The case for collusion

There’s been a lot of talk today about collusion. Multiple agents have made statements to the effect that there’s something fishy going on.

The conditions in MLB are always favorable for possible collusion to suppress the value of free agent contracts. There’s a relatively small number of participants. They generally know one another very well. They’re almost always talking to one another. They meet in person frequently. They have a press voracious for content and thus a willing participant in price signalling via “leaks”.

One of the main arguments against collusion this offseason is that teams are simply doing what is rational under a collective bargaining agreement that punishes excessive spending and rewards “tanking”. Supplementing that argument is that teams now more than ever value players similarly as teams have the same reams of data and then input them into the same WAR-like frameworks.

The issue with those arguments is that they don’t take the next logical step. Those circumstances make collusion both easier and more likely.

First, decreasing the number of participants in a market makes it easier to organize and less likely that someone will defect. There’s a general consensus that about 10 teams aren’t intending to compete and therefore aren’t interested in adding many free agents, particularly ones who would require significant commitments. There’s also a consensus that teams that are competing but are close to the luxury tax threshold are not interested in adding expensive free agents. And, depending upon which free agents we’re talking about, some of the remaining teams simply don’t have the financial ability to participate.

Second, if one believes that teams value players similarly, then those teams have less incentive to defect. Instead of some teams having meaningful differences in valuation, and thus an incentive to break ranks and sign a player they see as more valuable than the price the group is setting, they’re more content to stay unified and wait out a player at the group’s agreed valuation.

For those who think that keeping even 5 or 8 teams - that are competitors, after all! - united is implausible, well, one only need to look at history. Nearly every industry has had collusion, price-fixing, etc. And, back in the mid-80s, MLB itself managed to keep united front.

What were the arguments that the owners made to show they weren’t colluding? It might sound familiar:

The owners argued that what happened in the winter between the 1985 and 1986 seasons was simply the evolution of a more rational free agent market. They maintained there was not a concerted effort among teams to restrict player movement and that each team individually came to a “rational conclusion” that they should practice a form of fiscal responsibility.

I’m not saying there is or isn’t collusion. But this offseason exhibits more of the characteristics of collusion than usual. And you know what they say about smoke.