Friday, August 9, 2013

Baseball's Collective Action Problem

The following article is a guest contribution by written by Evan Zepfel.  Zepfel is a Portfolio Management Analyst at PAAMCO, is a graduate of Harvard College, was a member of Harvard’s Varsity Water Polo team and served a sports editor for The Harvard Crimson.

Alex Rodriguez will appeal his 211 game suspension.

On Monday, Major League Baseball announced an extended suspension for Alex Rodriguez in accordance with the Joint Drug Prevention and Treatment Program (JDA) and the 2012-2016 Basic Agreement (CBA).  The suspension is scheduled to last through the 2014 season (including playoffs), meaning that Rodriguez will be ineligible to compete for more than 200 games and lose over $30 million in salary if the suspension is upheld in the appeals process.  However, MLB based the suspension partially on violations of MLB’s drug policy, giving Rodriguez the ability to appeal the suspension and making him eligible to play until the appeals process is complete.

MLB’s JDA specifically delimits penalties related to usage of prohibited substances.  In this case, Rodriguez’s suspension is clearly greater than the pre-determined suspension for the use of a prohibited substance.  According to section 7(A) of the JDA, a player who “tests positive for a Performance Enhancing Substance, or otherwise violates the Program through the use or possession of a Performance Enhancing Substance” for the first time will be subject to a 50 game suspension. 

The JDA also lays out penalty schedules for other offenses, but unless MLB is accusing Rodriguez of the ‘sale or distribution of a prohibited substance,’ or of using stimulants or other illegal drugs, the suspension related to JDA infractions should not be longer than 50 games.

Based on the provisions in the JDA, it seems that newly-appointed arbitrator Fred Horowitz would not be overreaching his bounds should he reduce Rodriguez’s suspension to the pre-determined 50 games.  When considered in the context of arbitrator George Nicolau’s decision regarding Steve Howe in 1992, lifetime bans or other extended suspensions are unlikely to be upheld, on the grounds that they are not “reasonably commensurate with the [specific] offense.”  However, since the punishment in this case comes in the wake of “violations of [both] the Joint Drug Prevention and Treatment Program and the Basic Agreement,” it is possible that a longer suspension would be justified and defended. MLB has not identified specific provisions in the CBA that Rodriguez has violated, although it is likely that the Commissioner invoked the “conduct detrimental” clause in Article XII, Section B of the CBA, allowing him to punish the 14-time All-Star for an extended period.

In addition to arousing widespread confusion regarding suspensions attributable to MLB’s drug policy, the Rodriguez suspension incident demonstrates that the JDA is inherently flawed, as it creates a collective action problem among the 30-team owners.  None of the owners individually are incentivized to prevent their players from using PED’s; they are positioned to gain from the successes of artificially enhanced athletes, and do not personally stand accountable when one of their players is suspended.  Rather, they are no longer required to pay the suspended player for the duration of the suspension, which could save certain owners (in this situation, Hal Steinbrenner) tens of millions. 

The JDA does not provide sufficient disincentive for owners to sign PED users, and many owners are willing to take the risk of losing a player for 50 or 100 games if doing so allows them to win more games, sell more tickets, or sign a bigger TV contract.  Only a provision in the JDA punishing owners for signing players who use PED’s would truly align the interests of the owners with those of the commissioner.

The Commissioner, however, is responsible for the well being of the league as a whole (on behalf of the owners), and is thus incentivized to make the league appear as fair and as legitimate as possible. 

While PED’s might make for wealthier TV contracts and increased ticket sales in the short term, they are assuredly a detriment to the league in the long run.  Fans will shy away from a league that they perceive to be illegitimate and replete with cheaters, at which point the owners’ pockets will suffer. 

Selig is cognizant of his unique responsibilities, noting in his statement Monday that “Baseball must do everything it can to maintain integrity, fairness and a level playing field.”  It is important to remember that the Commissioner is the representative of the collective will of the owners; it is this responsibility that forces him to view such situations in a different light and consider the long-term impacts of PED use, and contributed to his decision to suspend Rodriguez for more than 50 games.

Even the players, who face the harshest penalties in the context of the JDA, are not substantially disincentivized from using PED’s, as a number of major and minor-leaguers have been disciplined since the program was put into place.  Since the penalty for an initial infraction is a mere 50 games (less than 1/3 of a major league season, or just over 5% of an average MLB career), the risk/reward decision inevitably favors using PED’s in the minds of certain players.  A player making minimum salary over that period stands to make more than $2.5 million over the lifetime of his major league career, even with the 50-game suspension taken into account.  When faced with a decision between toiling in the minors for years and the potential to make it to the big leagues (and earn big league salaries), it is understandable that many players make the decision to use PED’s.

Commissioner Selig was well intentioned in handing down an extended suspension to Rodriguez on the basis of violations of the JDA and of the CBA, given the specific circumstances of the situation.  However, it would behoove him to disentangle the separate parts of the suspension to the general public, in an effort to clarify his rationale for going beyond the predetermined penalty for PED usage.  Similarly, he would be better off punishing Rodriguez exclusively via the JDA, which was intended to be the sole source for punishments related to PED’s.  Section 7.G(2) gives the commissioner power to suspend a player for “any violation of Section 2 [Prohibited Substances] not referenced in Section 7.A through 7.F,” allowing Selig to attribute Rodriguez’s additional suspension to further violations of the JDA not specifically related to his usage of PED’s.

Since Selig wants to punish Rodriguez more harshly than the other players involved in the Biogenesis scandal, he should maintain the 50-game suspension dictated by section 7.A of the JDA, and utilize his power as commissioner to add time to the penalty by employing section 7.G (2) of the JDA rather than by utilizing the ‘conduct detrimental’ clause in the CBA.  By using both the JDA and CBA to punish Rodriguez for connected offenses regarding the Biogenesis scandal, the commissioner undermines the initial purpose of the JDA and potentially reopens discussion regarding his powers under the next iteration of the CBA, which will come into effect in less than four years.

The current structure of the JDA does not do nearly enough to protect the integrity of the game, especially with the widespread publicity of the recent Biogenesis scandal and the related suspensions.  The unprecedented and currently unsubstantiated 211-game suspension for Rodriguez further tarnished the image of the game and the commissioner, as it undermined the schedule of preset penalties agreed upon in the JDA. In light of the recent situation, the players and owners should revise the JDA to punish PED users more harshly or face the reality of a loss of legitimacy, and thus, the beginning of the end of baseball.

Sources:
MLB 2012-2016 Basic Agreement
MLB Joint Drug Prevention and Treatment Program
Michael McCann, “Analyzing the legal fallout from Alex Rodriguez’s 211-game suspension” 
Peter Carfagna, “Sports and the Law: Examining the Legal Evolution of America’s Three ‘Major Leagues’”
<http://mlb.mlb.com/news/article.jsp?ymd=20130805&content_id=55963494&vkey=pr_mlb&c_id=mlb>
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