THE Massachusetts Institute of Technology (MIT) violated antitrust laws by sharing financial-aid information with other colleges, a federal judge ruled Wednesday.
The case stems from a three-decades-long cooperation between the Cambridge, Mass., university and eight Ivy League schools, known as the Overlap Group. Members met annually to agree on uniform financial-aid offers to students accepted at more than one institution. Their aim has been to avoid bidding wars over the best students.
Three years ago, the Justice Department launched an investigation into the practice. Without admitting any wrongdoing, all the institutions except MIT settled out of court and agreed to discontinue the cooperation.
During the nonjury trial, MIT argued that its financial-aid program is a noncommercial charity and that its discussions with other schools were intended to spread limited financial-aid funds among the greatest number of needy students.
Rejecting this argument, Judge Louis Bechtle based his decision on the 1890 Sherman Antitrust Act, which, he said, is "not as old as MIT" but "for more than a century [has] guided our nation's economic policies."
"MIT's attempt to disassociate the Overlap process from the commercial aspects of higher education is pure sophistry," the decision states.
"No reasonable person could conclude that the Ivy Overlap agreements did not suppress competition."
The ruling could open the door to class-action suits brought by students or former students claiming they were denied a higher level of financial aid because of the Overlap Group practices, says Thomas Arthur, associate dean of the law school at Emory University in Atlanta.
The university will appeal the case, MIT President Charles Vest told the Monitor Wednesday: "We've got a reasonable degree of confidence that we will be able to win this at the appellate level. ... We believe we were not in violation of the Sherman Antitrust Act and that it was not intended as a law to apply to nonprofit educational or charitable organizations." Case to Supreme Court?
But the court disagreed. "What this court is saying is that as long as the bottom line is that people are paying a fee for service, the antitrust rules are going to apply," Mr. Arthur says. He predicts the precedent-setting case will move all the way to the Supreme Court.
This ruling further weakens the policy of "need-blind admission," which allows students to be accepted on their academic merit without regard for their ability to pay, say higher education officials.
"MIT believes that the best use of our limited financial-aid resources is to award scholarships only on the basis of students' needs, thereby maintaining a policy of need-blind admission," President Vest says.
Banning cooperation makes this goal more difficult to achieve, higher education officials agree. "The ultimate outcome is that you'll find bidding wars for students and that will reduce the amount of resources available for the schools to enhance their programs and maintain their facilities," says Scott Masten, a professor at University of Michigan's School of Business Administration. More aggressive offers
Some schools could begin making more aggressive offers to desirable students next year, predicts Professor Masten.
Congress, however, passed legislation in July that allows colleges to discuss financial-aid policies over the next two years as long as they do not discuss awards to individual students.
Because of this new legislation, "the practical effect of this decision is quite limited," says John Shattuck, vice president for government, community and public affairs at Harvard University. "It's been a diversionary issue," he says of the MIT antitrust case. "The real issue is that it is increasingly difficult for many American families to afford to send their children to college because there is a diminishing amount of financial aid."
The Justice Department has been waiting for the court's decision before pursuing its investigation of about a dozen smaller liberal-arts colleges that also have shared financial-aid information.
The appeal process for the MIT case could take several years, predicts Arthur. "This really is just Round 1."