Sixteen major private universities, including most of the Ivy League, are facing a class-action antitrust lawsuit alleging they illegally colluded to limit financial aid packages available to students.
The lawsuit filed in the U.S. District Court for the Eastern District of Illinois claimed the universities “participated in a price-fixing cartel” by exploiting an antitrust exemption to which they were not entitled, the Wall Street Journal reported.
The exemption, which is outlined in section 568 of the Improving America’s Schools Act of 1994, allows universities that exclusively practice “need-blind” admissions to coordinate with one another in awarding financial aid packages to students.
The 16 colleges organized in 2003 to establish “the 568 President’s Group,” which the lawsuit dubs the “568 Cartel,” to establish a “consensus methodology,” a “common formula for determining an applicant’s ability to pay” for college.
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But the lawsuit said the defendant schools, which include Yale University, Georgetown University, the Massachusetts Institute of Technology, and the University of Notre Dame, are not entitled to the 568 exemption as a number of them do not engage in straightforward need-blind admissions.
“Under a true need-blind admissions system, all students would be admitted without regard to the financial circumstances of the student or student’s family,” the lawsuit said. “Far from following this practice, at least nine defendants for many years have favored wealthy applicants in the admissions process.”
The suit listed Columbia University, Dartmouth College, Duke University, Georgetown, MIT, Northwestern University, Notre Dame, the University of Pennsylvania, and Vanderbilt University as the nine schools that explicitly favored wealthy applicants, but it added that seven other schools, Brown University, the California Insitute of Technology, the University of Chicago, Cornell University, Emory University, Rice University, and Yale, were not entitled to the exemption because they were conspiring with the schools that weren’t need-blind.
The result of this practice, the lawsuit said, is in effect a price-fixing scheme.
“In collectively adopting this methodology, and regularly meeting to implement it jointly, the 568 Cartel has explicitly aimed to reduce or eliminate price competition among its members,” the lawsuit said. “As a result of this conspiracy, the net price of attendance for financial-aid recipients at Defendants’ schools has been artificially inflated. In short, due to the conduct challenged herein, over almost two decades, Defendants have overcharged over 170,000 financial-aid recipients by at least hundreds of millions of dollars.”
The four law firms that filed the lawsuit have set up a website for former students who may have been affected by the colleges’ practices to help them determine if they are eligible to join the complaint.
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“Elite private universities … are gatekeepers to the American dream,” the lawsuit said. “Defendants’ misconduct is therefore particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents.”
The suit seeks to force the colleges to put an end to the 568 exemption collusion and secure damages for those affected.
