Reviewing the New Antitrust Suit

Justice is blind. But are need-blind admission policies either blind or just?

That’s one of the questions raised by a class-action lawsuit filed last week against 16 prominent national universities in U.S. district court. The universities include the California and Massachusetts Institutes of Technology; Dartmouth College; Brown, Columbia, Cornell, Duke, Emory, Georgetown, Northwestern, Rice, Vanderbilt and Yale Universities; and the Universities of Chicago, Notre Dame and Pennsylvania.

The universities are being targeted because of their membership in the 568 Presidents Group. That group takes its name (or number) from a section of the 1994 Improving America’s Schools Act that allows colleges that are need blind in admission to qualify for a limited antitrust exemption that permits them to establish common principles for assessing financial need. The 568 exemption has been renewed several times by Congress, most recently in 2015, when it was extended until Sept. 30 of this year. Interestingly, seven of the 16 colleges targeted are not currently listed as members of the 568 Presidents Group, and 11 listed 568 members, nine of them liberal arts colleges, were not targets of the suit.

The essence of the suit is that the named institutions are guilty of antitrust violations because many of them do not actually practice need-blind admission for all applicants but give preference to affluent applicants. In addition, the 568 Presidents Group has developed a “consensus methodology” for evaluating a student’s financial need, which is allowed by the federal legislation, but the plaintiffs argue that the 568 group is a “cartel” that uses the methodology to fix net prices and limit the amount of aid individual applicants receive.

An interesting side note in the suit is that one of the lawyers involved is Eric Rosen, who as a federal prosecutor led the prosecution in the Operation Varsity Blues cases. He is now a partner with Roche Freedman, one of the firms representing the plaintiffs, and he told Inside Higher Ed, “Varsity Blues took on the side door of admissions. This case takes on the back door—alleging that, while conspiring together on a method for awarding financial aid, which raises net tuition prices, defendants also favor wealthy applicants in making admissions decisions. The law does not allow them to do both.”

So does the 568 Presidents Group operate as a “price-fixing cartel,” in violation of antitrust laws? I’m not an antitrust lawyer, and I still can’t fathom why the Department of Justice concluded that the National Association for College Admission Counseling was a sinister force restricting competition through its voluntary Code of Ethics and Professional Practices (which, in the spirit of full disclosure, I helped draft), so I am not equipped to answer that question.

The 568 antitrust exemption came about as a consequence of a DOJ investigation and consent decree in the early 1990s regarding the actions of nine elite colleges known as the Overlap Group. Seven of the nine are on the 568 list found above. That group of colleges was accused of restricting competition by comparing and standardizing financial aid offers. The justification for that practice was that students shouldn’t make college choices based on cost alone. Depending on your point of view, that position either makes perfect sense or is an excuse masking price-fixing.

The lawsuit suggests that the consensus methodology used by the 568 Presidents Group colleges functions as a thinly veiled equivalent of what the Overlap Group was doing. That certainly could be the case, but there’s no evidence in the lawsuit that proves that contention. The closest is several quotes from financial aid officers at places like Yale and Harvard suggesting that the consensus methodology prevents them from awarding as much aid as they can using their own institutional methodology. A 2006 Government Accountability Office study found that the antitrust exemption had not affected affordability over the first couple of years after its establishment. I suspect that the lawyers representing the plaintiffs are hoping that discovery will provide incriminating evidence that things have changed.

Any methodology for evaluating need is a set of principles and assumptions, and every methodology has its flaws and biases. At one time the need analysis formula penalized families for having the foresight and responsibility to save for college, which doesn’t seem right or fair. The consensus methodology used by the 568 group incorporates the principles used by the College Board’s CSS Profile. Could that methodology limit aid offers for some students? It could, but can’t the same complaint be made about any methodology, including the federal methodology used in determining family contribution on the Free Application for Federal Student Aid?

From an ethical perspective, an important consideration in judging any action is intent. It is one thing if the consensus methodology was developed in order to minimize the awarding of financial aid, and another if minimizing aid is an unanticipated consequence of the methodology.

“Ethical College Admissions” is always on the lookout for broader issues and questions, and there are several embedded in the complaint against the 568 Presidents Group.

The first is what qualifies colleges and universities as elite. Is it the quality of the education they provide or because they cater to the wealthy?

The lawsuit contains prima facie evidence that supports the latter view—that the student bodies of the defendant schools are top-heavy with students from affluent backgrounds. All but two of the universities named have at least 10 percent of students from the top 1 percent of family incomes, with three above 20 percent. All of the universities have between 58 and 74 percent of students from the top 20 percent of incomes, compared with only 3 to 6 percent from the lowest 20 percent and 21 to 36 percent for the middle 60 percent of incomes. Those figures are shocking and embarrassing, unless you believe in a form of Calvinism where the wealthy are both smarter and better than the rest of us.

The second question is whether institutions that are private have a right to fill their student bodies with students who are from wealthy backgrounds. Private colleges receiving federal aid have an obligation to follow federal laws, but the Supreme Court has extended considerable discretion to colleges in various cases involving race-based affirmative action to determine what mix of students fits institutional needs. Does that apply to wealth as well as race?

That depends on whether you see higher education as an industry or as something more than that. Clearly selective colleges and universities use the admissions process to advance strategic institutional goals, and revenue is one of those. The lawsuit describes “enrollment management” as one of the villains in this case, and that may be a form of protest over policies and practices that are institution-centered rather than student-centered, focused on self-interest rather than the public interest.

The lawsuit claims that the 568 members are guilty of antitrust violations because they claim to be need blind but aren’t for every admission decision, and that raises a larger question about whether need-blind admission is any longer possible for all but a few colleges with long histories and huge endowments.

Back in the early ’90s, at the same time that the 568 exemption was established, the NACAC Statement of Principles of Good Practice required colleges both to be need blind in admission and at the same time meet a student’s full need. A number of private colleges argued that it was fiscally impossible to do both, that in order to manage financial aid budgets, they needed to be need aware at least on the margins. After a contentious debate in the Assembly, NACAC’s legislative body, the restrictions were loosened. At the time I argued that transparency should be the guiding ethical principle.

Since that time, a number of colleges that philosophically believe in need-blind admission have been forced to back away from their need-blind policies as their financial aid budgets have become strained. Does that suggest that need-blind admission may be an anachronism, aspirational rather than practical? Has the expectation that colleges be need blind embodied in the 568 exemption become an unfunded mandate? Is it OK for colleges to be “need-peek”?

There is one issue that both sides in the case agree on. That is that the decision to attend college should be primarily economic in nature. The plaintiffs argue that colleges are focused on revenue and therefore advantage applicants who are affluent, but they also argue that the consensus methodology provides economic disadvantage to students applying for aid. The cost of college makes the decision at least partly financial, but should it be only about cost? Isn’t that also a form of blindness?