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Monday, July 23, 2007
Baseball Draft Bonuses Down This Year Despite Skyrocketing Revenues

In the June 25 - July 1 issue of Sports Business Journal (subscription only), Liz Mullen reports that the MLBPA is investigating complaints from agents that major league clubs are being threatened by MLB to negotiate "league-recommended" signing bonuses for this year’s amateur draft picks that are about 10 percent lower than last year’s bonuses ("Baseball union reviews complaints"). However, MLB executive VP Rob Manfred denied that clubs were being told that recommended amounts were mandatory and that clubs were being threatened with penalties if they didn't sign the player for the recommended amount. But he did tell Mullen that the recommended amounts overall were "roughly 10 percent" below last year's recommendations due to the changes in the CBA negotiated late last year, which increased clubs' leverage in negotiating contracts with draft picks. According to Manfred, "Because of that increased leverage, we fully expect that (clubs) would pay less." Last October, I discussed these negotiated changes, which include: (1) clubs that fail to sign their first or second round draft pick will receive the same pick in the subsequent draft as compensation, and (2) pushing the signing deadline back to August 15. [However, I reviewed the 220 plus page document and did not find these provisions. These changes can most likely be found in the Major League Rules, which are adopted by the league.]

I've always thought that the baseball draft operates like the "wild west" because there are rules in place that are consistently violated and nobody cares. For example, scouts and agents frequently violate the rules by engaging in "pre-draft dealing," meaning that the scout and agent verbally agree on a signing bonus amount prior to the draft. But then, these verbal agreements are not legally enforceable anyways. Also, the baseball draft is unique from the other sports because agents working on behalf of players don't even have signed representation agreements (the draft takes place during the college baseball post-season and signing agreements with agents jeopardizes their NCAA eligibility). In baseball, agents also consistently violate the NCAA rules by communicating and negotiating directly with the clubs before and after the draft.

And getting to the subject of this post, my "lawyer brain" has also never understood this concept of "league recommended bonuses" in baseball. These recommended bonuses are sometimes referred to as "slot money," meaning that the player gets the league recommended bonus amount for the slot (or pick) in which the player was drafted. Each year the league has discretion to set the amounts of these recommended bonuses, yet the clubs are not required to adhere to the league recommended bonus amounts. And if a club suffers adverse consequences by the league for paying a player more than the recommended bonus amount, it would constitute a violation of the CBA. So then in that event, do the league recommended bonuses have any teeth? By the way, is anybody asking themselves at this point, if the clubs have greater leverage this year as a result of the new CBA revisions, then why would it be necessary for the league to even reduce the recommended amounts from last year, let alone threaten the clubs?

Well, amazingly (sarcasm), bonuses are in fact down exactly 10 percent this year across the board! Baseball America reported last week that "all 15 first-round picks who have come to terms have signed for slot money or less, and all of those slots have represented a 10 percent reduction from the 2006 slots." [I think they should just rename recommended bonuses as "restraints on trade."] Mullen noted that "compensation for rookies in other major American sports has been increasing, but agents say that signing bonuses for baseball players selected in the amateur draft have been down or flat in the last few years despite skyrocketing MLB revenue." Although approximately half of the players in the first round have yet to sign and there is still three weeks left until the signing deadline, I wouldn't expect the remaining bonuses to be much more than slot money when clubs will now get an additional draft pick in the same slot next year if they don't sign them this year.


Good post. Well, there's no doubt that the wild west analogy is a good one. This downturn is the byproduct of years of treatment for a new disease found in the Physician's Desk Reference Manual: PTSBD: Post Traumatic Scott Boras Disorder, a disease common among agents and general managers involving a lethal combination of brainwashing, hype, and the male ego. Possible treatment: conspire to lower bonuses in violation of federal antitrust laws. That, of course, requires further treatment requiring a lethal dose of PerSetra: A new drug which requires the teams to pay players and agents even MORE money after a visit to the courthouse.

Anonymous Anonymous -- 7/23/2007 9:56 AM  

Why couldn't an "amateur" player retain an attorney to represent him in dealing with a team and still retain his "amateur" status? Teams have scores of lawyers working for them, why shouldn't a player have that right as well without jeopardizing his status.

Anonymous Anonymous -- 7/23/2007 10:10 AM  

Anon 9:56,

Thanks for the comment. I don't think anybody can blame Boras. He's just doing his job working within a system that doesn't impose any limits via caps or rookie bonus pools. Ironically, he's the one that is complying with the rules by not engaging in pre-draft dealing. I just don't understand why the league and union beat around the bush with this stuff. The two sides should just agree on some sort of cap or rookie pool amount. But the union doesn't want that, so it agrees to this middle ground approach of allowing the league to set "recommended" amounts, which just creates disputes every year -- and rightfully so, because what the heck does it mean legally? I think the two sides need to bring certainty to this thing, which means ditch the recommended bonus concept and agree (or not agree) on a cap/bonus pool concept.

Anon 10:10,

The NCAA allows amateur players to retain an attorney, but the second he has communications about the player with a club he becomes an agent in violation of the rules. I wrote a law review article advocating that the NCAA should adopt an exception to the "no agent rule" for college baseball players for a variety of reasons due to the uniqueness of the sport compared to the other sports. [The article is accessible in my SSRN account attached to the blog if you are interested.]

