MLB Lockout Effect on Competitive Balance

            The recent lockout not only affects the players, but also the teams. Prior to the lockout, MLB was seeing a very eventful off-season. Big name players like Max Scherzer, Corey Seager, Javier Baez, Starling Marte, Marcus Semien, among many others all signed massive contracts with different clubs. These deals are all upwards of $100 million or more. The MLB can allow for incredibly lucrative contracts because the league does not have a salary cap; instead they have a competitive balance tax (CBT). The competitive balance tax sets predetermined payroll thresholds where if a team is above that threshold it is taxed on each dollar above that threshold, with the tax rate increasing based on the number of consecutive years a club has exceeded the threshold.[1] The CBT has acted as a form of salary cap since very few teams have exceeded the thresholds in recent years. Something many fans are not aware of is that the CBT is only in effect during the championship season.

            The championship season is the period of time from the first regular season game to the last. Since the CBT is not in effect in the off-season, teams with more money like the Mets, Yankees, Red Sox, Dodgers (the teams that are the only ones that have exceeded the threshold in recent years), are able to do what the rest of the league cannot, outbid other teams for the players they want. These teams are able to splurge and spend tremendous amounts of money bolstering their roster, and the only thing they have to do to avoid the CBT is adjust/manage contracts prior to the first game of the season. This is an art and undoubtedly takes time, but it is something that all front offices are capable of doing. On the other hand, not all front offices have the same amount of money to spend on top notch free agents like the teams listed above.

            Management wants control of this back so that the rich teams cannot sign all of the best talent. It is public that both management and the players want to reestablish the thresholds. The lockout not only has stopped players from signing, but has kept the rich from getting richer. The reason the off-season signings were so eventful was because teams saw the lockout looming and wanted to acquire talent while they still could. It is commonly believed that the lockout only harms the players, but the league is actually hindering both the players and the owners (who the league works for) in an attempt to recreate competitive balance in the sport.


[1] https://www.mlb.com/glossary/transactions/competitive-balance-tax

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Former college baseball player, focusing my legal studies on the intersection of sport, law, and business.

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