whispers of it after the 2007 season, when Barry Bonds didn’t get much of a look from the 29 teams that didn’t explicitly say he wasn’t welcome. During the 2008 off-season we saw a number of veterans take short-term contracts at what was considered reduced pay. Again, threats of collusion. After another off-season that was generally unfavorable to veterans we’re hearing yet again that the PA might file a grievance. As in years past, I doubt any such measure will go far.

The evidence of a possible impending grievance, per the Associated Press article, comes from player agents. They report having seen similar offers from different teams for their free-agent clients. It is understandable, then, that the Players’ Association would investigate. If owners were colluding, that is one symptom we might see. Yet, given the current environment, the claim should fall short.

There is one very good reason why agents would see similar offers from different teams for the same player: the Internet. Information is everywhere. Tom Tango took on the subject last night, using the availability of stat databases as an example. His argument certainly makes a degree of sense.

Ok, suppose that there’s a measure that everyone likes.  I dunno, let’s call it… WAR.  And let’s say that it’s constructed by researchers that both sides respect, say Tango, Rally, and Fangraphs.  And say that there’s a site that lists the dollar values, like a Beckett’s price guide or NYSE.  Then, teams give out offers that are consistent to what they read.  Well, this is a GOOD thing isn’t it?  There’s no collusion, there’s no acting in concert.  There’s an understanding that, hey, maybe Tango and Rally and Fangraphs know their [stuff].

This, however, represents just one aspect of the information revolution. Not only do teams have their internal data, but they have freely available data as well. This might cause them to act similarly when it comes to signing free agent players. But there are many other aspects at play here that would cause teams to similarly value certain players.

Just look at MLB Trade Rumors. Every day Tim Dierkes and his team aggregate more information than most people can process. This includes every rumor, from one-liners at the end of game stories to full-on reports. Some of it is noise, but some of it is legitimate information about a team’s thinking. This widespread access to information creates more efficient markets. It leads to fewer teams overpaying for talent, because they have a better idea of what other teams are thinking.

If teams were familiar with how others thought, though, wouldn’t they be able to make a superior offer to a free agent? For instance, if the Royals wanted Mark DeRosa and saw that the Giants were offering him two-years and $12 million, couldn’t they step in with a two-year, $13 million offer and have an advantage? Yes, they could. It seems, however, that the market was fragmented this winter. The big time players — John Lackey, Jason Bay, Matt Holliday — all got paid, and paid well. The similar offers likely came for the second- and third-tier players, who aren’t as important to a team. In this made-up example, perhaps the Royals didn’t feel a player like DeRosa was worth the extra million. They might be able to better use those funds to improve their team in another way.

With such easy access to so much information, it’s understandable that agents would see similar offers for their clients. Teams — most teams, at least — aren’t in the business of overpaying for talent. Nor should they. No team, not even the Yankees, has unlimited resources. The good teams deploy their funds in the best possible manner. If that means passing on a certain player because they’re not willing to overpay, so be it. Those resources can go to improve the team in another way. The superstars will continue to receive big contracts. But veterans like DeRosa might fall victim to the information revolution.

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Joe also writes about the Yankees at River Ave. Blues.

34 Responses to “Are Teams Colluding, or Just Better Using Information?”

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  1. MikeS says:

    Why wouldn’t they file a callusion grievance or at least threaten to? It worked out well for them in the past and the downside is small.

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    • Jimbo says:

      As someone wrote yesterday “millionaires fighting billionaires…gotta love it.”

      Perhaps the downside is small, but I’m part of it. My son is about to turn 4. As he gets older and I desire to pass on my appreciation of the sport I already know we’ll be doing that via minor league games.

      I don’t judge owners for running their business a certain way. I don’t begrudge players for wanting to get paid. In the same way I hope the professional teams in my area don’t hold it against me when I opt for a cheaper alternative.

