Dear Commissioner Manfred,
Right off the bat: I’m not asking for you to act with respect to the Diamondbacks’ trade of Touki Toussaint with Bronson Arroyo to the Braves for Philip Gosselin. I understand that your office has already approved it, and its impact is not great. Nonetheless, it’s not often that we perform the exercise of asking whether we’d do things differently if we were starting from scratch, and with that trade as an illustration, I think it makes sense that we take the opportunity to do that now with respect to a process set up almost 40 years ago under the “best interests” clause of the Major League Baseball constitution.
The Approval Process
After the Finley v. Kuhn litigation that decided that the Commissioner of baseball could wield the “best interests” clause to stop the sale of players, Commissioner Bowie Kuhn created a kind of standing order for teams to follow in understanding when he would like to review a trade under that microscope. A trade that provided for at least $400,000 to change hands would be submitted to the Commissioner’s Office for approval. As far as I understand, it was never actually included in the MLB constitution, its rules or its collective bargaining agreements with the Players Association. Commissioner Selig updated the figure to $1,000,000 about twenty years ago, but teams still are not required to abide by it. Essentially, teams that made a trade without going over the limit could expect that it would never be reversed under Commissioner Kuhn’s interpretation of the “best interests” clause. Teams that made a trade over that limit without approval from the Commissioner would do so at their own peril.
That process absolutely made sense when it was initiated, and it rested on two very reasonable assumptions: 1) that selling players could be bad for the game in at least some instances; and 2) that selling players could only be accomplished by trading players for cash. The basis of that first assumption has not changed, and I tend to think that it’s still true — it’s still possible, in at least some instances, that the sale of players could be bad for the game. The basis of the second assumption absolutely has changed, however. I believe when the process was first instituted, it was unlikely or unusual for players’ contracts to constitute liabilities — players were mostly making far less than they were worth to owners.
That certainly is not true now. Whereas requests for approval under this process were rare under Kuhn, they are commonplace now. In the wake of Finley v. Kuhn, the problem Commissioner Kuhn sought to avoid was of owners damaging the integrity of the game by fielding a team that really could not compete at the major league level. The sale of players at that time was a matter of choosing between keeping players and getting money. Now, it is frequently a choice between keeping nothing and getting players and money; in the game’s recent history, Commissioner approval is required under this process most often when money is being included to offset obligations under a player contract. Now, the money typically goes with the traded player, and is not traded for the player.
As things stand, then, the review process pretty much only flags trades that probably are not a concern to the best interests of the game. That has been true now for some time. What’s new is that we now know that the review process does not flag the very transactions it was designed to address.
A Change is Needed
The fact that the process doesn’t work as designed is reason enough to ask whether a change is appropriate. The reason I write to you, however, is that we’ve learned something new that suggests that either now or in the near future, a change may be necessary.
I think Commissioner Kuhn blocked the sales of Vida Blue, Joe Rudi, and Rollie Fingers because it would have meant something was taken out of baseball. The problem was the Athletics, and not the Yankees or Red Sox. Putting money into baseball is not bad for baseball; Yoan Moncada may have signed for much more than baseball’s rules hoped to permit, but no team was made worse by that signing. If anything, that signing is a testament to the fact that MLB can attract the very best players in the world — and that is certainly in the best interests of baseball.
And this is where the Diamondbacks’ situation comes in. Dave Stewart made some comments yesterday that suggest that he doesn’t understand some basic economic concepts, but I struggle to believe that’s true. A GM saying out loud that he didn’t test the market before selling a prospect, that he thought the prospect’s market value was the amount of his signing bonus from over a year prior, that just doesn’t make any sense. As a former agent, Dave Stewart absolutely must understand that what Toussaint received as a signing bonus would likely have been much higher had he had the ability to negotiate with thirty teams instead of one.
I just have trouble believing that, and we will soon find out if the Diamondbacks’ owners believe it. Either Stewart lacks some basic understanding that seems highly relevant for his position, or this is all window dressing for something a little more alarming. If it’s the first thing, Managing Partner Ken Kendrick will soon take action — you can’t have the success he’s had in the business world without understanding the importance of dynamics Stewart omitted from the thought process he laid out. If it’s the second thing, nothing will happen at all — and that would mean that Stewart is covering for Kendrick, who may be readying to sell the team.
Commissioner Manfred, it really doesn’t matter whether my read on this is correct or not; what matters is that it now appears to be possible. The process mandating approval for deals that move $400,000 or more was designed to prevent one owner from helping another to extract something important out of baseball. I suggest that with the sale of prospects now possible through a purchasing of liabilities, it’s now possible for the same thing to happen for a single team — when a team’s current owner may be extracting something out of baseball from a future version of the same team owned by someone else.
The Potential for More Serious Problems
I do believe the Diamondbacks are in good hands, so let’s use a more extreme hypothetical. Let’s say a team — call them “the Merlins” — wanted to remove a whole bunch of contracts off of its balance sheet, contracts that called for player salaries that were over what the market would be likely to pay. If the Merlins attempted to trade those contracts for prospects, they would have to send money in the deal to the other team. If the Merlins attempted to trade those contracts without sending money to the other team, there’s a way to do that: by sending prospects along with the contracts.
