The Collusion Years of the 1980s: What the Owners Did and What the Arbitrators Ruled

By 4Baseball Staff · November 5, 2026 · 11 min read

How baseball's owners were found to have conspired against free agents in 1985, 1986 and 1987, what three arbitrators ruled, and how a $280 million settlement ended the case in 1990.

For three winters in the middle of the 1980s, major-league owners acted as if free agency did not exist, and then three separate arbitration rulings found that they had violated their own labor contract by doing it. The cases are known as Collusion I, II and III, one for each offseason, and they ended in November 1990 with a settlement in which the owners agreed to pay the players $280 million. It was a very large settlement by the standards of any sport, and it is the reason the 1980s hold a lasting place in the history of baseball's labor relations.

The story is easy to misremember in either direction. It was not a case of owners making a mistake in the market, and it was not a criminal conspiracy. It was a breach of a labor agreement, proved in arbitration, that concerned the specific wages and offers of specific free agents in specific winters. This article explains what free agency was supposed to do, what the owners were found to have done, how the three decisions differ, and what changed after the settlement.

The player statistics here come from the historical record. The rulings are described in broad terms, since the story is mostly about contracts and arbitration, not about a statistical record, and where accounts of a detail differ the article says so.

The sequence at a glance

Notice that the rulings lagged well behind the winters. The second winter's market had closed before the first ruling, and the third winter's market opened after it. That is why the cases overlap in the retelling, and why the third one is the most pointed.

What free agency was supposed to do

Free agency came to baseball at the end of 1975, when an arbitrator ruled in the cases of two pitchers that a player who had played out his contract was free to sign elsewhere. The 1976 labor agreement turned that ruling into a system: after six years of service, a player could file for free agency and negotiate with other clubs. For the first time, a star's salary depended on what rival clubs were willing to pay. How free agency works and where it came from tells that story in full.

Free agency worked, in the sense the union intended. Salaries rose, and the owners complained throughout the late 1970s and early 1980s. There was a long strike in 1981 over compensation for clubs that lost free agents, and a short one, two days in August 1985, that ended with a new agreement. Peter Ueberroth had become commissioner in 1984, and by the end of 1985 many owners had come to the view that spending had to slow.

That is where the line was crossed. The labor agreement said that clubs could not act in concert with one another. The reasoning is plain: free agency is a market, and a market works only if each buyer decides independently what a player is worth. If the buyers agree not to bid, the market stops existing. The owners could, of course, choose to spend less. What they could not do was agree to.

Winter 1985: the first free-agent class

The 1985 offseason produced a free-agent class that, by every normal measure, should have drawn heavy bidding. Many were established veterans. What happened instead was widely noticed: players who had expected multi-year offers from several clubs got few or none, and some who did get offers found them lower than the year before. Several went back to their own clubs on terms that were less generous than they had expected.

The union's position was that this pattern could not be an accident, and it filed a grievance. The owners' position was that each club had decided for itself, for sound business reasons, to be careful with money. The question for the arbitrator was whether the clubs had in fact made independent decisions or had agreed, openly or by signal, to stay out of the market.

In September 1987, arbitrator Thomas Roberts ruled that they had not been independent. He found that the owners had acted in concert in the 1985 offseason, in violation of the agreement. That decision is Collusion I. Damages were left for later, and the ruling shaped what followed by establishing that the owners' conduct was a violation and not a coincidence.

Why collusion is so hard to prove

It is worth pausing on why the case took years. Baseball has an antitrust exemption, which comes from a 1922 Supreme Court ruling and was upheld in 1972, so the case did not run as a federal antitrust suit against the clubs as a cartel. The claim had to be made under the labor agreement, in front of an arbitrator, and the standard was whether the clubs had acted in concert.

That is a high bar to meet with circumstantial evidence. The owners did not need written agreements. If every club hears at a league meeting that restraint is wise and every club then makes the same choice, each can say it acted alone. The union therefore built its case on patterns: how many players received offers, how the offers compared with earlier years, and what the evidence showed about communication between clubs. The strongest part of the case was the contrast between the behavior of clubs in free-agent markets before 1985 and their behavior afterward.

The arbitrators looked at the same question in each case: was this a series of independent business decisions, or a shared one? Their answer, three times, was that it was shared.

A worked example of independent versus shared behavior

A simple thought experiment shows what the arbitrators were weighing. Suppose a star outfielder becomes a free agent, and ten clubs could plausibly use him. In a working market, some of those clubs will want him badly, some will want him at a lower price, and some will pass. Their offers will differ, and the differences will be large, because each club has a different roster, a different budget and a different view of the player. The best offer will usually be well above the second.

Now suppose none of the ten makes a serious offer. Each club can give a reason: the roster is full, the payroll is set, the player is aging. Any one of those reasons is believable for any one club. The suspicious thing is the pattern across all ten, repeated for dozens of players in the same winter. Independent decisions produce variety. Shared decisions produce uniformity. The union's case was largely an argument from uniformity, supported by evidence of how the clubs communicated.

The owners' side had a counterargument that deserves its place here: clubs may legitimately watch each other and respond. If one club cuts spending and its rivals notice that the sky has not fallen, they may cut as well without any agreement at all. Economists call this conscious parallelism, and it is not by itself a violation. The arbitrators found, in effect, that the evidence went beyond parallel behavior to coordination. That conclusion is what made the cases successful, and it is why the information bank in the third case carried so much weight.