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      • MikeS says:

        You are so right. I was just looking at it from the MLBPA perspective. Unfortunately, I think MLB doesn’t care much what you or I think. They see big TV revenues and corporate sponsorships. At times it seems that they feel they don’t need fans since they get more money from other sources. Sometimes I wonder if they realize that both ultimately stem from fan interest. If nobody goes to the stadium, nobody buys billboards. If nobody watches on TV, the ratings go down, the networks can’t sell commercials and the huge rights packages get much less huge.

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  2. Jimbo says:

    What if MLB had a free agent auction day? Anyone having problems landing a job can sign up. Similar to fantasy drafts, just put Mark DeRosa up for league minimum and let the bidding start.

    No collusion, no Scott Boras antics…just highest bid wins.

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    • Fresh Hops says:

      If all players received contracts for the same term, it might work. But how is the auctioneer supposed to decide whether 3 years/21m is better than 4 years 24 million, or 3 years/18 million with a player option for the 4th, etc.

      Also, having players auctioned takes away their freedom to value living in Cincinnati more than New York. Players should be free to negotiate with whomever they want.

      Also, the auction would result in ridiculous collusion among owners who would figure out ahead of time who wanted whom most, decide who was getting who on that basis, and then all agree to pay much much less than their actual auction value. The players would get raped in auction.

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      • Jimbo says:

        Participation would be 1. voluntary and 2. one year contracts only.

        Wouldn’t expect to see Jason Bay at auction. ;-)

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    • Mister Delaware says:

      I know you’re being sarcastic, but the draft is basically one big collusion-palooza. No hard slotting yet implied/coerced slotting and teams basically following the leader on down, year to year, save the occasional uber-prospect and signability case.

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  3. B says:

    “But veterans like DeRosa might fall victim to the information revolution.”

    As they should – for way too long the PA has managed to make them extremely overpaid relative to the value they provide, pretty much entirely at the expense of minor leaguers and young, cost controlled players. It’s about time the market gets knocked into shape. Of course the PA will look into it – and they should – but an honest evaluation is going to tell them that the market was out of whack and now it’s moving towards a more efficient equilibrium.

    “We heard whispers of it after the 2007 season, when Barry Bonds didn’t get much of a look from the 29 teams that didn’t explicitly say he wasn’t welcome.”

    And we all know he WAS colluded out of the game. Not that we can prove it….


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  4. CJ says:

    I don’t think you can so blithely discard the possibility of collusion. Proving collusion is very difficult, particularly if the conspirators are smart enough to avoid leaving a trail. However, we know from almost a century of anti-trust laws that collusion exists, and that businesses will engage in it if enough money is at stake and they think they can avoid detection. We also know that major league baseball teams have a history of having engaged in collusion. Common sharing of data and information in some cases can become the means for furthering an anti-trust conspiracy, particularly if the systems are used as a signaling system. And, I’m not saying that collusion has occurred in this case, but I have been suspicous ever since 2008. I wouldn’t draw conclusions, as you have, until the matter is fully investigated. Collusion generally is concealed enough that it isn’t apparent from the surface; however, an investigation of the process used by MLB teams to make decision could turn up evidence of collusion.

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  5. Antonio says:

    What they really need is a glimpse into the books of the teams who are crying foul (e.g. the Brewers) coupled with a comprehensive assessment of existing contracts. I’m sick of bad teams (insert Royals joke here) spending good money after bad players and crying poverty. We fantasy owners see it in auction drafts all the time and it NEVER works out. We shouldn’t punish teams for spending a little more on a dominant player. Instead, we should punish teams like the Brewers for giving the Jeff Suppans of the world $48M over four years (insert Royals/Willie Bloomquist contract joke here), because that’s what really screws things up.

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  6. Fresh Hops says:

    I would have a much easier time believing collusion if players were getting paid much, much less than they used to. Given that salaries have shrunk only about 10% in an economy that shrunk much more, I don’t think that’s there’s serious collusion.

    Collusion is pretty hard to pull off because it only takes one person to break the agreement for the system to fail. There are a lot of pressures on teams to make good signings, not just cheap ones, and the result is that there’s a lot of pressure to break the collusion deal for a few owners.

