MIT Appeals Overlap DecisionBy Sarah Y. Keightley
Lawyers for MIT filed a formal appeal in the Overlap Group case on Oct. 1, contesting a U.S. District Court judge's ruling that the Institute violated the Sherman Antitrust Act when it discussed financial aid packages with other universities.
In September, Judge Louis C. Bechtle found that MIT violated antitrust rules by discussing financial aid awards and cooperating with other colleges and universities in the Ivy Overlap Group to set need-based aid levels. The much-awaited ruling was preceded by a government investigation that lasted almost three years.
The Overlap Group, which included MIT, the Ivy League schools, and others, openly negotiated financial aid packages for prospective students every year. The schools compared the awards they had calculated for the same applicant, then adjusted their packages to make them similar or identical. This allowed students to choose a university without regard to cost, the schools said. It also allowed them to spread limited financial aid resources further by avoiding expensive bidding wars over particular students.
The government accused MIT and the Ivy League schools of price-fixing. Only MIT decided to challenge the suit, insisting that it had not broken any laws. But in September, Bechtle ruled that the Overlap Group's aid decisions did constitute price-fixing, were detrimental to competition, and were therefore illegal.
Reasons for appeal
Thane Scott, one of MIT's lawyers in the case, said the appeal, filed in the Third Circuit Court of Appeals in Philadelphia, where the case was first heard, will focus on two issues. "First, the judge wrongly decided that cooperative financial aid arrangements are commercial activities," he said. 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 anti-trust legislation.
"Second, in deciding whether the Overlap agreements were legal under the Sherman Act, the judge applied the wrong standard," Scott said. "He ignored the economic testimony that established that Overlap was not engaged in for financial reasons by MIT." During the trial, MIT argued that Overlap meetings allowed member universities to continue offering need-blind admission to students.
In his decision, Bechtle wrote that schools could maintain need-blind admissions without Overlap if they were willing to restructure their budgetary priorities, but Stanley G. Hudson, associate director and executive officer of financial aid at MIT, disagreed.
"Our argument is that we have limited financial aid resources," Hudson said. "We're making sure those resources are put in the hands of the people who really need them."
According to Scott, MIT's notes for the appeal were filed on Oct. 30. MIT's brief will be submitted by the year's end, and the government will respond on Feb. 1.
MIT might file another brief in mid-February, after the government responds. Then the case will go before the appellate court, consisting of a panel of between one and three judges, around March or April. The final decision is expected next summer or early fall, Scott said. If the original ruling is upheld, MIT could appeal to the Supreme Court.
Good outlook for appeal
According to MIT officials, the Institute has a good chance to win the appeal.
"I would say that we're hopeful that the appellate court will apply the correct standards, and in doing so, will decide that Overlap . . . was fully legal under the antitrust laws," Scott said.
James J. Culliton, vice president for financial operations, said, "All of the indications that I have are that the case for MIT is very good, having to do with the way the judge ruled narrowly" in the original decision.
MIT has been receiving moral support from other universities, Hudson added.
Officials at the Antitrust Division of the Justice Department could not be reached for comment.
Effects on future aid decisions
Even without Overlap, "we're committed to need-based financial aid," said Vice President and Secretary of the Corporation Constantine B. Simonides '57. Currently, while MIT refrains from comparing calculated aid awards with other schools, little difference is expected, he said. "But over time, it is possible that schools will become involved in bidding wars for students. MIT will try its best not to give anybody more than they need," he said.
"Some of these decisions, such as [the definition of] need, were improved by financial aid officers coming together. This analysis won't be so good when done by each school separately; some students will be getting scholarships that they didn't need, others who need may not get enough. Over time we are worried about what that will do," Simonides said.
Hudson agreed: "In the past we were able to determine a common need analysis." But now "schools are establishing different standards; we're going to get different awards for students." And due to the "constraints of the Justice Department actions, there is no access to financial aid policies of other schools," he continued. "There's serious concerns about disruption of the entire financial aid process."
Additionally, the need analysis formula changed this July with the re-authorization of the Higher Education Act of 1965, Hudson said. The act contains an amendment allowing colleges to make a joint commitment to need-based aid and to discuss principles for determining financial aid as long as they do not discuss individual cases, Simonides said. However, the law contains a provision which exempted litigation pending at the time of its passage, including the Overlap case.
"In Overlap you could do all three things, but with this amendment [you can do] only two," he said. Since the amendment will expire in 1994, "we are hoping for a permanent law or to win the appeal," he added.
Because the re-authorized act has an amendment which allows schools to confer on certain financial aid matters, university officials say there is a gray area between the protections of the law and the restrictions in the Overlap ruling, Hudson said. There is "undefined territory between what Congress authorized" and the Overlap decision, he said.
"Much of the complexity of the coming aid year is from the changes in the act, complicated by the Overlap constraints," Hudson said.
Moreover, the federal government has expanded eligibilities for financial aid considerably; for instance, aid will be expanded into the middle class, Hudson said. But along with the expanded eligibilities, there are fewer dollars to distribute, Hudson said.