The University of Chicago agreed to quit sharing financial aid information with other peer schools and pay $ 13.5 million
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$13.5M is a good deal for U Chicago.
Oh to be a fly on the wall during the discussions when Chicago was thinking about and ultimately decided to leave the 568 Presidents Group in 2014. Someone must have been the adult in the room after considering they do in fact know the financial aid status of some students (in direct violation of the antitrust exemption)…some/many of the recruited athletes, Questbridge admits, international students, students on the waitlist. This stuff wasn’t even a secret. Hope the rest of the schools have to pay more.
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Well…there is a paywall…
There’s a Reuters article that lifts heavily from it that was available yesterday.
Thank you for sharing the essence of the article.
I read the article and clicked on the related links. I honestly have no idea what exactly students allege happened. How exactly did they collude, and how exactly did they hurt students by setting policies? I’m not understanding the actual meat of the issue.
The students who sued these schools, members of the now disbanded 568 President’s group (which allowed them to coordinate financial aid practices), charge that price fixing led to higher prices because there was less competition.
As is clear, these universities weren’t practicing need blind admissions for everyone (Waitlist, international, student athletes, Questbridge…these schools often know the FA status of at least some of these students), which was required to qualify for the anti-trust exemption.
From one of the many articles on the ongoing lawsuit:
It’s named after an antitrust exemption that allows it to exist, Section 568 of the Improving America’s Schools Act of 1994. The exemption shields universities using need-blind admissions, meaning they don’t consider students’ financial need when deciding whether to accept or reject applicants.
UChicago settling to make this go away and the judge not dismissing the case, suggest there is merit to the case.
The student complaints are speculative. I find it hard to believe that these students, who could have attended other schools for less, were actually “hurt.” It seems like a waste of court resources, IMO. And no, I never worked at one of these schools, so I have no knowledge of what exactly they conspired to do, nor do I have any ties to them.
But that’s what is underlying the issue here…the students charge they paid more at the school they chose to attend because this group of schools were coordinating financial aid practices/policies/formulae. It’s a separate issue that the student could have made a different choice. Their choice (the students allege) was more expensive because of price-fixing.
And all of these schools were in violation of Section 568 because they weren’t need blind for every single student…I haven’t heard one of these schools deny that.
A couple quick legal observations:
(1) This complaint alleges a class action. The alleged class would be made up of all the people who enrolled in the relevant programs, during the respective relevant periods, and received need-based aid, but not enough to cover all the costs they paid to the relevant defendant (so, basically not enough aid to cover all of tuition, fees, room, and board).
(2) Damages in a civil antitrust cases are necessarily speculative in some sense. The question is usually some form of how much lower would the price paid have been if not for the illegal activity. This is necessarily a hypothetical, as of course the illegal activity happened in the actual world. That hypothetical world is often known as the “but-for world” (meaning world that would have happened but for the illegal activity).
Courts long ago decided the federal right to bring private antitrust suits would be meaningless if plaintiffs were not given a practical opportunity to prove such damages to the civil standard of proof (preponderance of the evidence). To do that, they usually offer some sort of expert testimony, supported by the documented facts and testimony in the case. The damages experts typically build some sort of economic model, where the illegal activity is a variable in the model, and then they run the model with that variable turned off during the relevant period.
That process generates the hypothetical “but for” price which can be compared to the actual price during that period, and the difference is the measure of damages. And of course the defense will have experts that dispute all that, and that is one of the critical trial issues.
Again, without being able to do something like that, it would be impossible for private rights of action under the antitrust laws to exist. And that right is specifically in federal law.
(3) This is a very advanced legal topic, but briefly, there is a critical intersection between these first two issues. For an antitrust action to be certified as a class action, the plaintiffs will need to show there is sufficient commonality as to how they were damaged. If damages are too individualized, then they can bring individual cases but not a class action.
So even before trial, there will very likely be a battle of the experts over that issue. But as these things usually go, the fact these institutions were (allegedly) using something they developed called the Consensus Methodology to inform their sophisticated internal financial aid models is going to help the plaintiffs. If that is true, it implies that there will be identifiable effects for each college using its basic model but assuming the Consensus Methodology was not applicable. And so it is at least plausible (not proven) the plaintiffs will be able to certify a class.
For more, the Court’s opinion denying the defendants’ motions to dismiss is here. On such a motion, the Court assumes the plaintiffs’ factual allegations are true, and determines whether if true, they would have a legally-sufficient claim:
But a relevant passage:
The plaintiffs’ allegations are not too speculative to support an antitrust injury or antitrust standing. The amended complaint alleges that the claimed conspiracy decreased competition in the relevant market by allowing the defendants to work together to provide the same aid awards. Am. Compl. ¶ 234. Without the conspiracy, the plaintiffs allege, the defendants would have competed for students by providing more competitive aid packages. Id. ¶ 237. This is supported by evidence cited in the amended complaint from Yale and Harvard that suggests that these schools left or declined to join the 568 Group because they concluded that doing so would hinder their ability to provide larger aid awards. Id. ¶¶ 123–25. For these reasons, the Court overrules the defendants’ arguments concerning antitrust injury and antitrust standing.
Again, that doesn’t mean the plaintiffs have won. It just means antitrust law allows for such a case, and now they have to prove it.
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Thanks - I appreciate the explanation.
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Another update, adding I didn’t realize the judge hasn’t yet accepted Chicago’s proposed settlement, so it’s not a done deal.
Here are a few excerpts. The entire article is worthwhile.
Now, with the settlement pending approval from a judge, officials from the other 16 institutions must decide what to do: follow the University of Chicago’s lead and settle the lawsuit, or continue an expensive and likely lengthy legal battle.
Whether other universities will pay up and bow out in the near future remains to be seen, but the University of Chicago settlement suggests that the 17 co-defendants were not in lockstep. And legal counsel for the plaintiffs indicated in a news release earlier this week that Chicago will provide “certain information,” such as “documents and a witness interview, that plaintiffs expect will assist them in prosecuting their claims against the sixteen universities that have not settled.” (Legal counsel did not respond to a request for comment.)
Excerpts from Inside Higher Ed article, 5 articles per month with free account. https://www.insidehighered.com/news/students/financial-aid/2023/08/17/what-does-uchicagos-settlement-mean-co-defendants?utm_source=Inside+Higher+Ed&utm_campaign=d3d7af63e2-AdmissionsInsider_COPY_01&utm_medium=email&utm_term=0_1fcbc04421-d3d7af63e2-236952254&mc_cid=d3d7af63e2&mc_eid=4546efc1ee
Here’s the full press release from the plaintiffs’ attorneys last week:
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Again just a couple quick notes.
Class actions require court approval for settlements, with absent class members getting a chance to object, because they will end up binding on class members who do not opt out of the settlement. This process can take a while in complex cases, including antitrust class actions. At this stage, any settlement that is for significant money is likely to get approved, but things happen.
It is very common for antitrust plaintiffs to have a strategy of “rolling” (or some such) defendants such that the earlier you settle, the less proportionately you have to pay, particularly if you provide meaningful cooperation. Details of documents and other information provided by an early settling defendant sometimes show up in an Amended Complaint.
The idea is to put pressure on individual defendants to settle sooner rather than later. It doesn’t always work, but sometimes the first settlement at least triggers a partial wave of additional settlements.
Anyway, it will be interesting to see how this progresses.
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