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    • snapper says:

      Average salaries were actually up 1%.

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    • B says:

      “Given that salaries have shrunk only about 10% in an economy that shrunk much more, I don’t think that’s there’s serious collusion.”

      It’s not the economy you should be looking at – it’s players salaries vs. MLB total revenues. The problem is, MLB and it’s owners jump through hoops to hide those revenues from everyone else.

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    • Tree says:

      It would take more than one team to make any collusion fall apart. Individual teams only have so many PAs and innings to hand out, so they can’t just buy up undervalued assets. You would probably see something like what we see currently in free agent salaries, a split between the top tier and everybody else.

      That said, I doubt there are any secret meetings setting prices, although the system is set up to work against the players, at the moment. As people have said, the Player’s Union could make teams pay their ‘cost-controlled’ players more if they wanted to raise the floor on free agent salaries.

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  7. Heather says:

    The Player’s Association seems like it has the attitude of the average homeowner circa 2005….Prices should only continue to go up! If prices go down, there’s collusion! The prices for everything in the ballpark (including salaries) have far outstripped inflation. Maybe we’re due for some painful cost correction.

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    • B says:

      I think that’s a bit harsh. I like the way Joe put it in his article:

      “If owners were colluding, that is one symptom we might see. Yet, given the current environment, the claim should fall short.”

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    • Teej says:

      Salaries, ticket prices, etc. are not tied to inflation. They’re tied to how much money consumers are willing to give MLB to enjoy its product. Any correction would have to come from consumers no longer going to games, buying jerseys and, etc. That may very well happen, of course, but I don’t see any inevitable correction as it stands right now.

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    • NBarnes says:

      The prices in the ballpark have far outstripped inflating because that’s what people are willing to pay. That money then goes into the owners’ pockets. MLB’s profits have been going up far, far faster than the rest of the economy, and far faster than player salaries have been.

      Which is exactly what you’d expect to see if teams were colluding.

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    • Jason B says:

      I agree with Heather. Except that the term “homeowner” is a misnomer for a LOT of people. I “bought” a house in 2008, but have no illusions – right now I own about 10% of it and the bank owns the other 90%. They’ve paid for it; I haven’t. I think I own the master bathroom, maybe one wall…by Christmas I just might have the patio paid for!!

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  8. Brian says:

    The idea of overpaying is rarely examined well in such studies. There is no inherent overpaying because value is not the same for all teams. Rather, winning ought not be valued the same by all teams. That would be really strange, and unlikely. Value is not tied to the level of a player’s production, but by how much a team values that production. Just because one team gets production at a lesser cost than another doesn’t mean that one is overpaying. Other issues play into this as well like availability of production.

    If every team values WAR, just as an example, the same, that is collusion. That’s an impossibly static market, and also an extremely predictable one in which the correlation between payroll and wins becomes stronger. Even if it’s not conscious, there’s no way the union stands for it. Such a market only allows market efficiencies in scouting, international scouting and the pre-arbitration years.

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    • B says:

      “Rather, winning ought not be valued the same by all teams.”

      I get what you’re saying, and agree to a degree you have a point, but keep in mind 25 roster spots gives a team a lot of flexibility in who to sign, and there are usually enough FA’s out there to also add to their choices. If there are enough options available, a team can pay market rate for wins even if they value them more than the market, because the team will just turn to a different option if they don’t get what they’re looking for. Of course, there are limits to this and situations where it may not apply, but it’s at least a significant factor working against teams paying more just because they value wins more.

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    • CJ says:

      I agree with your points.

      Also, collusion could involve more than just free agent salaries. For instance, teams’ decisions on non-tendering players could be involved, particularly if the decisions seem unusually similar in the way they might produce a glut in the market.

      As I recall, some agents claimed that Selig sent a memo to the teams in late 2008 warning management about the potential impact of the recession and urging them to keep that in mind in signing contracts. The agents think that caused teams to pull back their contract offers. I don’t know about the validity of those claims, but if it’s true I can see how someone might be suspicious of coordinated salary offers. At the time, some teams pulled back salary offers or made non-tenders which were unexpected. Of course, the teams can claim that the recession caused all of these reactions, and it would be hard to disprove. So, in some ways, the economic recession provides an ideal cover if teams are inclined to engage in collusion.

