ECN 337 paper 2 collusion.pdf - 1 Carlos Zaragoza Liam Malloy ECN 337 The business dictionary defines collusion as the improper and secret agreement

ECN 337 paper 2 collusion.pdf - 1 Carlos Zaragoza Liam...

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Unformatted text preview: 1 Carlos​ ​Zaragoza Liam​ ​Malloy ECN​ ​337 12/5/2017 The​ ​business​ ​dictionary​ ​defines​ ​collusion​ ​as​ ​the​ ​improper​ ​and​ ​secret​ ​agreement between​ ​two​ ​or​ ​more​ ​entities​ ​in​ ​order​ ​to​ ​defraud​ ​or​ ​deprive​ ​others​ ​of​ ​their​ ​property​ ​or​ ​rightful share,​ ​or​ ​to​ ​otherwise​ ​indulge​ ​in​ ​a​ ​forbidden,​ ​illegal​ ​or​ ​illegitimate​ ​activity.​ ​In​ ​other​ ​words collusion​ ​occurs​ ​when​ ​competitors​ ​come​ ​to​ ​a​ ​mutual​ ​and​ ​secret​ ​agreement​ ​to​ ​further​ ​benefit each​ ​other.​ ​This​ ​occurs​ ​all​ ​the​ ​time​ ​between​ ​industries​ ​in​ ​order​ ​to​ ​limit​ ​competition​ ​and maximize​ ​profits.​ ​A​ ​common​ ​example​ ​is​ ​when​ ​competitors​ ​in​ ​an​ ​industry​ ​agree​ ​to​ ​increase​ ​the price​ ​of​ ​their​ ​similar​ ​products,​ ​so​ ​consumers​ ​do​ ​not​ ​have​ ​a​ ​cheaper​ ​substitute​ ​they​ ​can​ ​buy​ ​and both​ ​firms​ ​in​ ​the​ ​industry​ ​increase​ ​their​ ​profits.​ ​This​ ​illegal​ ​activity​ ​is​ ​one​ ​of​ ​the​ ​most​ ​common examples​ ​of​ ​collusion​ ​between​ ​firms​ ​in​ ​an​ ​industry.​ ​Another​ ​industry​ ​that​ ​has​ ​had​ ​many​ ​cases of​ ​collusion​ ​in​ ​the​ ​past​ ​is​ ​the​ ​professional​ ​sports​ ​industry,​ ​for​ ​this​ ​example​ ​it​ ​is​ ​Major​ ​League Baseball. After​ ​the​ ​season​ ​of​ ​1918,​ ​Major​ ​League​ ​Baseball​ ​owners​ ​got​ ​together​ ​and​ ​colluded​ ​what they​ ​called​ ​“a​ ​gentlemen's​ ​agreement”​ ​to​ ​not​ ​sign​ ​each​ ​others​ ​players​ ​that​ ​were​ ​on​ ​the​ ​free agency​ ​market.​ ​After​ ​each​ ​season​ ​owners​ ​released​ ​all​ ​of​ ​their​ ​players​ ​and​ ​would​ ​eventually resign​ ​them​ ​to​ ​one-year​ ​or​ ​shorter​ ​deals​ ​than​ ​they​ ​had​ ​before​ ​because​ ​the​ ​other​ ​owners​ ​agreed not​ ​to​ ​sign​ ​those​ ​players.​ ​Owners​ ​colluded​ ​to​ ​this​ ​agreement​ ​because​ ​it​ ​kept​ ​baseball​ ​players salaries​ ​from​ ​continuing​ ​to​ ​rise.​ ​This​ ​agreement​ ​that​ ​the​ ​owners​ ​had​ ​got​ ​rid​ ​of​ ​the​ ​non guaranteed​ ​money​ ​in​ ​players​ ​contracts​ ​and​ ​forced​ ​them​ ​to​ ​resign​ ​with​ ​their​ ​team​ ​for​ ​less​ ​money and​ ​shorter​ ​contracts.​ ​This​ ​collusion​ ​took​ ​place​ ​until​ ​star​ ​players​ ​began​ ​to​ ​enter​ ​into​ ​joint negotiations​ ​in​ ​order​ ​to​ ​increase​ ​the​ ​price​ ​of​ ​their​ ​deals.​ ​After​ ​the​ ​Dodgers​ ​made​ ​it​ ​to​ ​the​ ​World 2 Series​ ​in​ ​1965,​ ​their​ ​star​ ​players​ ​Sandy​ ​Koufax​ ​and​ ​Don​ ​Drysdale​ ​entered​ ​into​ ​contract negotiations​ ​together​ ​and​ ​both​ ​ended​ ​up​ ​signing​ ​the​ ​biggest​ ​contracts​ ​in​ ​MLB​ ​history​ ​at​ ​the time.