{"id":3585,"date":"2023-04-25T10:49:57","date_gmt":"2023-04-25T14:49:57","guid":{"rendered":"https:\/\/www2.law.temple.edu\/10q\/?p=3585"},"modified":"2023-04-25T10:49:57","modified_gmt":"2023-04-25T14:49:57","slug":"federal-court-allows-price-fixing-class-action-to-proceed-against-universities","status":"publish","type":"post","link":"https:\/\/law.temple.edu\/10q\/federal-court-allows-price-fixing-class-action-to-proceed-against-universities\/","title":{"rendered":"Federal Court Allows Price-Fixing Class Action to Proceed Against Universities"},"content":{"rendered":"

Seventeen of U.S. News & World Report<\/em>\u2019s 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 \u201c568 Exemption,\u201d on which many universities\u2019 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.<\/p>\n

The 568 Exemption to Antitrust Laws<\/strong><\/p>\n

The exemption dates back to 1989, when the Department of Justice filed a civil antitrust case against the \u201cIvy Overlap Group,\u201d a group of universities alleged to have \u201ccollectively determine[d] the amount of financial assistance to award to commonly admitted students\u201d by \u201cemploy[ing] the same analysis to compute family contributions.\u201d 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 \u201cstudent financial aid,\u201d including \u201chow family or parental contribution will be calculated.\u201d<\/p>\n

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, to paraphrase, as long as admissions <\/em>decisions are need-blind, universities may collaborate on a financial aid <\/em>framework.<\/p>\n

Carbone v. Brown University<\/strong><\/p>\n

The plaintiffs in Carbone v. Brown University<\/em> allege in their putative class action that the \u201c568 Presidents Group\u201d of universities \u201cparticipated \u2026 in a price-fixing cartel that is designed to reduce or eliminate financial aid as a locus of competition\u201d by agreeing to a \u201cConsensus Approach, [i.e.<\/em>,] a set of common standards for determining a family\u2019s ability to pay for college.\u201d They also allege that the defendants are ineligible for the 568 Exemption because the defendants considered financial circumstances in deciding whether to admit students. Accordingly, they allege the university defendants violated \u00a71 of the Sherman Act.<\/p>\n

In August 2022, the District Court denied a motion to dismiss by the university defendants, finding that the plaintiffs\u2019 allegations sufficed at the pleading stage. In self-proclaimed dicta, the court rejected several interpretation arguments concerning the 568 Exemption. First, it agreed with the plaintiffs, at least at the pleading stage, that the phrase \u201cwithout regard to the financial circumstances\u201d means without regard to \u201cany <\/em>aspect of an applicant\u2019s financial circumstances,\u201d despite the universities\u2019 position that this interpretation \u201cwould prohibit schools from considering an applicant\u2019s financial hardship in a positive way.\u201d<\/p>\n

Second, the court rejected the argument that each <\/em>individual defendant must be alleged to have considered financial need in admissions decisions. All participating universities must admit students solely on a need-blind basis or no one gets immunity. While the universities argued this interpretation would require onerous policing of other schools\u2019 policies, the court concluded there is no \u201cactual knowledge requirement\u201d in the 568 Exemption and that \u201cbad policy\u201d arguments are \u201cbetter directed towards Congress, not the Court.\u201d<\/p>\n

Legal Takeaways<\/strong><\/p>\n

The Carbone <\/em>decision offers several important takeaways:<\/p>\n