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  9. Jimbo says:

    Is there an acceptable (i.e. non-collusionary) level of communication regarding player values?

    If Scott Boras can get in front of a camera and spout off about all the demand around a client, why can’t a team pick up the phone and verify his claims? Should they find out he was lying, or exaggerating at least, then a TRUE market-based offer doesn’t strike me as anything devious/unlawful.

    I think this is probably fuelled by lawyers—er, I mean agents—who promised their clients more than they could deliver. Instead of being humbled they get litigious.

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    • Dann M says:

      That’s an interesting point, Jimbo. Front offices have always been full of guys who know one another. Where in the past a lot of those guys were baseball guys, the new generation’s credentials are largely statistical. Because these new guys have the more complex and quantifiable ways of evaluating players, two AGMs from different teams can compare their internal VORP ratings on a free agent or two in the same way a pair of AGMs could make a call about how a free agent looked and how the other feels about him. Has the changing field of player evaluation affected the definition of collusion?

      If a pair of number guys who know each other want to get a second opinion on a 3.5 win player, is it collusion for them to discuss if this guy’s 3.5 in a given climate is worth $3 million or $3.5 million per win?

      Fourteen of thirty teams cut payroll from 2009 to 2010, while few teams made big leaps (Minnesota, for instance). Looking around, there are a lot of teams that are somewhat hamstrung by previous contracts and simply unable to take on more veteran contracts when they have no pretensions about being a World Series contender. My favorite example of this is the San Diego Padres. According to Cot’s Baseball Contracts, the team only has 9 players making 7 figures and only 2 others not making the minimum for their years of service. Their only veteran obligations in 2011 are a $500k option on Torrealba and $600k to Garland. Why should they be in the market for anyone other than a 25th man/clubhouse guy like Matt Stairs for $700k?

      If you take teams like those out of the market as well as teams like the Cubs whose back-loaded veteran contracts failed to account for age regression, you start to have a shrink in open roster slots. Then there’s STL and the Twins, who spent the off-season focused on Pujols and Mauer, respectively. The money goes to them first.

      If the players have a problem with the Orlando Cabreras and Jon Garlands of the world waiting all winter for a phone call, then maybe they should consider bringing some better options than revenue sharing to the table. Johan Santana makes $21 million, 50x more than Jon Niese’s $402k. This doesn’t leave a whole lot of room for the guys in the middle. Developing from within, keeping the wheat, waiving the fungible chaff, and developing more from within (or developing, selling high, and repeating) work better in the current climate.

      The Cubs took Theriot (a 2.5-3.0 win player) to arbitration over $800k this year, but meanwhile they are paying Alfonso Soriano (last 3 WARs: 5.6, 3.1, -0.7) $19 million this year alone. If borderline starter/reserve position players and passable 4-5 starters want contracts, they have to recognize:
      a) that they’re competing for jobs with young players on scale;
      b) that it isn’t their job competitors they are fighting for money with;
      c) and that 20+ teams know by any given February that it isn’t going to be their year.

      I’m not saying that collusion doesn’t exist. I’m not saying that it’s not happening. Nor do I claim to know the agreed-upon definition of collusion in MLB (remember: MLB and insurance companies are the only 2 anti-trust exemptions, so real laws don’t matter). But teams are getting smarter a lot faster than players still riding high on that 2004-2007 wave of big contracts.

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  10. pft says:

    In business and politics, the leaders seek to control information. They do this primarily with the carrot rather than the stick (censorship). One way to do this is to offer jobs, provide access to information or people not readily available to the public, grants, donations, etc.

    Now, on the subject of MLB, what if some genius in MLB FO thought that it might be a good idea to devalue those players in shorter supply, the slugger who does not play very good defense. Remember prices follow the law of supply and demand. The supply is what it is, so you reduce demand, and prices fall.
    Good defensive players are a dime a dozen, so supply will usually exceed demand and prices will stay low .

