Top Universities Conspiracy to Reduce Financial Aid Antitrust Class Action

This antitrust class action is aimed at an unusual target: sixteen elite universities, including Brown, Columbia, Dartmouth, Georgetown, and Yale, which the complaint calls “gatekeepers to the American Dream.” It alleges that the schools “have participated in a price-fixing cartel” that “has artificially inflated the net price of attendance for students receiving financial aid.”

The class for this action is all US citizens or permanent residents, and those who paid for tuition, room, or board on their behalf, who have (1) enrolled in one or more of the defendants’ full-time undergraduate programs, (2) received need-based financial aid from one or more, (3) paid one or more tuition, room, or board not fully covered by financial aid, and (4) first enrolled in one of more of their full-time undergraduate programs during these time periods:

• Brown: 2004-2012
• CalTech: 2019-present
• Chicago: 2003-2014
• Columbia: 2003-present
• Cornell: 2003-present
• Duke: 2003-present
• Dartmouth: 2004-present
• Emory: 2004-2012
• Georgetown: 2003-present
• MIT: 2003-present
• Northwestern: 2003-present
• Notre Dame: 2003-present
• Penn: 2003-present
• Rice: 2003-2009, 2017-present
• Vanderbilt: 2003-2019
• Yale: 2003-2007, 2018-present

The sixteen schools, the complaint claims, “have participated in a price-fixing cartel that is designed to reduce or eliminate financial aid as a locus of competition,” and that has in fact raised the net price of attendance for those who do receive financial aid.

Section 568 of the Improving America’s Schools Act of 1994 provided these schools with certain exemptions from antitrust laws. It applies to two or more institutions of higher education, the complaint alleges, to which “all students admitted are admitted on a need-blind basis”—that is, without taking into consideration financial circumstances.

However, the complaint alleges that the schools have not all been need-blind, and that at least nine of them “have favored wealthy applicants” or, for example, “maintain[ed] admissions systems that favor the children of wealthy past or potential future donors.” It also claims that all of them “have conspired to reduce the amount of financial aid they provide to admitted students.”

The schools have agreed on a Consensus Methodology, the complaint asserts, a formula that determines applicants’ abilities to pay. The complaint alleges, “Under the Consensus Methodology, an applicant’s ability to pay is a substantial determinant of the net price” that it costs the student to attend after financial aid.

The complaint alleges that the schools have “explicitly aimed to reduce or eliminate price competition” within the group. As a result of this conspiracy, the net price of attendance for financial-aid recipients at Defendants’ schools has been artificially inflated.”

The complaint alleges that the misconduct of the schools is “particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents. The burden of the 568 Cartel’s overcharges falls in particular on low- and middle-income families struggling to afford the cost of a university education and to achieve success for their children.”

Article Type: Lawsuit
Topic: Antitrust
Tags: Antitrust, Education, Requiring Consumer to Pay Higher Prices