Federal Court Allows Price-Fixing Class Action to Proceed Against Universities

By: Carl Hittinger, Ann O’Brien, Tyson Herrold & Nicholas Rose (Baker Hostetler/Antitrust Advocate)

Seventeen of U.S. News & World Report’s top 25 universities in the nation recently lost their bid to dismiss allegations of an antitrust conspiracy to suppress student financial aid awards. The ruling by the U.S. District Court for the Northern District of Illinois is notable because it held that the “568 Exemption,” on which many universities’ financial aid systems are based, does not provide antitrust immunity unless all participating universities admit their students on a need-blind basis. It also highlights the risk in relying on narrow exemptions to the antitrust laws in reaching horizontal agreements with competitors.

The 568 Exemption to Antitrust Laws

The exemption dates back to 1989, when the Department of Justice filed a civil antitrust case against the “Ivy Overlap Group,” a group of universities alleged to have “collectively determine[d] the amount of financial assistance to award to commonly admitted students” by “employ[ing] the same analysis to compute family contributions.” After a trip to the U.S. Court of Appeals for the Third Circuit, in 1991 the parties inked a 10-year consent decree in which the universities pledged, among other things, not to agree on “student financial aid,” including “how family or parental contribution will be calculated.”

The ink on the consent decree was barely dry when, in 1992, Congress passed what has become colloquially called the 568 Exemption. Modeled in part on concepts in the 1991 consent decree, the exemption provides that “institutions of higher education at which all students admitted are admitted on a need-blind basis” may agree on “common principles of analysis for determining the need of … students … if the agreement … does not restrict financial aid officers at such institutions in their exercising independent professional judgment with respect to individual applicants for such financial aid.” To paraphrase, as long as admissions decisions are need-blind, universities may collaborate on a financial aid framework…

CONTINUE READING…