    A guy who hits 35-40 HR is a relative rarity, even in the juiced era. HR’s are popular, fans love them, such players demanded high slaries in the past, so fans must be convinced somehow that a guy who hits 35-40 HR is not as valuable as a guy who its 20 HR and plays good defense (larger supply than the 40 HR guy who plays poor defense). And if there are not enough HR’s being hit, simple, just juice the ball a bit like they did in 1993-1994. The main difference is you won’t have so many hitting 50-70 HR’s

    Jason Bay, hits 36 HR, knocks in 119 RBI, yet some fans are convinced his defensive woes offset his good offense, and that RBI’s are not important, and acquiring a 37 yo who plays good defense but is not the hitter Bay was is deemed a wise decision. It’s easy to convince people, just say the experts believe it to be true and the “statistics” prove it. You can’t argue with statistics derived from models with many free parameters and unproven assumptions.

    More importantly, the emphasis on defense means players are well into their declining years by the time they become FA, while sluggers are just reaching their declining years. Defense tends to decline more rapidly than power. Thus, less money will be offered to those having the highest WAR (which weights defense highly) on the basis of age related decline potential.

    The net result is less money will be offered to older players, especially those who only slug and knock in runs. We see this today. The indentured servants are where the real money is made, paying players less than market value for 6 years, then say they are old and their defense is declining when they become free agents.

    Now you might argue that teams are competitive, they all want to win, and will make offers based on their best interest. Thats not so. MLB is a monopoly. Good teams that generate the most revenue pay a significant amount of that revenue to the smaller market or bad teams. Signing a Jason Bay to improve a poor teams weak offense can easily be discouraged by the richer more influential teams threatening to reduce revenue sharing (as JWH has done). Either stay with the program (collusion and capping a certain type of players salary to minimize wage inflation paid mostly by the richer teams), or risk losing those badly needed revenue dollars.

    If it smacks of a conspiracy theory it is because it is one. I was in an industry where 3 companies dominated. All 3 CEO’s would meet on an annual basis in a casual setting, and discuss measures to control costs (capping employees salaries-those jumping from one company to another, avoid price reductions-no price wars, and limit benefits to clients-they have no other place to go). It happens.

    Not saying it is happening in MLB and the SABER world, since I don’t know this. But if it was happening at the MLB level, getting the SABER world onboard as a 3rd party observer supporting their offers helps them in a collusion defense. A number of the most prominent SABER guys get jobs with MLB teams. Tango I believe is working for Toronto now. Bill James works for Boston, etc

    The SABER industry is rapidly growing, books, subscriptions, etc.
    These sites all need data provided by MLB or a MLB suppliers for their work. Discounts and free access may be offered, so those relying on them are compromised to some extent. Not saying they are dishonest or anything, or that they don’t believe in what they are saying, but you don’t bite the hand that feeds you. My dog knows he did something “good” when he gets a reward, and tries to do good more often to get that reward, and so it works with people.

    And to Jason B. The house the bank paid for (90%) was paid for mostly with money that did not exist until the bank wrote the check. They create money (which is created on a ledger and stored in a hard drive, only a small percentage is printed), while you work for your money. Over the life of the loan, you will pay as much in interest as in principal. It is a myth that they loan out other peoples deposits to cover the loan (thats a very small percentage of the loan). The banks do not create money for interest (except for government debt), thats why we have these huge recessions from time to time. It’s called profit by foreclosure. While you may argue that some banks go under, why would they do this, it’s because fewer banks mean less competition, and the bigger banks grab a bigger piece of the pie, so will earn even more during the next boom (which will be followed by a bust). For every loser there is a winner.

    Just a matter of time before the MLB starts it’s own bank, then they can loan money to weak teams instead of revenue sharing. John Henry might be working on it with Bud as we speak.

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  11. CJ says:

    If you are interested in reading about the history of baseball collusion, the wikipedia article is pretty good:

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