Prepare and write a strategy for Donald Fehr using INTEGRATIVE negotiation method and explain why.

The 2002 contract was set to expire in December 2006. The history of labor relations in professional baseballthe lost revenue from strikes and lockouts, attempts to control escalating players salaries, and clauses found in prior contractsall cast a long shadow over the 2006 negotiations. Baseball Commissioner Allen H. (Bud) Selig issued an order to all MLB employees that no one outside of his office was to discuss upcoming labor negotiations. While the MLBPAs Fehr planned to travel to each of the teams to listen to player concerns in the early spring, as of December 2005 the following issues seemed prominent:

1. Steroids In the fall of 2005, with negotiations over the 10th Basic Agreement still months away, the two sides were forced to bargain over a drug testing program. The endless media coverage over certain players alleged steroid usage was harming Major League Baseballs image greatly, and Congress (most notably Senator John McCain, R-Arizona) had been threatening to act if the two sides could not develop a tougher policy.10 The controversy began when a book by ex-slugger Jose Canseco claimed to reveal the extent to which major league ballplayers were using and abusing steroids. The steroid issue had been gaining momentum for several years prior, as home-run records were broken and balls were flying out of the park like never before. In what some say was an attempt to garner media attention and solidify anti-drug stances with the public, several Congressmen became involved, even subpoenaing several former players and executives to testify in front of the Government Reform Committee in March of 2005.11 The MLBPA complained that the union should be contacted before either current or former players spoke out publicly on this issue.

Fehr and Commissioner Selig were far apart on the issue of punishment for steroid users, with Fehrs proposal being far more lenient than Seligs.12 Fehr was calling for suspensions of 20 games for the first time a player was tested positive for steroids, 75 games for the second penalty (with some flexibility, based on circumstances), and a lifetime ban for the third penalty. Selig countered with an absolute ban of 50 games for the first penalty, 100 games for the second penalty, and a lifetime ban for anybody dumb enough to be caught a third time.13 Congress was threatening to act if the two sides could not voluntarily agree on a drug testing program for steroids.

Amphetamines also became a topic for discussion. Owners wanted to expand the drug testing program to include amphetamines, albeit with lighter penalties than for steroids. The union leadership generally opposed this expansion of the drug testing program, but again Fehr was sensitive to Congressional pressure.

2. Contraction In 2002, contractiona possible decrease in the number of MLB teams and/or relocation of poorly performing clubswas a prominent topic. However, with the transformation of the Montreal Expos into the Washington, D.C. Nationals, it was unlikely that the topic would be a part of the 2006 negotiations; the owners had sent signals that contraction was no longer a pressing issue. However, it was possible that the topic could reemerge, if only as a throw-away issue. The 9th Basic Agreement stated that the owners had until July 2006 to notify the union of contraction/relocation plans.

3. The Luxury Tax Financial disparity was a topic that the PRC would certainly not consider to be throw-away issues. Owners argued that because some teams could afford to pay high salaries, they could hire the best players and make it unlikely that most other teams could make the playoffs. To restore competitive parity, the owners wanted to continue, and even expand, the luxury tax that had been implemented in 2002. The players union remained philosophically opposed to any formula such as the luxury tax (which they considered to be a type of flexible salary cap) that might hurt player incomes. However, as Murray Chass of The New York Times wrote, . . . the owners would be hard pressed to make proposals based on economic hardship. Industry revenues didnt reach $2 billion until 1997, and last year [2005] it soared to $4.7 billion.14 The luxury tax which was laid out in the 9th Basic Agreement only affected a few teams (most of the penalties were paid by the New York Yankees), so both sides could have trouble proving or disproving its worth. It started in 2003 with a tax threshold of $117 million and rose to $136.5 million in 2006. Certain alterations to the complicated tax formulathe tax increased with each offensecould be proposed during bargaining, but it was doubtful that team owners would agree to a complete overhaul of the system so early in its existence.

