MIT Handed Guilty Ruling in Aid-Fixing Case

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The Massachusetts Institute of Technology violated federal antitrust laws by colluding with the eight Ivy League universities to fix the amount of financial aid they awarded students, a federal judge ruled last week.

U.S. District Judge Louis C. Bechtle, of Philadelphia, rejected MIT's argument that its participation in the so-called "overlap group'' with the Ivies served to promote its policies of need-blind admissions and need-based aid distribution.

The institution had also argued that its involvement in the group enhanced competition by allowing it to admit students who might normally be unable to afford a private college.

"No reasonable person could conclude that the Ivy Overlap Agreements did not suppress competition,'' Judge Bechtle wrote in the 49-page decision. "The member schools created a horizontal restraint which interfered with the natural functioning of the marketplace.''

Moreover, "MIT's attempt to disassociate the overlap process from the commercial aspects of higher education is pure sophistry,'' he wrote, noting the school's $1 billion annual operating budget and its $1.5 billion endowment.

The group began sharing information on students in 1958. Typically, it would meet each spring to discuss common applicants and the awards each institution independently was prepared to offer. If the expected family contribution in the offers differed by more than $500, the schools would agree on a common figure or settle somewhere between the conflicting contribution figures.

In 1989, the U.S. Justice Department began investigating the group and related colleges for possible violations of the Sherman Antitrust Act.

Because of the federal probe, the Ivies signed a consent agreement in May 1991 and agreed to stop sharing information. But MIT decided to go to trial.

School Plans Appeal

Charles M. Vest, the president of MIT, said in a statement that MIT plans to appeal the decision, which left the school open to a large number of possible civil or class actions.

"If this decision is upheld, colleges will be even more hard-pressed to maintain need-blind admissions to all,'' Mr. Vest said.

"If colleges are forced to give subsidies to relatively wealthy students, the colleges will not have enough money for scholarships to those who need them,'' he added.

But Judge Bechtle said there is nothing that prevents the overlap group from adhering to need-blind admissions and need-based financial-aid decisions individually.

One higher-education finance expert who asked not to be named agreed, saying, "What does get lost in this is that there are hundreds of private institutions that practice need-based aid without overlap.''

The federal Higher Education Act signed into law this summer allows institutions to meet to discuss financial-aid principles and to agree to voluntarily award aid only to needy students, but it prohibits them from discussing individual cases. The provision expires in October 1994.

Vol. 12, Issue 01, Page 19

Published in Print: September 9, 1992, as M.I.T. Handed Guilty Ruling in Aid-Fixing Case
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