Of those two Merlins scenarios, it’s pretty clear that the one most likely to be against the best interests of baseball would be the latter. And yet the current approval process would require your approval only for the former. It is currently possible for a team owner to rid itself of large contract liabilities by trading prospects, and the current process that requires your approval for deals involving over $1 million would not be invoked.
Whether that’s a bad thing is up to you to decide. I think it probably is; if a team owner is motivated to sell, there’s at least a chance that it’s because the owner needs money. There’s at least a chance that the same owner needs money sooner rather than later, or is likely to have difficulty making payroll. Say a sale is on the horizon, and the public knows it, but the owner hasn’t actually stated that publicly. If a prospect-for-liability sale is completed, the appearance may be that the owner is stripping down the team in a manner that happens to be very difficult to reverse even if the team is sold soon thereafter.
Such a scenario would not be in the best interests of baseball, in my opinion. The fact that there is a process in the first place for money trades is a strong indication that taking money out of the sport is not in its interests. The potential to shake the public’s confidence in the sport’s integrity is, I believe, the exact purpose for which Commissioner Keneshaw Mountain Landis insisted the best interests clause be instituted. That potential alone is enough to set up a new process, one that would at least give you the opportunity to review the trade.
It’s not that this would ever be common, and I’m not sure it’s likely to happen at all. Teams are good policemen for themselves, because what is good for baseball is almost always what is good for team owners. It’s good for baseball when all teams are trying to win games, and a team owner is completely within his rights to prioritize wins in some seasons over others. We can trust that in most trades, it really is only that question of priorities. The process was never about protecting team owners from themselves, however. And in cases in which an owner may be poised to sell the team, the interests of baseball and team owners may begin to diverge.
Let’s also be clear: although freeing up money in one trade with a prospect can look better if examined in conjunction with another transaction, that justification will always be available even though it will not always be warranted. I once had a discussion with the head of a school within a university, who explained why fundraising was so difficult; if someone made a large donation to his school, the university would simply move funding away from it to compensate, spreading the money around elsewhere. The problem is the same. Which money would actually be the money that had been freed up? A team could always point to something. All that means is that while “financial flexibility” may be sufficient justification for a trade, it can never be a reliable proof.
A Question of Implementation
A more difficult question is one of implementation, and I do not think any replacement for the current $1 million threshold could be as simple as what it is replacing. Money is easy to recognize, and right now, the process has the look and feel of a formal rule and can be followed just as easily. How can we define a prospect-for-liability trade that you might wish to review? That’s not so simple. One of the more common kinds of trade is of a veteran for prospects, from a team with a losing record to a contender. A new process shouldn’t trigger a review of that kind of trade.
We also cannot define when a prospect is being traded in exchange for an assumption of liability, because there is no definition of prospect. We can’t limit this to when minor leaguers are only moving in one direction in the trade, because that would be overinclusive, but also because it would be underinclusive — it would not catch situations in which a “non-prospect” was included just to avoid review, a scenario like the one when the Diamondbacks sold David Holmberg for an assumption of liability to Heath Bell, a trade in which Justin Choate was included as a placeholder to make the trade permissible.
Another problem is that there can be no definition for when a player contract is a liability. One quick but underinclusive definition of “dead money” would be money owed to a player on the disabled list. That is already formally required, anyway; teams must get approval from your office in order to trade a player on the disabled list, such as this recent trade of Bronson Arroyo and Phil Gosselin. Not all liability contracts are for disabled list players, and that extends to prospect-for-liability trades, as I think the Holmberg trade illustrates. I’m not sure there can ever be a reliable definition.
Maybe the trade of a prospect in exchange for an assumption of liability will always be difficult to define. The lack of an elegant solution, however, does not mean that there isn’t a solution. Being an informal, standing interpretation of the best interests clause and how the Commissioner’s Office is likely to interpret it, you can simply change that. You can tell teams: if the trade you wish to make is something I’m likely to consider the sale of a prospect, or if you aren’t sure, submit it to me to approval. You could say that if they do not seek approval for a move that you wished to review, that doesn’t mean you won’t review it — it just means that you will review it after the transaction is complete. Just as was the case when the original rule was designed, if a team did not get approval in advance, it would proceed to its own peril.
I do hope that you strongly consider articulating a change in policy on your review of trades that may affect the best interests of baseball. Perhaps you already have, among team owners. And I want to say again — while I do think a pattern suggests a sale may be on the horizon for the Diamondbacks, this is not about that team. This is about the potential that is clearly there for unreviewed trades that are not in the best interests of baseball. The current process is overinclusive by design. Nothing harmful to the sport has happened here with the Toussaint trade, but it has put us all on notice that the current process is also demonstrably underinclusive. A process that is both overinclusive and underinclusive meets the definition of insufficiency, and it is time to consider whether it should be replaced.
Very Truly Yours,
Ryan P. Morrison
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