The history of team control over players

Earlier this week, Major League Baseball made its first attempt at resolving its self-inflicted lockout by submitting the league’s first proposal of 2022 to the MLB Players Association. As part of our coverage of this event, we decided to take a look at the history of the “core economics issues,” beginning with Thursday’s history of the Competitive Balance Tax and how it represents ownership’s commitment not to competitive balance, but low player salaries. Today, we’ll dive into one of the players’ unions biggest demands: the reduction of service time requirements for free agency from six years to five years.

On Thursday night, MLB insider Jon Heyman tweeted the following:

In many ways. this tweet absolutely sounds like it comes from the mouth of commissioner Rob Manfred, and at the very least represents Heyman’s attempt to stick to the party line so that he doesn’t lose his job at the MLB Network (because if Ken Rosenthal isn’t safe, nobody is). But as many commenters on Twitter pointed out, that argument about competitive balance sure sounds familiar.

The beginning of the story will inform us of how we got here. Once upon a time, the two early professional baseball leagues, the National Association and the National League, essentially had total unrestricted free agency, although it was not yet given that name (instead, they called it “revolving”). Although the National Association, which was a loosely-structured organization, did not particularly care during its run from 1871-75, the National League felt that this freedom among players hurt their bottom line, and leadership set out to stop it upon the NL’s establishment in 1876. They initially did so informally via collusion, as each team would inform the others about which five players they would “reserve” when signing players; because some teams ignored the unofficial reserve lists, the NL owners proceeded to formalize the rule on December 6, 1879.

Over the course of the 1880s, the reserved list grew to encompass the entire roster, and owners from different leagues began to respect each others’ reserve lists. Despite attempts by the players to fight the system — most notably through the short-lived Players’ League, run by the Brotherhood of Professional Baseball Players in 1890 — the NL’s deeper pockets allowed the reserve system to stand unchallenged for 40 years. Although, strictly speaking, the 1922 Supreme Court Case Federal Baseball Club v. National League did not discuss the reserve clause, the Court’s decision to rule that Major League Baseball was exempt from the Sherman Anti-Trust Act in essence codified the league’s immense control over the sport, including the players.

The prevalence of the reserve system meant that the only time players had any agency over where they played was at the beginning of their careers. Naturally, the very next thing that MLB set out to do was destroy that agency in an attempt to limit signing bonuses. First, they began by forging agreements with minor leagues to acknowledge each other’s reserve lists, so that the only way a player could jump from the minor leagues to the majors was if an MLB team purchased his contract.

This too, however, represented a higher financial commitment than MLB liked — not to mention that several teams, such as Jack Dunn’s Baltimore Orioles of the International League (unrelated to the modern ballclub), decided that it was more profitable to build a superteam in the minors and not sell MLB-caliber talent to the majors; as a result, they instituted a minor league draft. Branch Rickey’s St. Louis Cardinals then began developing the first minor league farm system, removing the last bit of agency that minor league teams had. To that was added the amateur draft, eliminating the last bit of agency that players had, and it was this system that dominated for decades.

That changed, however, in the 1960s and 1970s. First, Curt Flood, with the backing of the MLBPA, sued commissioner Bowie Kuhn and the league, challenging his trade to the Philadelphia Phillies and arguing that it was unlawful for teams to renew a player’s contract in perpetuity. Although he lost the case, Flood v. Kuhn set in motion the sequence of events that led to the end of the reserve clause system, allowing baseball to fall under the National Labor Relations Board.

As part of the 1972 strike, the MLBPA received the right to independent arbitration in the new Collective Bargaining Agreement. Three years later, Dave McNally and Andy Messersmith played the 1975 season without a contract, and then argued in front of an independent arbitrator that they were free agents because their previous contracts did not specifically state that the reserve clause could be applied to a season played without a signed contract. Arbitrator Peter Seitz agreed with the players’ interpretation; the reserve system was, for all intents and purposes, dead. (The deep-pocketed Yankees soon profited from this change, as free agent additions Catfish Hunter and Reggie Jackson were pivotal for their back-to-back champions from 1977-78).

The owners’ reaction to the Seitz decision was, predictably, to lock out the players, arguing that the end of the reserve system would be the death of the sport. As the league played over the summer without an agreement in place, league and union officials hammered out the first CBA, which allowed freedom of movement for players while keeping the reserve system in place for players early in their careers. In essence, players would be subject to the reserve system for their first two seasons, followed up by four years of salary arbitration, before finally being allowed to file for free agency. It was not a free market, however, as players were only allowed to negotiate with the 12 teams that received the right to negotiate with them in what was called a “re-entry draft.” While this was allegedly intended to prevent one team from signing every free agent, its real intent was to suppress the market.

In negotiations for the 1980 CBA, league officials attempted to implement a system in which teams that signed free agents had to give a player of comparable value to the player’s previous team. Because this system had essentially frozen free agency in the NFL and NBA, the players were against it, leading to a short-lived compromise: the Free Agent Compensation Draft. It worked similarly to an expansion draft for teams that lost top free agents. This setup made nobody happy, and when George Steinbrenner went on a personal crusade to end it after the Yankees lost top pitching prospect Tim Belcher because of a technicality, nobody stood against him.

As part of the 1985 CBA, the league agreed to end the free agent re-entry draft and allow an open market in exchange for increasing the amount of pre-arbitration years from two to three. This would be the last major change to the system in more than 30 years, with the only adjustments since then being alterations to how free agent compensation was calculated (it was originally a system based on arbitration before the current Qualifying Offer setup was instituted in the 2011 CBA).

This system, as we all know, is laden with holes that allow teams ways to keep control over their players. From service time manipulation to option years, teams have a number of ways to keep players from hitting free agency as long as possible. In the most extreme of cases, a player who signs at the age of 18 could be unable to hit free agency for 14 years (five in the minors before being added to the 40-man roster, all three option years taken before being promoted to the Major Leagues, three years pre-arbitration, and three years of arbitration). As has always been the case, the primary motivating factor for these rules has been keeping player costs down. Because of this, it’s extremely clear why the MLBPA seeks to reduce this control, and also why the league’s argument that it would ruin the sport holds as much water as a spaghetti strainer.