Could We See the MLB Intervene with Shohei Ohtani's Contract Breakdown?
Dodgers Fans Don’t Click.
Shohei Ohtani announced this afternoon that he has chosen the Los Angeles Dodgers as his next team. Shortly after the news broke, the media quickly got a hold of his contract being 10 Years - $700 million. This was followed by reports that the deal would hold “unprecedented deferrals” and that a majority of his salary could be deferred. Other reports later stated that the contract breakdown/deferrals were Shohei’s idea to help spread the money out, lower the luxury tax salary on his contract, and allow the Dodgers to remain competitive long term. Not so fast though… could we see the MLB step in soon after the official contract details are released.
We do not yet know the full details and breakdown of Ohtani’s contract, but these reports seem to make it clear… Shohei and the Dodgers are manipulating the luxury tax with this contract so it doesn’t handcuff the Dodgers from making future free agent moves. Some reports are that the luxury tax salary could come down from $70 million AAV to around $50 million AAV. The MLB has worked to prevent luxury tax manipulation in the past and with the current Collective Bargaining Agreement (CBA).
Throughout my luxury tax research for my Mets Offseason Plan, I uncovered an article from Metsmerized Online about potential luxury tax manipulation. The gist was along the lines of teams offering north of 10 year contracts to help spread the Average Annual Value (AAV) which the luxury tax is based on. The Ohtani deal would be relatively similar to this concept since the deferred money would significantly lower Ohtani’s AAV to give the Dodgers more operating room.
This Metsmerized piece quoted Ken Rosenthal’s article on The Athletic about the same topic. Rosenthal’s article summarizes the language in the CBA about manipulating the luxury tax “Baseball’s collective-bargaining agreement states neither players nor clubs shall enter into any agreement ‘designed to defeat or circumvent the intention’ of the luxury tax. The language is vague, subject to interpretation. But if the league determined a circumvention occurred, it conceivably could ask the parties to restructure the contract, most likely by agreeing to a shorter term, or reject the deal entirely.”.
Based on the wording in this summary, the reality is that the Dodgers and Shohei Ohtani are doing exactly this. I do not blame Ohtani for wanting to structure his contract this way, I applaud him. I have endless respect for a player putting money to the side in order to win. Unfortunately, the fact of the matter is that if the MLB is truly as adamant about luxury tax manipulation as they claim to be (in the CBA), they will interfere with this contract. The Dodgers should not be allowed to shave off tens of millions of dollars from their luxury tax payroll, which is supposed to be one of the consequences of signing a superstar like Shohei Ohtani.
Before I conclude this blog, it needs to be made very clear that I am NOT saying that the MLB should veto this signing. I am saying the Dodgers should be allowed to sign Ohtani. However, according to the wording of the CBA the MLB should take a close look at the deferrals and luxury tax impact to make sure the Dodgers are not abusing luxury tax exploits.
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