Two players who show the pattern

Two players are used again and again to illustrate the story, and the historical record shows why. Both were Montreal Expos stars, and both were free agents after the 1986 season, the second of the three winters.

Dawson, who had played for the Expos from 1976 to 1986, could not find the contract he wanted and signed with the Chicago Cubs for 1987 on terms that were widely reported as being far below his market value. He then hit 49 home runs, drove in 137 runs and won the National League's Most Valuable Player award, the only MVP award of his career. He was elected to the Hall of Fame in 2010. A player of that quality, available at a low price, is the case that the union pointed to when it argued that something was wrong with the market.

Raines, a leadoff hitter who had hit .334 in 1986, did not play until May of 1987 because he did not have an acceptable offer, and he finished the year with a .330 average in 139 games. It is a useful detail in a different way. His performance did not fall during a month away from the game, and it was not a player in decline whom clubs had reason to avoid. For a closer look at the Expos, see the story of the Montreal Expos and the move to Washington.

These two stories do not prove collusion, and neither player's case was itself decisive. What they illustrate is why the owners' defense of independent decisions looked weak: strong, productive players were not receiving offers from clubs that could have used them.

Winter 1986 and the second ruling

The second case concerned the 1986 offseason, which came before the first ruling was issued. The union filed its grievance in February 1987, and the evidence included communications between clubs about particular free agents, such as a January 1987 note from the Red Sox to other clubs about re-signing one of their own players.

George Nicolau, the arbitrator for the later cases, ruled in August 1988 that the owners had colluded again in the 1986 offseason. This is Collusion II. It meant that two consecutive winters had now been found to violate the agreement, which raised the stakes for the damages that would follow.

Winter 1987 and the third ruling

Collusion III concerned the 1987 offseason and was decided in July 1990. The difference in this case was timing. The 1987 market opened after Roberts had already ruled against the clubs, which made a third winter of the same pattern the most pointed of the three. In that winter the clubs also used a system for sharing information about free agents, often described as an information bank, run through the commissioner's office. Through it, a club could learn what other clubs were offering or intended to offer, which makes it simple to avoid bidding against anyone. The union argued, and the arbitrator accepted, that free agents again found few real offers.

Nicolau's ruling confirmed that the owners had colluded a third time. By then the argument over what the owners owed was no longer theoretical. Each case involved the lost earnings of identifiable players, and each ruling made a total possible to estimate.

The 1990 settlement and what it paid for

In November 1990 the owners and the Players Association settled all three cases. The owners agreed to pay $280 million, to be distributed among the affected players according to a formula set by the union. The sum covered the wages the players were found to have lost, and the settlement also gave some players a form of renewed free agency. It closed the matter without further hearings, and no criminal wrong had been alleged.

Settlements in labor disputes are compromises, and this one has been described in both directions. Players have said the sum was too small for what was done to them. Owners have said that the sum was a fair price to end the litigation. What is not disputed is the fact that arbitrators had found against the clubs three times.

The commissioner's office was a separate matter. The grievances were filed against the clubs, not against the commissioner, and the owners paid. The era also spans a change of commissioners: Peter Ueberroth served until 1989, followed briefly by Bart Giamatti and then by Fay Vincent. For the longer line of office-holders, see the commissioners of baseball from Landis to Manfred.

What changed afterward

Three consequences followed, and they should be described carefully because causes are hard to pin down. First, free-agent spending rose sharply in the early 1990s, as clubs competed again in a market that the settlement had effectively reopened. Second, the relationship between owners and the union stayed tense, with a lockout in 1990 and the long strike of 1994 and 1995 to come, and the memory of collusion is often cited as a reason the union resisted any salary cap. Third, the expansion that brought two new National League clubs in 1993 and two more clubs in 1998 added buyers to the market. For that sequence see baseball's expansion timeline.

The limits of what this article can say are worth stating. The historical record shows performance, not salaries, so the numbers above show how well Dawson and Raines played and not what they were paid. The totals owed to each player came from the union's calculations in the arbitration, which this article does not reproduce. Anyone who needs those figures should consult the rulings themselves or the union's records.

Common questions

Was collusion illegal? It violated the labor agreement, and the arbitrators found so. It was not prosecuted as a crime, and baseball's antitrust exemption meant the case was not argued as an antitrust case.

How many cases were there? Three, one for each of the offseasons of 1985, 1986 and 1987, decided in 1987, 1988 and 1990.

Who paid? The clubs paid, through the settlement of November 1990, which totaled $280 million.

Did the players who were hurt get their money? The money was distributed according to a plan worked out by the union, and some players also received renewed free agency. The exact amounts varied.

Did the owners learn from it? The owners were more careful after 1990, and the free-agent market of the following years looked different. Whether they changed their goals or only their methods is a question historians still argue about.

Where to go next

If this raised questions about how the market works today, read how free agency works and where it came from, then the commissioners of baseball. For the business side of the 1990s, the expansion timeline and the topic page at /searchset/business-and-labor/ are good next stops. For the October context in which these players performed, see how the MLB postseason works.