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MIT Hopeful for Appeal in Overlap Antitrust Case

By Karen Kaplan
News Editor

President Charles M. Vest and attorneys for MIT are hopeful that a September ruling that MIT violated antitrust laws when it discussed financial aid awards with members of the Ivy Overlap Group will be reversed on appeal next month.

MIT was acting as a charity and not a business when it met with the Overlap Group to discuss the financial aid packages that would be offered to admitted students, and therefore antitrust laws do not apply, MIT's attorneys plan to argue to a panel of three judges who will convene in Philadelphia on June 22 to hear the appeal.

In September, U.S. District Court Judge Louis C. Bechtle ruled that MIT violated the Sherman Antitrust Act when it met with the eight Ivy League colleges and discussed the financial aid packages that would be offered to high school seniors admitted to more than one Overlap school.

"The Justice Department view of higher education as an industry conspiring to offer discounts to unmeritorious students is simply wrong," Vest said this week. "We are disbursing charitable funds to assist the students who most need financial help. All of our students are meritorious."

Michael Gass, an attorney with Palmer and Dodge, the Boston law firm representing MIT, estimated that a decision on the appeal would be announced this September.

David Seidman, who is representing the government in the appeal, refused to comment on the case. Spokesmen from the Justice Department did not return repeated phone calls.

Better chance in higher courts

Gass said MIT's prospects will improve as the case moves to higher courts. "We're optimistic. The higher up we go, the more optimistic we get," he said.

Vest agreed: "I am optimistic that we ultimately will prevail in this case. The higher one goes in the appellate process, the more likely the court is to examine the social policy implications of the case."

Gass said Bechtle applied standard antitrust principles to this case without addressing the larger question of whether those laws were applicable to financial aid transactions. In contrast, appellate court judges are more willing to "really roll up their sleeves and dig into what the real purpose of the statute is," and this should be to MIT's advantage, he said.

Three briefs were filed on MIT's behalf for the appeal, Gass said. One is signed by the American Council on Education, the American Negro College Fund, and other educational groups. Another was filed by a number of minority associations, and supports the Overlap Group meetings because they allow colleges to remain accessible to underprivileged students.

A third brief was filed by a group of charitable foundations headed by members of the Rockefeller family, which might be subject to antitrust laws if the appellate court upholds Bechtle's decision. "The theme of that brief is in trying to apply the Sherman Act to [financial aid], the government is really misconstruing the function of educational institutions in society," Gass said.

No independent briefs were filed on behalf of the Justice Department.

If MIT loses this appeal, Vest said he would definitely consider appealing again to the Supreme Court. "It is very important to stand up for the principles and implementation of need-based financial aid and the independence of universities from unreasonable government interference," he said.

Vest said the legal costs of the suit have been "substantial," but did not give a specific figure.

Suit is now two years old

The suit was announced in May 1991 by then-Attorney General Richard Thornburgh and originally included the eight Ivy League schools as well as MIT. The Ivy League schools signed a consent decree, agreeing not to continue Overlap meetings but admitting no liability. MIT refused to settle and was the only defendant in last year's trial.

"The issues in the appeal will be the same issues that have been alive in this case since the beginning -- that is, whether the Sherman Act, a statute which was designed to regulate commercial activity driven by profit motives, can be applied to essentially charitable activities, like deciding how much charity money to allocate to students based on need," Gass said.

Normally, each side has 15 minutes to argue its case in an appeal, but MIT's lawyers have requested 30 minutes for each side to allow for a more complete hearing of all the issues in the case. Lawyers for the government have backed this proposal, but the court has not decided whether to accept it.

In the trial, Bechtle ruled that the Overlap Group's financial aid decisions constituted price-fixing and were therefore illegal, regardless of whether they raised prices for students or increased revenues for MIT.

"Few aspects of higher education are more commercial than the price charged to students," Bechtle wrote in a 49-page decision. The Overlap Group meetings "interfered with the natural functioning of the marketplace by eliminating students' ability to consider price differences when choosing a school," and the economic impact on students was "not germane to the resolution of this case," he wrote.

In the trial, MIT's lawyers argued that Overlap meetings allowed member schools to maintain need-blind admissions. Without an agreement not to offer merit-based scholarships, schools would engage in bidding wars over particular students, leaving less money available for students with demonstrated financial need. Gass said that at least four former Overlap Group members, including Brown and Columbia Universities, have gone off need-blind admissions at least temporarily.

Need-blind admissions also allowed schools to compete for students on the basis of curricula and other non-monetary factors.

Bechtle dismissed these arguments, saying any school could maintain a need-blind admissions policy if it were willing to restructure its budgetary priorities.