4. Revenue Sharing In addition to the luxury tax, MLB used revenue sharing (e.g., from television contract rights and ticket sales) to distribute income from the most profitable teams to the least profitable teams. In 2004 and 2005, Major League Baseball witnessed its highest attendance levels ever, with 73,022,969 and 74,915,268 fans passing through the turnstiles, respectively.15 With luxury box and ticket prices rising, this attendance boom signaled an unprecedented rise in gate revenue. While this helped improve the profitability of the smaller-market teams, the union was concerned about how these funds were used. Minimum team salary levels needed to be addressed. After the Florida Marlins club received luxury tax and revenue sharing funds, it slashed its payroll to $15 million ($20 million less than the second lowest payroll). To the union leaders, such a move exposed holes in the revenue sharing programin effect, funds were being transferred from some owners to other owners, but there was no guarantee that the players would see any of those funds.

5. Salary Levels The average salary earned by a MLB player rose 7 percentabout double the inflation rate for 2005. The average MLB player certainly seemed well-paid, with a 2005 salary of $2.4 million. However, this figure was skewed by the very high salaries paid to star players, some of whom earned over $20 million annually. The minimum annual salary was $327,000. The union wanted to increase that minimum.

6. Salary Arbitration and Free Agency How long one must play before becoming eligible for salary arbitration and/or free agency remained an issue. The union wanted to shorten the length of time so that high-performing players could increase their income to be comparable to their peers. The owners wanted to keep it where it was, or perhaps even lengthen the eligibility requirements. The appropriate compensation a signing team should pay to the team losing a free agent also remained a topic of potential discussion in contract negotiations.

7. Pension Contribution Levels The union wanted owners to increase their contributions to the players pension fund. Owners balked at this request, citing declining television revenues, which were used to fund pension contributions. The World Series television contract that Major League Baseball could sign with the FOX network might be the X-factor in the owners approach to bargaining over economic matters. A large percentage of baseballs revenues came from national broadcasting contracts, which gave a network the right to broadcast playoff games, the All-Star Game, and a certain number of games throughout the regular season. The previous contract with FOX, which ran from 2000 through 2006, was worth $2.5 billion, but unfortunately coincided with the lowest television ratings in the sports history. The World Series ratings in 2000, 2002, and 2005 were the three lowest-rated broadcasts since the Series began airing in 1968.16 Because of this surprising trend, the new contract with FOX, which was to be signed in July of 2006, was rumored to be worth significantly less (estimated at $1.75 billion over seven years).17 Since the owners used large portions of the television contract to fund the players pension fund, the claim of financial hardship by the PRC could rear its ugly head during Basic Agreement negotiations.

8. Strike Risks The potential alienation of baseballs fan base by undergoing another work stoppage might prove to exert more influence over bargaining matters than any other factor. Past work stoppages had cost both players and owners significant amounts of money. A strike could result in team owners attempting to bring in scab players (e.g., minor league players) or it could result in the decertification of the union by disgruntled players.

9. The Media and Public Perception Finally, with any labor relations situation, the media play an important role in the approaches that the two sides take to bargaining. In prior negotiations, national media attention to labor contract negotiations was considerably more intense than in other industries. The ESPN television network only added to the scrutiny as it complemented traditional media outlets, such as Sports Illustrated magazine and the USA Today, New York Times, and Washington Post newspapers. The MLBPA was recently accused of shielding drug addicts and criminals because of its stance on steroid testing. Yet to give in to owner demands for a tough new drug testing policy would only lead to media criticism that the strongest union in America was ineffective and could be beaten by determined owners. Such criticism could cause some union leaders to encourage taking a hard-line approach to regain the confidence of their constituents.

The Big Decision: What Bargaining Strategy Should Fehr Adopt? Donald Fehr realized that he could go one of two ways when the bargaining sessions were to begin during the 2006 season. On one hand, he could probably secure the basic increases in minimum salary and pension contributions without a lot of resistance from the PRC and its leader, Commissioner Bug Selig. Although the owners might claim that the decreased television revenue put them in a less desirable financial position, Fehr knew that he could retaliate by going to the media with the astronomical industry revenue figures that baseball was currently realizing. With gate revenues and industry profits at an all time high, a hard-line approach and the threat of a strike or anti-trust lawsuit might allow the union to secure better wages and benefits than they had ever imagined. On the other hand, Fehr knew that the public image of the union had suffered because of past strikes by millionaires and because of the unions current resistance to a tougher steroid policy. As Fehr mulled his options and planned his bargaining strategy, he perhaps hoped that Jose Canseco wasnt planning on writing another book anytime soon.