ADV 378S Lecture Notes - Lecture 16: Signing Bonus, Deferred Compensation, Revenue Sharing

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10 May 2016
ADV 378 Apr 6th:
MLB: The Reserve Clause
oOwners could keep players for an infinite amount of time while dictating their
Curt Flood vs. Bowie Kuhn
oFlood, an all star, refused a trade to the Phillies, challenging the Federal Baseball
Ruling which upheld the reserve clause
oSupreme court rules 5-3 against him, saying the rule was archaic but protected
because congress had chosen to do nothing about it
Charles Finley and Catfish Hunter
oPlayers understood what was possible and union solidarity ensued. Players held
out for free agency planning to use arbitration. Arbitration interpreted the
reserve clause as relevant for one year, not life.
oPlayers routinely would try to sue owners using anti-trust laws that no group of
owners could ban together to restrain trade
o1922: courts rule that baseball was exempt from anti-trust law, not interstate
trade, but localized exhibition
oLegacy of dominance of owners briefly reduced when new American League was
born, but ended when leagues merged
Challenge to Reserve Clause
oFlood challenged court, refusing trade, lost, but awakened public sentiment to
the unfairness of system
oInadvertent breach of contract by Oakland A’s, failing to renew his reserve
clause, won freedom in arbitration
oSigned a huge deal, prove of reserve clause is bad and limiting value
Marvin Miller
oExec director of the MLBPA in 1966
oFrom struggling/ineffective to most influential union is sports
o1966: FIX
1976 CBA
oplayers didn’t want total free agency
oallow owners to discriminate against newer/declining players
ounion went to free agency for veterans, believing if they received market level
salaries, others would benefit from ripple effect
First 2 years: players must accept team’s terms
3-6: disputes referred to arbitration
After 6: players are free agents
1985-1987 League Collusion
osalary rose from 50,000 in 76’ to 370,000 in 85’
oto stem the growth, commissioner Peter Ueberroth encouraged owners not to
sign each others free agents in order to keep costs down
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