Blogger Rick Karcher -- 7/23/2007 11:18 AM  

So, does this mean MLB is opening itself up to another collusion suit? Or are the first-year draftees outside of the scope of the CBA on this issue? And if they are outside of the scope of the CBA then how does MLB have any authority in setting an August 15th signing deadline?

Anonymous Anonymous -- 7/23/2007 11:41 AM  

In refference to the attorney retained by the player, wouldn't that attorney also have to register with the MLBPA as a player agent in order to even be able to negotiate with the MLB? If I remember correctly, the NCAA rule that allows a player to hire an attorney is limited to a "family advisor" capacaty, basically just to instruct the player on the risks/benefits of signing with an agent or team and thereby loosing your NCAA eligibility.

Blogger Jimmy H -- 7/23/2007 11:53 AM  

Anon 11:41,

Excellent question, and extremely complicated. First, the anti-collusion provision in Article XX of the CBA, by its terms, applies with respect to major league players (unless the union and league have otherwise agreed to apply it to amateur players).

So then you asked, if amateur players are outside the scope of this provision, then how does the MLB have the authority to set the Aug. 15 deadline? Art. XVIII of the CBA provides that any changes to the MLB Rules that alter a major league player benefit shall be negotiated with the union. This situation is analogous to that of In the Matter of the Arbitration between MLBPA and the 28 Major League Clubs. Long story short, revisions to the draft rules that reduce the value of draft picks has an impact on major league players because it changes the value of the draft choices a club must surrender in exchange for signing a Type A or B free agent, which alters the economic bargain underlying the free agent compensation system. Therefore, the recent changes to the draft would have to be negotiated with the union. The reports I have read state that the union and the league negotiated the draft changes (but as I said in my post, those provisions are not in the CBA).

Could somebody successfully challenge any of this on antitrust grounds? No way. (1) Baseball's antitrust exemption; (2) the Curt Flood Act expressly states that any conduct, practices or agreements regarding minor league players, amateurs or the first year player draft are exempt from the antitrust laws; (3) and all the proponents of the Clarett decision could even argue the issue is a mandatory subject of collective bargaining and exempt under the non-statutory labor exemption.

Blogger Rick Karcher -- 7/23/2007 12:35 PM  


Enjoyed the post, but I'm not sure it's accurate to say that "the Curt Flood Act expressly states that any conduct, practices or agreements regarding minor league players, amateurs or the first year player draft are exempt from the antitrust laws."

Instead, the Act expressly states that the antitrust laws do apply "to conduct, acts, practices, or agreements of persons in the business of organized professional major league baseball directly relating to or affecting employment of major league baseball players."

The Act then clarifies that "No court shall rely on the enactment of this section as a basis for changing the application of the antitrust laws to any conduct, acts, practices, or agreements other than those set forth in subsection (a). This section does not create, permit or imply a cause of action by which to challenge under the antitrust laws [agreements regarding minor league players, etc.]."

One can at least make an argument that the only purpose of the Act was to lift the "baseball exemption" as it applied to labor issues involving major leaguers. And, rather than creating an express exemption for minor league agreements, the Act left such matters untouched and subject to the baseball exemption.

The question then remains-- what does the baseball exemption cover? Other than express removal of labor issues for major leaguers, that answer is not changed by the Curt Flood Act. It is thus still open to the courts to decide if minor league baseball issues are subject to the exemption.

Anonymous Anonymous -- 7/23/2007 1:22 PM  

Where can I get a copy of the CBA to read for myself?

Anonymous Anonymous -- 7/23/2007 1:32 PM  

Anon 1:22,

I agree with everything you said. But I assume you would agree that case precedent makes clear that the "business of baseball" is exempt (with the exception of Piazza), and thus minor league issues are exempt?

Anon 1:32,

I got my copy from the Sports Lawyers Assoc. website, of which one needs to be a member in order to have access.

Blogger Rick Karcher -- 7/23/2007 1:41 PM  


I don't think there is much clarity on the scope of the exemption. I think the "business of baseball" cases are more persuasive than Piazza and Butterworth (the state court decision), but my (admittedly minor) point was that the Curt Flood Act does not provide (or confirm) any express exemption for the minor league agreements. And, if there are more judges out there like Judge Padova, the Act won't (or at least should not) provide any support...

Anonymous Anonymous -- 7/23/2007 2:25 PM  

Professor Karcher,
Knowing that bonus money is down over the last season, what has happened to the average salary of a player drafted in a particular slot? Has a decrease in signing bonus money been met with a substantial increase in salary? Just a thought on why the decrease in bonus money could be justified, but for the record I am opposed to the idea of slot money.

Anonymous Brad -- 7/23/2007 3:00 PM  

The 2007-2011 CBA is available through the players association site at

Blogger Jimmy H -- 7/23/2007 3:40 PM  

The slot money, i.e. "the signing bonus", represents the entirety of the payment to be received by the player during their minor league years with the exception of the standard monthly pay (ranges from about $850 per month to $2500 per month as they move through the system)and meal money. Since many players never make any significant major league money, the signing bonus is very important.

Anonymous Anonymous -- 7/23/2007 5:31 PM  

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