Dexter Fowler, Casey Close, Collusion and the Value of Information

Back in February, everybody thought Dexter Fowler was going to sign with the Baltimore Orioles on a nifty three-year, $35 million contract. But then, on Feb. 25 at Cubs training camp in Mesa, Ariz., Fowler made a surprise entrance. The presumed new Orioles center fielder instead shocked the baseball world and returned to the Cubs.

Look who’s back?! @DexterFowler is a #Cub again! pic.twitter.com/yqG8Z6PYXm

— Kelly Crull (@Kelly_Crull) February 25, 2016

Fowler, it turned out, was the latest of many players to have an agreed-upon deal with the Orioles fall apart at the last minute. Issues with a physical held up a deal with Yovani Gallardo this past offseason, eventually resulting in Gallardo taking a shorter, less lucrative deal with Baltimore. The Orioles pulled an offer to Nick Markakis after a shoulder MRI in the 2014 offseason. They revised an offer of a major league deal for Tyler Colvin down to a minor league deal in the winter of 2014 after physicals revealed a back issue and did the same with Jair Jurrjens the year prior. They withdrew a two-year, $14 million offer to Grant Balfour after his physical in the 2013 offseaosn.

And this isn’t just a recent issue. Jeromy Burnitz backed out of a two-year, $12 million contract with the Birds in 1998 after his agent discovered contract language regarding the physical examination that gave the Orioles too much latitude to back out of the deal. He took a one-year, $6.7 million contract in Pittsburgh instead. Peter Angelos voided the contract of Xavier Hernandez in 1999 after a physical discovered a partially torn rotator cuff, after which Hernandez filed a grievance and won $1.75 million in a settlement. And after Baltimore agreed to a three-year, $21 million contract with Aaron Sele in 2000, an Orioles physical produced questions about Sele’s labrum, which led Angelos to reduce the length of the contract offer to two years. Sele wound up signing with Seattle instead, on a two-year, $15 million contract.

You likely have noticed a pattern by now, specifically that almost every player mentioned here has exited his interaction with the Orioles with a substantial reduction in contract value. Fowler was no exception; he was left to settle for a one-year, $8 million deal with the Cubs, including a $5 million buyout on a $9 million mutual option for 2017. Fowler and his agent Casey Close were understandably furious and sent out this statement regarding the debacle:

In my 25 years in this business, never before have I witnessed such irresponsible behavior on so many fronts. Both the Orioles front office and members of the media were so busy recklessly spreading rumors that they forgot or simply chose not to concern themselves with the truth. The Orioles’ willful disregard of collectively bargained rules governing free agency and the media’s eager complicity in helping the Orioles violate those rules are reprehensible. Dexter Fowler never reached agreement with the Orioles and did not come close to signing with the club; any suggestion otherwise is only a continuation of an already disturbing trend.”

The premature reporting of contract agreements has become so commonplace that it’s hard to imagine the hot stove season without the practice. But when the details of contract negotiations are leaked, players are almost always the losers. In some cases, the market clears while the player is held in contract limbo, as happened with Ryan Madson in 2012. He went from $44 million guaranteed from Philadelphia to signing a one-year, $8.5 million deal with Cincinnati. It would be his last big contract; he blew out his elbow before the season even started. In other situations, the stigma of questions with the physical tanks the player’s market value. Those details could become known only through leaks from team sources, as happened with Balfour, who saw his years and total contract value roughly halved after the Orioles flinched at his physical results.

Close’s anger also is rooted in the deep history of ownership’s bad-faith actions in free agent negotiations. Collusion, in my experience, tends to evoke the image of owners banding together and refusing to make major offers, whether league-wide as they did in the mid-1980s, or with a single player, as many have alleged happened with Barry Bonds in the 2007-08 offseason. But there are other ways to collude in a market, and one of them is to create a monopoly of information.

That’s exactly what major league owners did in 1987, when they were accused of collusion for the third time by the Major League Baseball Players Association. That offseason, owners created an “information bank” containing all contract offers made by any team to any free agent. The point of this information bank supposedly was to keep teams fiscally responsible. Even though there was no specific agreement not to sign free agents, MLB was found in violation of Article XVIII of the collective bargaining agreement, a bar against “concerted action.”

George Nicolau, the grievance arbitrator who heard the 1987 case, wrote the following in his opinion:

(The) information bank converted the free agency process into a secret buyers’ auction, to which the sellers of services — the players — had not agreed and the existence of which they were not aware…. (It) is evident that many clubs used the bank to report offers to free agents and to track just how far they would have to go with particular players.”

Nicolau awarded the players $65 million in lost salaries for the 1988 season. Note that the highest major league salary in 1988 was Ozzie Smith’s $2.34 million deal with the Cardinals. After accounting for the fact that collusion awards carried treble damages per the CBA, Nicolau concluded that the information bank cost players over $21 million — nearly enough to pay for the league’s most expensive contract 10 times over.

In an open market without information on bids and preferences from around the league, teams are not only forced to bid based on how much they value the player, but also have to bid defensively against what they think rival teams might be willing to pay. Creating an information bank of player valuations removes the possibility of a bidding war. Teams have been half-jokingly accused of “bidding against themselves” in attempts to thwart off competing bids in recent years — Robinson Cano’s contract with the Mariners a prime example. Instead, with an information bank, the offers in the database set a ceiling on the market for a player.

