Following the 1995 strike and subsequent Basic Agreement, Commissioner Selig had members of the Commissioner's Blue Ribbon Panel report on the economics of baseball. Richard Levin, George Mitchell, Paul Volcker, and George Will issued their report in June of 2000. The report primarily studies the struggles of teams with low payrolls and details the disparity in revenue and on-field performances. To relieve competitive imbalance, the panel suggested revenuce sharing and a competitive balance tax. Other recommendations are detailed in the report. The panel did not include representation from the MLBPA, nor does the union necessarily agree with the findings.

Shortly after the exciting conclusion of the 2001 World Series, Commissioner Bud Selig announced the contraction of two teams before the 2002 season. Owners voted on contraction and supported the elimination of two teams with a 28-2 vote (November 6, 2001). The two teams later chosen were the Minnesota Twins and the Montreal Expos, since they had the lowest revenue. The union filed a greivance against the owners on the issue.

The primary impetus for the contraction decision was the alleged increasing losses affecting Major League Baseball as a whole and almost every individual team. Selig claimed that owners had operating losses to $232 million and $519 million with interest payments and depreciation added in. Don Fehr, on behalf of the MLBPA, claimed that Selig was not providing all pertinent information, such as the salaries of owners.

Selig's contraction plan and poverty claims led the United States Congress to hold hearings to study Major League Baseball's financial records. In addition, legislation had been proposed to eliminate baseball's long-held antitrust exemption. The legislation would allow injured parties, such as baseball players or stadium authority, to sue the league for antitrust violations. For instance, it would allow for teams to file lawsuits against the league if folded or relocated. In December 2001, Selig testified in front of the House Judiciary Committee.

In February 2002, the contraction plan was postponed until the 2003 season. However, when an agreement was reached, the new contract stipulated that contraction would be put off at least until the 2007 season (the new agreement ends after the 2006 season).

On August 16, 2002, the union executive board set a strike date for August 30. Early in the morning that day, the two sides reached an agreement without the cancellation of a single game. This was the first collective bargaining agreement reached in Major League Baseball without a work stoppage since 1970. The owners ratified the new agreement September 5 with a 29-1 vote. The dissenting vote came from the New York Yankees, who will be the team most negatively impacted by the competitive balance tax.

Late in 2002, declining attendance and television ratings throughout the 2002 season and for the World Series led Commissioner Selig to again form a panel to study every aspect of today's game and find a way to increase the world-wide audience. Similar to the Blue Ribbon Panel in 2000, this task force has an unspecified length of time to determine a list of realistic recommendations on how to improve baseball.

Meanwhile, in recent years, baseball has seen a shift in competitive balance. The Oakland Athletics, usually in the bottom three in payroll, have gone to the post-season three years in a row. The Minnesota Twins, on the verge of contraction, won the AL Central and advanced to the 2002 ALCS. And the Anaheim Angels, who were arguably the third most popular baseball team in Southern California, won the World Series.