Analyzing A Case Study

 

Instructions

Analyzing a Case Study

Bargaining Strategy in Major League Baseball

Review Case 4: Strategy in Major League Baseball from the textbook, Negotiation: Readings, Exercises, and Cases. After reading the case, address the following prompts:

  • Assess the issues of conflict between the players and management during the history of the sport.
  • Analyze mistakes made in negotiations and the effect of mistakes on the processes and outcomes of negotiations.
  • Evaluate the interests and goals of each of the parties.
  • Analyze the best solution and strategy for all parties involved, including each partys best alternative to a negotiated agreement (BATNA).

Submission Details:

  • Submit your answers in a 3 page 

 Case 4 Bargaining Strategy in Major League Baseball 

Introduction During the winter of 20052006, Donald Fehr was faced with some monumental decisions. As the head of the Major League Baseball Players Association (MLBPA), he had been arduously preparing for the upcoming round of negotiations between his union and the owners of the 30 major league baseball clubs (collectively known as Major League Baseball, or MLB). Being the representative of the labor force in a multi-billion dollar business was no easy task, even for a seasoned negotiating veteran. The healtheven the very survivalof his union had hung in the balance each time a new basic agreement (the uniform contract between the two sides) was negotiated, and Fehr couldnt help but remember past work stoppages, which hurt both sides tremendously. Fehr knew that hard bargaining with the ownership group might cause another strike or lockout, but with attendance levels at the highest they had ever been in the history of the sport, he needed to gauge his constituents (and his oppositions) resolve to decide how to approach the process. History The Early Years Tumultuous labor relations in professional baseball were almost as old as the sport itself. What started as a gentlemens game in the mid-1800s quickly turned into business when the general public started taking interest in the sport. Throughout the second half of the 19th century, different leagues were formed by American industrialists whose intentions were to capitalize financially on the sports growing popularity. Only two leagues stood the test of time, the National League, formed in 1875, and the American League, formed in 1901. In 1903 the two leagues merged to become Major League Baseball, which quickly became the most profitable sports business in America. When players began to realize that their unique skills could be marketed to the highest bidder, nervous owners began to seek ways to ensure that their moneymakers would not jump ship. In the most controversial move in baseballs early history, the reserve clause was developed and implemented into player contracts. In a move that some considered a form of outright collusion, owners agreed amongst themselves that after each season, each club was able to reserve five players that could not be sought after by the other teams. In this regard, the five players on each team that were reserved had no right to switch teams if they found the conditions deplorable or found that they could make more money elsewhere. Eventually this clause would be written into all contracts, and players who chose to dishonor the clause were blacklisted from organized baseball. Opposition to the reserve clause became a rallying point for the players, and several unions were formed over the next few decades in an attempt to give players bargaining leverage and a bigger voice. The Brotherhood of Professional Base Ball Players (1885), the Players Protective Association (1900), the Baseball Players Fraternity (1912), the National Baseball Players Association of the United States (1922), and the Association of Professional Ballplayers (1924) all had formed, in part, to oppose the reserve clause. However, those unions had trouble sustaining member interest and financial backing and eventually disbanded. During the time of these unions formations, the anti-union sentiment was high among the general public due to several highly publicized instances of labor union violence. The unions failures meant the owners maintained complete control over their players salaries, benefits, and livelihoods. Illegal Restraint of Trade? By restricting the movement of labor from team to team, which in almost all cases would be over state lines, it seemed to many that the owners were illegally restraining trade, a violation of the Sherman Antitrust Act. Several legal challenges were mounted against organized baseball by rival start-up leagues who were angered when they were denied access to the player market. In 1922, the United States Supreme Court ruled that baseball was a sport, not a business, and since it was conducted in local ballparks for local fans, it was mainly involved in intrastate commerce. The Federal Baseball Club v. National League decision (aka the Holmes