Now, teams don’t even need to do the work of creating or maintaining an information bank. Every time a team source leaks a contract offer to a reporter, who then posts it to Twitter or a rumors blog, another piece of that same kind of information bank is gained by anybody with access to the internet. When injury information is added to the equation, it only creates a more sensitive situation for the player, particularly when the medical information is disputed as it was with Balfour, Hernandez, Sele and others.

This issue has come up multiple times over the course of the current collective bargaining agreement, which began in 2012 and will run out at the end of the current season. In 2012, Ken Rosenthal of Fox Sports reported on multiple public statements that were close to crossing the line, including a “high-ranking” Rangers official telling USA Today his club didn’t plan to offer Josh Hamilton a contract longer than three years, Tony La Russa telling ESPN any contract over six years in length is “scary and dangerous,” and Tigers GM Dave Dombrowski telling reporters Detroit would not be offering contracts to departing free agents Jose Valverde and Delmon Young.

Similar accusations surfaced again in 2014, according to another report from Rosenthal. Rob Manfred, then baseball’s chief operating officer, specifically addressed the issue of public comments from team sources to media outlets, as he said, “We have had conversations with the union about public comments concerning free agents. We have a mutual interest in assuring that there is no excessive commentary.” Both stories cite the addition of “anti-collusion” rules to the latest CBA, which state that team officials cannot communicate economic terms discussed by players and clubs through the media.

So when Close railed against the Orioles and the media, this was not just the bitterness of an agent and his client watching money slip away. The players and the union fought for specific rules against the tactic that was deployed against his client. They fought for these rules because this kind of sharing of information, whether done in secret or done through the media, has caused substantial damage to players’ earning power in the past. And it doesn’t particularly matter whether team officials are creating these leaks with the intent of damaging a player’s market value; the impact is the same.

I don’t think it’s realistic to expect reporters to refrain from reporting tips they get from team employees. Reporters have to do their jobs, after all. But Close, Fowler and others caught in similar situations still have plenty of reason to hold the media’s role in disregard. Every time a team official breaks the details of a contract negotiation before things are official — particularly before a physical is conducted, as the Orioles have become so fond of doing — that official is committing a violation of the collective bargaining agreement. Is that not a newsworthy story?

The economic realities of baseball reporting ensure this angle will never be covered. Beat writers aren’t paid to be muckrakers. Any reporter who blew the whistle on leaks would soon be without any sources at all. Reporting on leaks and rumors accounts for the bulk of the industry’s production in the hot stove season. What Close referred to as the “media’s eager complicity” in spreading these rumors may be an understatement.

Marvin Miller, the legendary executive director of the MLBPA, wrote in his autobiography, A Whole Different Ball Game, about the approach of Peter Ueberroth, baseball’s commissioner in the late 1980s, toward corruption:

Ueberroth had a straightforward approach: ‘This is a business. I’m a businessman. You hired me to help improve profits, and I’m telling you how.’ He advised them against ‘spending themselves into the ground’ and offered such helpful suggestions as ‘It’s not smart to sign long-term contracts.’ As George Steinbrenner said, ‘Peter Ueberroth…got us together on numerous occasions — always with four lawyers in the room to guard against anything that might be construed as collusion — and made us tell each other how stupid we’d been in the past.’ In other words, he taught them how to collude without saying ‘collusion.’ (He was, however, unable to teach them how not to get caught.)”

So Manfred can say, “We have a mutual interest in assuring that there is no excessive commentary,” and it is technically true. The owners’ interest is in adhering to the collective bargaining agreement and avoiding another payout like that $65 million 1987 settlement (which might require an extra zero at the end in today’s market). But it is clear to me the stakes are not equal here. Teams have little reason to believe their sources ever will be exposed. Bringing a collusion case against MLB is unrealistic unless the evidence is airtight. And reports from anonymous team sources form the bedrock of baseball journalism.

Unfortunately for Fowler, Close and the players and agents who will inevitably find themselves in a similar situation in the future, these things are unlikely to change anytime soon unless the MLBPA or the baseball media discover a rebellious streak and start fighting against this behavior. Until the stakes are even — until team owners and executives actually have to worry about the repercussions from violating a rule they agreed to in collective bargaining — there’s no reason to expect teams won’t continue to leak with impunity.

References & Resources

• Jeff Todd, MLB Trade Rumors, “Orioles’ Deal With Tyler Colvin Falls Through”
• Murray Chass, The New York Times, “What’s the Deal? Angelos Is Orioles’ Dr. No”
• Marc Edelman, Loyola of Los Angeles Entertainment Law Review, “Has Collusion Returned to Baseball – Analyzing Whether a Concerted Increase in Free Agent Player Supply Would Violate Baseball’s Collusion Clause”
• Eugene Freedman, Baseball Prospectus, “Prospectus Feature: Assessing Barry Bonds’ Collusion Case”
• Michael Haupert, SABR, “MLB’s annual salary leaders, 1874-2012”
• Ken Rosenthal, FOX Sports, “Are teams’ statements crossing line?”
• Ken Rosenthal, FOX Sports, “MLB free-agent signing chill raising questions from union”
• Marvin Miller, A Whole Different Ball Game: The Inside Story of the Baseball Revolution