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Judge Rules Against MIT in Overlap Suit

By Brian Rosenberg
Editor in Chief

MIT violated the Sherman Antitrust Act by cooperating with Ivy League schools to set need-based financial aid levels, a United States District Court judge ruled yesterday.

In the 49-page decision, Judge Louis C. Bechtle refuted MIT's arguments that the Sherman Act did not apply to the financial aid meetings held by what is known as the Overlap Group. He held that the Overlap Group's aid decisions constituted price-fixing and were therefore illegal, whether or not they raised prices for students or increased revenues for MIT.

MIT plans to appeal the decision, President Charles M. Vest announced yesterday. Vest said MIT will "fight very hard to win this case," though he said it was too early to discuss specific legal strategies for the appeal. In an interview last night, he said "I am proud of the Institute for being willing to stand up in a visible way ... for important principles."

Attorneys at the Justice Department in Washington, D.C., could not be reached for comment.

Vest said this summer's passage of a federal law specifically allowing colleges to discuss principles for determining financial aid as long as they do not discuss individual students "adds to my confidence in the wisdom of our stance." The law contains a provision which exempted litigation pending at the time of its passage, including the Overlap case.

Vest added that MIT had received support hundreds of colleges and other educational organizations, and said that a few alumni classes had asked that their donations be put toward the cost of the case.

The Institute faces no fines or penalties if its appeal is defeated, Vest said, but could be forced to pay some of the government's court costs.

`Pure sophistry'

In the case, MIT asserted that its distribution of financial aid is not commerce but a charitable activity by a non-profit corporation, and thus should not be subject to antitrust legislation. Bechtle called this argument "pure sophistry," saying that "few aspects of higher education... are more commercial than the price charged to students."

Bechtle went on to say that the Overlap Group's meetings constituted price-fixing and were therefore detrimental to competition. The Overlap meetings "interfered with the natural functioning of the marketplace by eliminating students' ability to consider price differences when choosing a school," he wrote.

Though both sides made substantial efforts to demonstrate the economic impact of the Overlap Group's decisions on MIT and on prospective students, Bechtle dismissed these concerns as "not germane to the resolution of this case."

MIT argued during the case that the Overlap meetings allowed member universities to offer need-blind admission to students and enhanced competition among them in curricula and other areas. The group also enhanced competition among students for limited enrollment opportunities, MIT said.

Bechtle ruled that these considerations were irrelevant, saying that "every institution, with or without Overlap, is free to embrace independently any admission and financial aid policy it wishes." He noted that schools could maintain need-blind admissions without Overlap if they were willing to restructure their budgetary priorities.

Bechtle wrote that the issue is whether "the elimination of competition itself can be justified by non-economic designs," and said that it cannot.