decision, named after Judge Oliver Wendell Holmes) would ultimately give baseball an antitrust exemption. In 1953, the Supreme Court would reaffirm the ruling after a player (George Toolson of the New York Yankees) filed suit, claiming the reserve clause was illegal and was threatening his livelihood. Chief Justice Earl Warren reiterated that baseball was not within the scope of federal antitrust laws,1 and that action taken against the exemption should be by the U.S. Congress, not the courts. The reserve clause would remain untouched and embedded in players contracts until the mid-1970s. The Major League Baseball Players Association In 1946, a Mexican league was hiring several prominent U.S. players, creating competitive pressure on American player salaries. U.S. owners wanted to avoid a bidding war with the Mexican League. That same year, a labor lawyer convinced U.S. players to organize the American Baseball Guild. This unions existence concerned management enough to cause them to bargain over a uniform players contract. The contract called for a minimum player salary ($5,000) and a guaranteed pension plan. Players contributed the bulk of the retirement funds, paying into the pension plan until their tenth season; owners contributed to it primarily from radio, television, and post-season ticket revenue. The union was short-lived, fading into obscurity by the end of that same year; however, the pension fund endured. By the early 1950s funds for the pension plan fell short, and the players felt it was in their best interest to organize once again. In 1953, the Major League Baseball Players Association (MLBPA) was formed to serve as the players main bargaining body and the owners implicitly voluntarily recognized the union by allowing it to operate the pension fund and by contributing to the fund. The union was led by player representatives and legal advisors until 1965 when it hired its first full-time executive, Marvin Miller, an economist with the Steelworkers Union. Miller brought with him experience in industrial relations and a hard-line bargaining approach. In response, the owners formed the Major League Player Relations Committee (PRC) to serve as their negotiating body. In 1968, the two sides hammered out the 1st Basic Agreement, a uniform contract that established (among other things) a formal grievance procedure for players and a significantly increased minimum salary level. Baseball historian Lee Lowenfish writes, [the owners] conceded more rights in the 1st Basic Agreement than in all previous decades of the sport.2 The Early 1970s: Players Challenge the Reserve Clause In 1972, the MLBPA and the PRC ran into trouble while negotiating the 3rd Basic Agreement. The major disagreement between the two sides stemmed from the amount the owners were willing to contribute to the players pension fund. Players union head Marvin Miller claimed that there was a surplus of pension funding that could be used to offset increased cost-of-living expenses that the players had been incurring. The owners showed solidarity (which has been rare throughout the leagues history) by refusing the MLBPAs demands. The union even went so far as to file an unfair labor practice claim with the National Labor Relations Board when the owners refused to share certain financial information with them (the information was eventually provided). On April 1, 1972, a day that the Sporting News would call the darkest day in sports history,3 the players went on strike. The strike did not last long, as the two sides eventually reached a compromise on the contribution amount ($500,000). The half-million dollars that the players received in increased pension contributions was far less than the salary losses they incurred during the two-week long strike. The owners, who had talked the union down from their initial proposal of a $1 million increase in contributions, had lost $5.2 million in revenue.4 Shortly after the strike of 1972, the reserve clause was threatened once again. Outfielder Curt Flood of the St. Louis Cardinals challenged the legality of the reserve clause in court, and in Flood v. Kuhn, the Supreme Court once again upheld the Holmes decision. Flood was successful, however, in attracting Congresss and the medias attention to the reserve clause issue. In 1974, pitcher Catfish Hunter sought to become the leagues first free agent when the owner of his team (the Oakland As) dishonored a provision in his contract. Hunters case went to a three-man arbitration panel, which had been created and outlined in the 3rd Basic Agreement. The panel voted 2 to 1 that Hunter had the right to shop his services to other clubs since his own club did not honor the legally binding contract. Hunter became baseballs first free agent. A year later, two players (Dave McNally and Andy Messersmith) challenged the clause once again. The two teams that held the rights to McNally and Messersmith had renewed the players contracts for the 1975 season, and for different reasons,…