Baseball America On CBA Loopholes

The guys over at Baseball America have been killing it for the last few weeks, but since we try not to link to content that requires a subscription to read, I’ve held off on linking to several of their better recent stories. Today, though, Ben Badler has a fantastic read on how teams may attempt to exploit some potential loopholes in the new CBA, and it’s free for everyone to read. I’ll just quote the first loophole that he mentions, but you should click through and read the entire piece. It’s worth your time.

While the new international rules kick in on July 2, before then a team can sign currently eligible players—pretty much anyone 17 or older—and and not have the money count against its signing bonus pool.

If a trainer has an outfielder who previously might have commanded $3 million in an unrestricted market, he could still get his $3 million by agreeing to a package deal with a team. Before July 2, the team will reach an oral agreement to sign the trainer’s outfielder when he becomes eligible, say for $2.2 million, and to sign a couple of 17-year-old players from the same trainer before July 2 for a total of $800,000, regardless of how much those 17-year-old players are truly worth.

In the end, the team gets the outfielder it values at $3 million, and the trainer gets his commission on $3 million. While the star outfield prospect may get shortchanged, the trainer could work out an arrangement with his players to pass some of their money to the outfielder, since the 17-year-olds would know he’s the only reason they’re getting inflated bonuses.

It’s worth noting that this scenario – like all of the ones Badler presents – are speculative and he’s not suggesting that any of this loophole tampering has taken place, but he is showing that it may be difficult for MLB to enforce the policies they’ve put in place in order to constrain spending on international free agents.

We’ve actually seen similar cause-and-effect scenarios take place in the NBA and NFL after they implemented salary caps for their respective rosters. In both sports, teams began to hire specialists that were often referred to as “capologists”, and in many cases, their primary duty was to become experts on the nuances of the salary cap and find exploitable loopholes to allow their franchises to circumvent the rules. While those loopholes were often more straightforward than what Badler is discussing here, and were based more on strategy than outright deception, the financial marketplace of both sports adapted to the new rules in order to help teams get around the cap as often as possible.

If Major League Baseball thinks that their teams aren’t going to react in the same way and take advantage of the loopholes in their CBA in order to exploit competitive advantages, they’re likely in for a rude awakening. These clubs have too much at stake to not attempt to maximize the return they can get on their allocated budgets, and history suggests that the incentives for manipulating the rules far outweigh the potential costs of getting caught. As Badler notes, MLB is going to have to show that their new rules have some teeth to avoid widespread exploitation of these loopholes, but it’s not obvious how they’re going to be able to enforce these rules when there are so many areas that are open to interpretation.



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Dave is the Managing Editor of FanGraphs.


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geo
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geo
4 years 22 days ago

You should have mentioned that this particular article is a no-subscription-required.

Eminor3rd
Member
Eminor3rd
4 years 22 days ago

He did.

Greg
Guest
Greg
4 years 22 days ago

It really bugs me that most teams WANT to spend money because they want to bring in talented players but the policy is in place because of those owners in the minority who don’t want to pony up.

Alex
Guest
Alex
4 years 22 days ago

Controlling costs is important to every team.

Nitram Odarp
Guest
Nitram Odarp
4 years 22 days ago

Why would owners that don’t want to spend money put into place a system that actually increases the amount they’ll spend due to the much higher slot recommendations? The reason for the changes was to try and make talent level determine draft position instead of having signability play such a prominent role.

baty
Guest
baty
4 years 22 days ago

I still don’t understand why MLB wants to cap the kind of investments that low spending teams have the ability to spend proportionately heavy in. We’ve seen teams like Kansas City and Pittsburgh finally give it a go, and there’s been some success throughout. So, now Pittsburgh can’t spend 20M on an entire draft of players, but the Angels can spend 30M per year/$250M total on a single free agent player?

The risk with young IFAs is pretty significant, but it’s not like they are throwing disastrous amounts of money at these guys. I thought the system was doing decent enough. It’ll be really interesting to see how these loopholes develop and who they ultimately help the most, in contrast to the new CBA’s intentions.

Alex
Guest
Alex
4 years 22 days ago

It’s about controlling costs and what the MLBPA will agree to. They are always going to be less protective of future members than current members.

RationalSportsFan
Guest
4 years 22 days ago

It’s not merely about controlling costs. It’s about teams that can dominate the free agency market removing one of the arenas where a low-income team can reasonably compete with the big boys.

