According to press reports, the Antitrust Division of the US Department of Justice (DOJ) is investigating several issues related to admission of students to institutions of higher learning.
- In January, reports emerged that DOJ was investigating whether the National Association of College Admission Counseling’s (NACAC’s) ethical guidelines violate the antitrust laws. The DOJ appeared to be concerned about an agreement not to recruit students who have enrolled, registered, declared their intent or submitted deposits to other institutions. This could affect so-called early decision programs, under which students pledge to attend a particular school in return for early consideration of their applications. Although early decision programs have existed for many years, the DOJ could be concerned about schools putting “teeth” into such programs by agreeing with each other not to recruit or accept students who pledge to enroll at other schools.
- In early April, the Wall Street Journal reported that the DOJ had sent letters to a number of colleges and universities asking that they preserve emails and other messages detailing agreements with other schools regarding their communications with one another about admitted students and how they might use that information. The request suggests that the DOJ could be concerned that schools are unlawfully coordinating with one another regarding admission of students, limiting competition among themselves for the highest-performing students.
The DOJ’s nascent activity follows in the footsteps of other antitrust cases in higher education that have alleged horizontal trade restraints. These cases have involved financial aid, faculty hiring and coordinated application processes. The nub of DOJ’s interest is that the Sherman Act requires higher education institutions to compete for students and faculty in much the same way as ordinary businesses must compete for their customers and workers. Courts have acknowledged that some aspects of higher education differ from ordinary commerce and are subject to less rigorous rules than other types of trade restraints. However, as to the core matters of competing for students and faculty, colleges and universities should strictly avoid agreements that limit rivalry among them.
The Sherman Act Applies to Institutions of Higher Learning
Section 1 of the Sherman Act forbids agreements in unreasonable restraint of trade. This law covers obvious agreements among commercial competitors such as bid-rigging, price-fixing, and horizontal allocation of territories or markets. Perhaps less obviously, provision of higher learning is a service that the government has treated much as it does other goods and services for antitrust purposes. The Sherman Act has no blanket exemption for restraints of trade by non-profit actors. Nor do state-run universities necessarily benefit from an exemption. The Sherman Act does have a form of judicially-created state action immunity, but its scope is narrow,[i] and it would not likely allow coordination on recruitment of students.
The Sherman Act also covers the activities of associations. Non-profit associations have regularly been subject to antitrust enforcement when their rules seek to restrain competition among their members.[ii] This includes rules that may be couched as ethical guidelines.[iii] Associations bring together horizontal market actors who may have a shared interest in limiting competition. Thus, to stay out of DOJ’s crosshairs, institutions should be wary of agreements, understandings or joint guidance as to:
- Levels of tuition, fees, housing or other costs of attendance
- The amount or type of financial aid to be offered to students
- The recruitment of students (g., agreements to limit “poaching” of students, or to limit the discounts and benefits offered to prospective students)
- The quality of student amenities (g., agreements to limit certain amenities)
- The hiring, recruitment, and compensation of faculty (g., no-poach agreements)
These types of agreements impair the critical role that the DOJ sees for...
