Overview
Cohen Milstein and Langer Grogan & Diver represent college students and recent college graduates in a landmark antitrust class action against 32 of the country’s most prestigious colleges and universities for allegedly conspiring to use “early decision” to reduce or eliminate competition for top students. The plaintiffs argue that the colleges collude to increase tuition rates and to decrease financial aid, thereby increasing the net price of attending these institutions and entrenching patterns of inequitable access to these elite schools.
The plaintiffs further claim that the conspiracy’s anticompetitive restraints are facilitated and enforced by the Consortium on Financing Higher Education (COFHE), whose stated purpose is to facilitate information sharing among these institutions, and the Common Application Inc. and Scoir Inc., which provide common application products.
The named college and university defendants include Amherst College, Barnard College, Columbia University, Duke University, Emory University, Haverford College, Johns Hopkins University, Middlebury College, Northwestern University, Oberlin College, Pomona College, Rice University, Smith College, Trinity College, University of Pennsylvania, Vanderbilt University, and Washington University in St. Louis, among others.
Case Background
These elite institutions occupy an undeniable place of privilege and influence in American society. And despite their critical role in the American higher education landscape, these schools, the plaintiffs allege, have openly participated and are participating in practices that entrench patterns of inequality of access while inflating the price of college attendance. Among these is the central practice challenged in this case: a horizontal agreement to reduce or eliminate competition through use of the early decision process.
The Common App and the Coalition App—provided by defendants Common Application Inc. and Scoir Inc., respectively—are common application platforms that use technology to enforce the schools’ collective limits on each applicant’s “early decision” applications. Additionally, each named school either is or has been a member of COFHE, whose very purpose is to enable information sharing among these institutions.
Each of the named colleges and universities employs early decision to accept a substantial portion of its incoming class each year. A student applying early decision indicates that they will accept an offer of admission and withdraw all applications made to any other schools if offered admission through the early decision process. They must also state that they agree to pay whatever tuition and fees the school demands of them, provided the family can afford the price of attendance after factoring in the school’s offered financial aid package if one is provided.
While the early decision agreement is presented in a form that resembles a contract, admissions experts and school officials widely acknowledge that early decision is not based on any enforceable contractual obligation, and instead describe it as an “honor-bound agreement” that imposes an “ethical” obligation, but “doesn’t have any legal standing.” This state of affairs benefits the colleges and universities in several ways, including allowing them to withdraw their offers of acceptance in certain circumstances and to avoid contractual obligations as to any price terms, programs of study, or available amenities.
Notwithstanding the absence of a contractual obligation, colleges and universities collectively force early decision admittees to be bound to the school that offered early admission, the plaintiffs allege, by preventing students from receiving and comparing offers from other schools.
The plaintiffs allege that early decision is a classic per se violation of the antitrust laws because it is enforced by mutual agreement between would-be competitors not to compete for students offered admission through early decision at other schools. That mutual agreement not to compete for students accepted through early decision, the plaintiffs allege, both raises prices for tuition and other services and entrenches a system widely acknowledged to be unfair and harmful. In particular, early decision is widely acknowledged to disadvantage price-sensitive students and those who lack the awareness and/or resources to participate in the early decision process, even as it drives up prices for wealthier, less price-sensitive students.
According to the plaintiffs, the schools lose their incentive to compete on price for students admitted through early decision, driving up overall “top line” tuition levels and reducing both need-based and merit-based aid for early decision admittees. The result is that both early decision and non-early decision students pay higher prices than they would have paid absent the conspiracy alleged to be at the center of the early decision scheme.
Both the existence of this restraint on trade and its effect on price have long been acknowledged, including by university insiders. For example, Defendant Vanderbilt University’s current general counsel, Ruby Shellaway, argued in the Yale Law Journal in 2006 that Early Decision reflected an unlawful conspiracy that violated the antitrust laws:
In essence, the competitor schools, who—under E[arly] A[ction] or regular decision—might have lured the student away with a better financial aid package, promise not to compete with the school to which the student has been admitted. The colleges have, through their agreement, created monopolies on certain customers’ business for themselves—an illegal customer allocation and horizontal restraint of trade. Just as it is illegal to act in combination with competitors to set different prices for different customers, it is also illegal for competitors to grant each other exclusive access to certain customers. Each school, by sending out a list that its competitors will enforce, is guaranteed a listed student’s attendance, and a student can only negotiate financial aid with the school that admitted him. In the remaining negotiations, the student has given up his leverage: He cannot make a credible threat to go elsewhere, because his name has already been removed from other schools’ applicant pools.
The alleged conspiracy is also self-reinforcing. Schools that choose not to use early decision may lose out on applications from desirable students who wish to use early decision at a competing school. Such schools also cannot earn the supra-competitive levels of revenue that result from being protected from competition by the alleged early decision conspiracy. Unwilling to subject themselves to these disadvantages, few schools have abandoned early decision programs after using them, notwithstanding the broad consensus that they are harmful and unfair.
Plaintiffs claim that this early decision conspiracy has caused substantial injury to them and other members of the proposed class as defined below, and that the Defendants will continue their conspiracy unless their efforts are stopped.
The proposed class includes: All persons who have (a) enrolled in one or more of the defendant schools’ full-time undergraduate programs and (b) directly purchased education from one or more of defendant schools not fully covered by grant-only financial aid and (c) were either (i) admitted through the early decision process and received financial aid in the form of school-provided grants for any semester in which they attended the school or (ii) admitted through any decision process and did not receive financial aid in the form of school-provided grants for any semester in which they have attended the school (d) during the period beginning four years prior to the filing of this complaint until the effects of defendants’ continuing conduct cease.