Probe Studies Price-Fixing Charges
HIGHER EDUCATION: ANTITRUST INVESTIGATION
AS students start cracking the books in colleges around the country, administrators of several dozen of their schools are being asked to do a little research of their own - for a Justice Department probe. The probe, which began last month, is looking into possible violations of the Sherman Anti-Trust Act in connection with tuition practices. More than 30 colleges and universities have been asked to provide detailed information on tuition, financial aid, and salaries.
The Justice Department investigation started with about a dozen heavy hitters like Harvard, University of Chicago, Wellesley, Brown, Dartmouth, Wesleyan, Princeton, and Cornell. It has since expanded to smaller ones like Wells College in Aurora, N.Y.; Colby College in Waterville, Maine; and Mary Baldwin College in Staunton, Va.
In another development, Wesleyan University student Roger Kingsepp filed a lawsuit last week in New York City seeking damages on behalf of thousands of students against 12 colleges for alleged tuition price-fixing. Wesleyan officials say the suit is without merit.
Many Ivy League schools have almost identical financial-aid packages, tuition, and fees. Representatives often meet to discuss these issues. The question seems to be: Does this practice constitute price-fixing, which is prohibited under the antitrust act?
Spokesmen for the universities are perplexed by the probe. The practice of sharing information among colleges is widespread and public, they say.
``We've been part of the Overlap Group, a group of 23 colleges and universities on the East Coast, that have met since the late '50s to ensure that financial aid is equitably distributed,'' says Debra Thomas, director of public information at Bryn Mawr. ``It's always been public and has been written about in the press.''
``The practice of sharing financial information is something we would defend,'' says Alex Huppe, director of the Dartmouth News Service. ``It's done to get more financial aid to more students.'' He says that the civil investigation doesn't ``imply any institutional wrongdoing.''
The Justice Department won't comment on the investigation, and many find that secrecy troubling.
``When you're taking into account the amount of material in question, and the time and money involved in meeting the request, it seems only fair to know what's motivating the request,'' says Robert L. Durkee, vice president of public affairs at Princeton.
Some observers speculate that what may be behind the probe is a Wall Street Journal article in May about colleges colluding on financial aid that said, ``The Ivy schools are part of a price-fixing system that OPEC might envy.''
Meetings with financial-aid officers are meant to avoid bidding wars, so that the most sought-after students can choose college on the basis of academics alone. University sources see that as part of the cooperative aspect of higher education, something that makes them different from for-profit businesses.
``From a free-market point of view, individual students [should] get as much money as possible from colleges which want them,'' says Ms. Thomas. ``Why shouldn't they be allowed to bid up, as it were? But we're looking at the common good. If it takes $8,000 to put someone through school for a year, we don't want to give them $9,000. That's $1,000 that could go to someone else.''
``Colleges setting their prices to be virtually identical are able to cushion each of themselves against consumer resistance and allow their prices to rise faster than each could get away with,'' says Chester Finn, director of Educational Excellence Network and professor of education and public policy at Vanderbilt University.
``They're packaging student aid in the same amount and in the same combinations. That is equivalent to saying to me as a parent that I am not being allowed by the college to consider price as my child and I are considering which college to choose,'' Mr. Finn says.
College officials say they are trying to keep costs down, and that one reason for high costs is that they're having to provide substantially increased financial aid because of federal cutbacks.
``With all the troubles of trying to run universities, upgrading research facilities, bringing in minority students, and deferred maintenance, and have someone come and say we're price-gouging and colluding - it really frosts me,'' says Dennis O'Brien, president of the University of Rochester.
College Tuition Costs Amherst College $19,990 Colby College $20,380 Duke University $20,414 Northwestern University $18,846 Oberlin College $19,630 Stanford University $20,999 Wellesley College $20,185 Source: College Board