Volume 113 >> Issue 29 : Wednesday, June 23, 1993

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33 Years of Overlap Under Contention

Yesterday the U.S. Court of Appeals in Philadelphia heard MIT's appeal of a decision by the U.S. District Court last September. That ruling stated that financial aid and scholarships provided to students constituted a commercial transaction, not a charitable one, as MIT contends.

The case focuses on an Overlap group of 23 colleges that met between 1957 and 1990 to agree on financial aid levels for students admitted to more than one of the schools.

The U.S. Justice Department contends that such collaboration constituted price-fixing, and was illegal under the Sherman Antitrust Act. All the members of the "Overlap Group," except MIT, agreed not to continue their meetings, but did not admit any wrongdoing in the matter.

Thus, MIT filed a civil suit to resolve the issue, contending that the cooperation among the colleges involved charity, not commerce, and that it was for the purpose of promoting socioeconomic diversity. MIT claimed that the Sherman Act cannot be applied to charitable activities, and the lower court erred by not considering "the educational policy and social welfare justifications offered by the schools to explain their policies" when making its decision.

Several major national newspapers have published editorials strongly supporting MIT's position and the necessity of a method of distributing financial aid fairly to ensure equal access to higher education. Further support for the Institute has come in the form of "friends of the court" briefs by groups representing "thousands of private and public colleges," MIT stated Monday.

Because the colleges work to maintain "need-blind" admissions, students seldom receive more financial aid than they need, but under this system the money can be distributed to a greater number of students. The members of the Overlap group contend that without the standardized methods of financial aid that resulted from their meetings, this advantage will not continue. They fear that schools will engage in "bidding wars" for the most promising students, and have fewer need-based scholarships available for less wealthy students.

The Antitrust Division of the Justice Department believes that a college education is a product, and financial aid is a discount on that product. They maintain that schools should not be allowed to collaborate on prices any more than other businesses should. They also claim that colleges are enhancing their revenue by standardizing the financial aid process. The Justice Department charges that by collaborating to decide on the amount of financial aid, the Overlap group is circumventing market forces which would otherwise play a role in the income of each college.