​ ​This​ ​raised​ ​concerns​ ​for​ ​owners​ ​and​ ​they​ ​eventually​ ​came​ ​to​ ​a​ ​Collective​ ​Bargaining Agreement​​ ​stating​ ​that​ ​“​Players​ ​shall​ ​not​ ​act​ ​in​ ​concert​ ​with​ ​other​ ​Players​ ​and​ ​Clubs​ ​shall​ ​not act​ ​in​ ​concert​ ​with​ ​other​ ​Clubs."​ ​This​ ​CBA​ ​agreement​ ​ended​ ​the​ ​“gentlemen’s​ ​agreement”​ ​that the​ ​owners​ ​previously​ ​had​ ​until​ ​the​ ​late​ ​1980’s. After​ ​the​ ​1985​ ​season​ ​only​ ​four​ ​out​ ​of​ ​thirty-five​ ​free​ ​agents​ ​ended​ ​up​ ​switching​ ​teams, which​ ​is​ ​very​ ​unusual.​ ​There​ ​were​ ​many​ ​star​ ​players​ ​at​ ​the​ ​time​ ​that​ ​were​ ​available​ ​as​ ​a​ ​free agent​ ​in​ ​the​ ​offseason​ ​but​ ​they​ ​were​ ​receiving​ ​no​ ​offers​ ​from​ ​any​ ​teams​ ​and​ ​they​ ​eventually resigned​ ​with​ ​their​ ​former​ ​teams​ ​for​ ​less​ ​money​ ​than​ ​expected.​ ​In​ ​the​ ​following​ ​offseason​ ​the free​ ​agency​ ​market​ ​was​ ​similar​ ​as​ ​very​ ​few​ ​free​ ​agents​ ​signed​ ​with​ ​different​ ​teams.​ ​Also​ ​during this​ ​offseason​ ​the​ ​league​ ​saw​ ​a​ ​rise​ ​in​ ​the​ ​number​ ​of​ ​one-year​ ​contracts​ ​that​ ​players​ ​signed leading​ ​to​ ​a​ ​large​ ​decrease​ ​in​ ​salaries​ ​for​ ​free​ ​agents.​ ​Players​ ​agents​ ​expected​ ​some​ ​sort​ ​of collusion​ ​happening​ ​between​ ​the​ ​owners​ ​to​ ​decrease​ ​their​ ​players​ ​contract​ ​so​ ​they​ ​filed complaints​ ​to​ ​the​ ​Major​ ​League​ ​Baseball​ ​Players​ ​Association.​ ​These​ ​complaints​ ​led​ ​to​ ​the MLBPA​ ​eventually​ ​filing​ ​for​ ​a​ ​grievance​ ​on​ ​collusion​ ​for​ ​the​ ​owners​ ​violating​ ​the​ ​Collective Bargaining​ ​Agreement​ ​between​ ​players​ ​and​ ​owners.​ ​The​ ​MLBPA​ ​started​ ​awarding​ ​the​ ​players the​ ​money​ ​that​ ​they​ ​were​ ​owed​ ​by​ ​the​ ​team​ ​with​ ​their​ ​initial​ ​contracts​ ​and​ ​bonuses​ ​costing​ ​the owners​ ​and​ ​their​ ​organizations​ ​a​ ​lot​ ​of​ ​money.​ ​This​ ​was​ ​the​ ​MLBPA’s​ ​best​ ​response​ ​in​ ​order​ ​to end​ ​the​ ​collusion​ ​by​ ​the​ ​owners. ​ ​Since​ ​the​ ​MLBPA’s​ ​response​ ​to​ ​the​ ​collusion​ ​during​ ​the​ ​late​ ​1980’s​ ​there​ ​has​ ​not​ ​been any​ ​confirmed​ ​collusion​ ​between​ ​the​ ​MLB​ ​owners.​ ​Later​ ​in​ ​the​ ​2000’s​ ​there​ ​was​ ​suspicion​ ​of collusion​ ​from​ ​the​ ​MLB​ ​players​ ​unions​ ​on​ ​star​ ​players​ ​such​ ​as​ ​Alex​ ​Rodriguez​ ​and​ ​Barry​ ​Bonds. These​ ​players​ ​were​ ​rising​ ​stars​ ​and​ ​receiving​ ​large​ ​contracts​ ​but​ ​when​ ​they​ ​were​ ​having 3 difficulty​ ​getting​ ​signed​ ​in​ ​the​ ​offseasons​ ​of​ ​2007​ ​and​ ​2008​ ​the​ ​MLB​ ​players​ ​unions​ ​made allegations​ ​towards​ ​the​ ​owners​ ​for​ ​trying​ ​to​ ​drive​ ​the​ ​contracts​ ​for​ ​these​ ​players​ ​down.​ ​These allegations​ ​were​ ​never​ ​confirmed​ ​due​ ​to​ ​lack​ ​of​ ​evidence. 2.