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Court Hears MIT Overlap Appeal

By Jeremy Hylton


The United States Circuit Court of Appeals here heard over an hour of arguments yesterday from lawyers representing MIT and the Justice Department, as MIT defended the sharing of financial aid information among Ivy League colleges. MIT sought to overturn a lower court's decision that the cooperation constituted an illegal trust.

The focus of debate yesterday was on whether financial aid grants represent a discount on tuition and are effectively commercial, as the Justice Department argued, or are charity, as MIT held.

In the decision from the first trial, Chief Judge Louis J. Bechtle dismissed MIT's arguments about the charitable nature of financial aid, using the "truncated rule of reason" to decide that granting financial aid is a commercial activity.

"The character of Overlap is to award charitable subsidies to needy students," said Thane D. Scott, attorney for MIT.

Scott was joined in the argument by former U.S. District Judge in Philadelphia, A. Leon Higginbotham Jr. He made an impassioned argument on behalf of the Philadelphia Public Schools, the Greater Philadelphia Urban League, and several other organizations.

The appeal was heard by a panel of three judges, Judge Carlo Los Mansmann, Judge Robert E. Cowen, and Senior Judge Joseph F. Weis, Jr. A decision on the case is not likely for several months, sources said.

The case is unusual for a number of reasons. The court extended the customary half hour of oral arguments to a full hour. Also, there is no body of case law about the commercial or charitable nature of financial aid, according to Scott.

Both lawyers for MIT and the Judges mentioned what Weis described as `the unusual fit' of the situation here with standard commercial antitrust laws. Giving needy students aid at the cost of refusing full paying students has no commercial analogy, Scott said.

Higginbotham emphasized the unusual nature of the case when he cited a footnote to a ruling by a former Supreme Court Chief Justice Warren Berger which said that in antitrust cases organizations of public service should be treated differently.

The Justice Department's argument, presented by David Seidman, returned several times to the convention that the family contribution computed for financial aid represented the price of education- and that the Overlap meetings fixed those prices.

Part of the dispute concerned the definition of the price of education. The Justice Department holds that the price is the amount of money a student must pay, or the total cost minus financial aid.

MIT argues that the price is the total cost and that the financial aid is strictly a charitable grant made independently. "When a college such as MIT can fill all its seats with students willing to pay full price, accepting impecunious students for a smaller tuition, or no tuition, is `charity' in the purest sense," Scott wrote in the appellate brief.

"From the standpoint of the students it's the price," Seidman countered. "If they were truly giving charity they would find disadvantaged students and give them money."

Scott also argued that financial aid should not be considered commercial because the colleges made no profit by agreeing to financial aid levels, nor was there an effect on the overall average price to students.

"I don't believe there is any evidence of ... an effect on any aided students," Scott said. "The government never argued that `overlap' affects prices,'' Scott added.

Seidman also discounted that argument. "The Sherman Act does not differentiate between whether price fixing is profitable or not. The test is whether or not an unreasonable restraint of trade," he said.

Stretching Limited Resources

Higginbotham argued that the public service aspect of the case outweighed the alleged harm of price-fixing. "This is not the politics of exclusion, it is the practice of inclusion," he said.

"Those people who are talented but poor should have the same opportunities to enter these great institutions as the Kennedys and Rockerfellers," Higgenbotham said.

MIT argued during its original trial that its policy of need-blind admissions, which Scott said "stretched limited financial resources," would be difficult to maintain without cooperation from other schools.

There could be instances of good faith financial aid offers by schools being seen as competition for top students by other schools, witnesses for MIT testified.

Eventually price wars could make continuing need-blind admissions unattainable, MIT argued. "If you bid up the price for the extraordinary students there's less in the pot for the meritorious students," Weis observed.

Seidman, however, cited Stanford University's admissions as a program that provides full financial aid to students and maintains need blind admissions without discussing aid with other schools.

Seidman also argued that MIT could afford to maintain the admissions and financial programs because the $20 million financial aid budget represents such a small portion of the Institute's $1.1 billion operating budget.