Nitram Odarp
Guest
Nitram Odarp
4 years 22 days ago

No, it’s about driving down the costs for everyone by removing leverage from the players/agents and giving it back to the teams. I swear, 90% of people have completely missed the point of these rules. No longer can players claim they want to go to college just to try and get as much money as they can. Now players will need to be upfront with teams about how badly they want to go to college and how much it will cost to sign them away. With the old system, it made sense for players to push themselves down in terms of draft position to up their leverage (Josh Bell for example), but now players need to get drafted as early as possible to get the sort of money they’re hoping to get.

baty
Guest
baty
4 years 22 days ago

If the Pirates wanted to save money, they simply wouldn’t have drafted Josh Bell.

I think you might have a dozen players of relatively significant value within each draft that plays this game. How much money is really being saved?

Nitram Odarp
Guest
Nitram Odarp
4 years 22 days ago

“If the Pirates wanted to save money, they simply wouldn’t have drafted Josh Bell.”

I’m not sure what this has to do with anything I said. The point is that baseball doesn’t want all the teams at the top of the draft to pass on Bell if they think he’s the BPA because they don’t think they can pay him enough to buy him out of college. He should be telling teams before hand if he’s really going to consider going pro for the right money and what sort of money it will take. Now there is an actual downside to him throwing out a completely ridiculous number to start since he will then fall in the draft and have no chance of getting anywhere near what he wants.

As a group, high school players generally play up their interest in college just o up their leverage and get as much as they can out of teams. Baseball is removing their ability to do just that. Now the players really need to be straight forward and their position in the draft will have much more to do with their actual talent level. That’s exactly how the draft should be functioning.

baty
Guest
baty
4 years 22 days ago

I’m saying that i don’t think it really drives down costs. I think it more redistributes or spreads cost throughout a draft… or postpones cost to a future draft.

Also, while elite HS prospects might not use that game as a verbal pre-draft tactic the same way as before, that threat of going to college will still be there. If I were a HS prospect with good projection, I’d be doing anything possible to convince teams that I’m in no threat at all of going to college to leverage the highest draft slot, then decide if it’s worth saying no to and waiting another 2 years, gambling for more.

I wonder how this influences a team’s ability to persuade your non-elite high school draft picks to sign. I’d be concerned about drafting and loosing any high school pick between the 3rd and 40th round. $50,000-$100,000 might be a pretty substantial difference to those types of guys.

baty
Guest
baty
4 years 22 days ago

I get the motivations of the MLBPA, but It was never close to anything like the NFL where you have rookies “stealing jobs” from and landing larger contracts than their current player association members. Your top MLB prospects make significantly less, and it still takes them significantly longer to make an impact at the MLB level. I don’t see any reason why this needed to be the agreement.

CJ in Austin, TX
Guest
CJ in Austin, TX
4 years 18 days ago

I think the MLBPA would contend that they were “helping” amateur players because they obtained agreement to higher slot amounts for the draft—amounts which will increase each year. Since many teams already adhered to the MLB slot recommendations, the players association may have succeeded in raising the MLB-wide amounts of bonuses that will be paid to amateurs. Even if the system hurts certain individual amateur players and their agents, MLBPA may have gotten the best they could for the amateurs out of the negotiations.

kilroy
Guest
kilroy
4 years 22 days ago

I’ll play devil’s advocate and defend the new rues (a bit). Wasn’t it just a matter of time until the yanks\sox got in the game and money whipped everyone like they do free agents?

That being said, i’d much rather seen rules that strengthen the small market advantage for low revenue teams. Maybe something like penalties for overspending on the draft\IFAs AND Being a top 10 payroll?

Bradley Woodrum
Member
Member
4 years 22 days ago

The problem is that the biggest spenders on amateur talent were the small market and mid market teams, not the Angels, Red Sox, and Yankees.

If anything, the new CBA was anti-Pirates, Rays, and Mariners more than anything else.

kilroy
Guest
kilroy
4 years 21 days ago

But how long would that last? Wouldn’t the big money teams wise up eventually?

Tim
Guest
Tim
4 years 22 days ago

They’re way too baroque requiring trainers and third party collusion with the “released player” rule:

1. Sign Player for $5k
2. Release Player.
3. Resign Player for $395k.

John
Guest
John
4 years 22 days ago

Way too blatant for that to ever happen.

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