​ ​Was​ ​this​ ​explicit​ ​collusion​ ​or​ ​implicit​ ​collusion? These​ ​cases​ ​of​ ​collusion​ ​by​ ​the​ ​MLB​ ​owners ​were​ ​in​ ​effort​ ​to​ ​keep​ ​MLB​ ​players contracts​ ​from​ ​continuing​ ​to​ ​rise​ ​every​ ​year.​ ​This​ ​was​ ​not​ ​necessarily​ ​illegal​ ​in​ ​a​ ​sense​ ​that​ ​the government​ ​had​ ​to​ ​take​ ​action​ ​to​ ​stop​ ​it.​ ​The​ ​MLBPA’s​ ​and​ ​MLB​ ​players​ ​unions​ ​is​ ​put​ ​in​ ​place to​ ​prevent​ ​actions​ ​like​ ​this​ ​from​ ​occurring​ ​and​ ​allows​ ​players​ ​and​ ​owners​ ​to​ ​discuss​ ​issues​ ​and come​ ​to​ ​terms​ ​that​ ​help​ ​both​ ​of​ ​them.​ ​This​ ​became​ ​a​ ​problem​ ​because​ ​they​ ​came​ ​together​ ​and had​ ​a​ ​collective​ ​bargaining​ ​agreement​ ​put​ ​in​ ​place​ ​years​ ​prior​ ​to​ ​prevent​ ​this​ ​from​ ​happening but​ ​owners​ ​colluded​ ​against​ ​it.​ ​The​ ​owners​ ​did​ ​this​ ​because​ ​star​ ​players​ ​demand​ ​and​ ​sign​ ​big contracts​ ​it​ ​becomes​ ​a​ ​snowball​ ​effect​ ​in​ ​the​ ​league​ ​and​ ​players​ ​contracts​ ​slowly​ ​start​ ​to​ ​go​ ​up every​ ​single​ ​year.​ ​Usually​ ​owners​ ​try​ ​to​ ​sign​ ​the​ ​best​ ​available​ ​free​ ​agents​ ​on​ ​the​ ​market​ ​that will​ ​help​ ​their​ ​team​ ​compete​ ​for​ ​a​ ​World​ ​Series​ ​in​ ​the​ ​upcoming​ ​season​ ​but​ ​in​ ​this​ ​instance​ ​of collusion​ ​these​ ​owners​ ​put​ ​aside​ ​the​ ​competition​ ​for​ ​winning​ ​a​ ​championship​ ​in​ ​order​ ​to​ ​spend less​ ​money​ ​to​ ​acquire​ ​players.​ ​This​ ​type​ ​of​ ​collusion​ ​was​ ​in​ ​the​ ​interest​ ​of​ ​maximizing​ ​profits​ ​for the​ ​organization​ ​by​ ​cutting​ ​spending​ ​on​ ​salaries​ ​making​ ​it​ ​explicit​ ​collusion​ ​in​ ​this​ ​case. In​ ​most​ ​cases​ ​of​ ​collusion​ ​the​ ​government​ ​has​ ​to​ ​get​ ​involved​ ​and​ ​set​ ​forth​ ​laws​ ​or policies​ ​to​ ​stop​ ​these​ ​acts​ ​of​ ​collusion.​ ​In​ ​this​ ​particular​ ​case​ ​of​ ​the​ ​Major​ ​League​ ​Baseball,​ ​the Major​ ​League​ ​Baseball​ ​players​ ​union​ ​is​ ​set​ ​in​ ​place​ ​to​ ​protect​ ​the​ ​players​ ​from​ ​being​ ​taken advantage​ ​of​ ​by​ ​the​ ​league's​ ​owners.​ ​When​ ​the​ ​government​ ​can​ ​not​ ​step​ ​in​ ​to​ ​stop​ ​collusion between​ ​firms​ ​it​ ​is​ ​important​ ​that​ ​there​ ​unions​ ​are​ ​created​ ​to​ ​protect​ ​workers​ ​or​ ​consumers. 4 Works​ ​Cited “What​ ​is​ ​collusion?​ ​definition​ ​and​ ​meaning.”​ ​​, ​ ​ ​ ​. “Collective​ ​Bargaining​ ​Agreement.”​ ​Collective​ ​Bargaining​ ​Agreement​ ​-​ ​The​ ​Official​ ​Site​ ​of ​ ​ ​ ​Major​ ​League​ ​Baseball​ ​Players​ ​Association​, ​. How​ ​MLB​ ​owners​ ​once​ ​colluded​ ​to​ ​keep​ ​Hall​ ​of​ ​Famer​ ​Tim​ ​Raines​ ​off​ ​the​ ​field.”​ ​USA​ ​Today​, Gannett​ ​Satellite​ ​Information​ ​Network,​ ​19​ ​Jan.​ ​2017, 7-owners-mlb. Chass,​ ​Murray.​ ​“7​ ​in​ ​Baseball​ ​Collusion​ ​Case​ ​Win​ ​Free​ ​Agency.”​ ​The​ ​New​ ​York​ ​Times​,​ ​The New York​ ​Times,​ ​22​ ​Jan.​ ​1988, ​. ...
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