MIT press release on the Overlap Group settlement

The following was distributed as a press release by the MIT News Office at 5 p.m. on December 22nd, 1993.

ANTITRUST CASE SETTLED

MIT, Justice Dept. Set Up New Way for Non-Profit

Colleges To Cooperate on Need-Based Financial Aid

The U.S. Justice Department today agreed to dismiss the financial aid antitrust case against the Massachusetts Institute of Technology and establish a new way for non-profit colleges to cooperate on need-based financial aid to undergraduates, MIT announced.

MIT President Charles M. Vest told a news conference at MIT, "I am very pleased to annmounce that the U.S. Department of Justice has informed MIT it will drop the antitrust case it brought against the Institute nearly thre years ago."

He said the resolution of the case is in two parts:

Dr. Vest commented, "This decision enhances competition between colleges on the quality of education. It re-establishes the principle that colleges, in awarding their funds for scholarships, can follow the same principles that the U.S. government has followed in higher education. That principle is that because funds are limited, financial aid in the form of loans and grants are awarded to students who could not attend college without that financial assistance."

Dr. Vest noted that last year, of the $28 million in outright financial aid grants to needy MIT students, the Federal government provided $3 million and MIT provided $25 million. MIT last year administered a total of $43 million in aid, including Federal and MIT loans, grants and other aid, to about 2,500 undergraduates.

Dr. Vest said the settlement "creates principles and procedures that ... establish a more modern system to replace the overlap processes." He said, "The complaint brought against us three years ago was ill conceived. We appreciate the leadership of officials in the Justice Department who engaged in thoughtful discussions in our efforts to reach a principled resolution on these matters."

The settlement provides that non-profit colleges may participate so long as they:

Colleges may also Any non-profit college (there are a very few for-profit colleges) may participate. The Ivy League colleges, which signed a consent decree in May, 1991, may request to come under these news standards of conduct. The government and the college "shall jointly move for and support modification of the Consent Decree to incorporate the standards" of conduct, the agreement says.

The Justice Department agreed to dismiss the case after weeks of discussions between government and MIT attorneys following the unanimous decision Sept. 17 of the Third Circuit Court of Appeals. The Circuit Court reversed the decision of the U.S. District Court in Philadelphia that a simple "quick look" at the cooperative financial aid practices of MIT and the Ivy League schools determined that the schools violated the Sherman Antitrust Act.

The Third Circuit Court of Appeals, recounting the history of the case in its September, 1993 decision, said, "In 1991, the Antitrust Division of the Justice Department brought this suit alleging that the Ivy (League) Overlap Group unlawfully conspired to restrain trade in violation of section one of the Sherman Act ... by (1) agreeing to award financial aid exclusively on the basis of need; (2) agreeing to utilize a common formula to calculate need; and (3) collectively settling, with only insignificant discrepancies, each commonly-admitted student's family contribution toward the price of tuition."

The eight Ivy League schools--Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, University of Pennsylvania and Yale-- signed a consent decree to stop the practices. But MIT insisted that its actions were both legal and necessary if the university was to continue its long-standing policy of offering admission on a need-blind basis and providing need-based aid so that all those admitted would be able to attend, regardless of financial circumstances. The Antitrust Division of the Justice Department brought suit against MIT on May 22, 1991.

All three appellate judges said the ruling should be reversed. One judge, Joseph F. Weis, Jr., ruled unequivocally in favor of MIT, saying that the 1890 Sherman Antitrust Act did not apply in this case. Judge Weis said, "It does seem ironic ... that the Sherman Act, intended to prevent plundering by the `robber barons,' is being advanced as a means to punish ... philanthropy."

In the majority decision, the two other judges said the decision should be reversed and the case should be remanded for further proceedings on a rule of reason antitrust analysis, rather than the "quick look" ruling made Sept. 2, 1992 by the U.S. District Court in Philadelphia. The decision of the Appeals Court said, "Overlap may in fact merely regulate competition in order to enhance it, while also deriving certain social benefits. If the rule of reason analysis leads to this conclusion, then indeed Overlap will be beyond the scope of the prohibitions of the Sherman Act."

The Appellate decision said higher education "is a common good that should be extended to as wide a range of individuals from as broad a range of socio-economic backgrounds as possible."

In closing Wednesday's news conference, President Vest said, "Let me say that I am very proud to be a member of this university. We stood up for the principles that we believe in. And when I say we, I mean students, faculty, staff, alumni and alumnae. We are also extremely grateful for the support that we have received from those who have no MIT connection but who have shared our strong belief in the principles of need-based financial aid."