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Overlap Case Ruling Set Antitrust Precedent

By Hyun Soo Kim
News Editor

The recent federal appeals court decision on the Overlap antitrust case sets a legal precedent for antitrust cases. The appeals court ruling allows the consideration of social welfare in cases where non-profit institutions collude.

In a 2-1 ruling, the 3rd U.S. Circuit Court of Appeals in Philadelphia said that the district court was obliged to more fully investigate the "procompetitive and noneconomic justifications proffered by MIT."

"What the case establishes is that institutions who have objectives that extend beyond commercial objectives are entitled to full consideration of social welfare and public interest for what they do," said attorney Thane D. Scott of Palmer & Dodge, who represented MIT in the case.

According to the decision, the district court had originally found the Overlap Agreement "plainly anticompetitive because it eliminated price competition for outstanding students among the participating schools," and thus had taken only a "quick look" at any social and economic benefit arguments presented by MIT.

The district court also based its decision in part on two analogous cases decided by the Supreme Court, where it had rejected social welfare justifications for the anticompetitive design of certain professional associations. The district court "flatly rejected the contention that the elimination for competition may be justified by non-economic considerations."

However, the appeals court ordered the district court to rehear the case. "We succeeded because we got the court to adopt an unusual method of analysis," said Scott. "We needed to show that MIT improves social welfare by agreeing with other schools to cooperatively promote enhanced educational access and activity."

In response to the appeals court ruling, the Justice Department's antitrust division is studying several options. Daniel Hamilton, spokesman for the Justice Department, said, "We can ask for a rehearing on the full appeals court, we can ask for a writ of certiori for the Supreme Court, or we can directly follow the opinion of the appeals court."

The Justice Department will decide on an option by Oct. 15, when the reconsideration deadline for the appeals court expires.

"So far, we have been successful in convincing the appellate judges to give this case the comprehensive review to which MIT was entitled. It's our view that ... the better the case is understood, the better the chances of MIT prevailing," Scott said.

Social benefit of overlap

"Overlap was a principal way to preserve need-based and need-blind admissions. In the absence of overlap, over time need-based aid and need-blind admissions would vanish. This would greatly change the character of these schools," Scott said.

Though the social welfare arguments can be "very multifaceted," the preservation of need-based aid and need-blind admissions is the basis of the social welfare argument, he said.

Already, a number of schools have abandoned need-based aid, Scott said. "If the need-based system experiences great stress because of absence of cooperation in the schools, I would expect financial aid to be diverted from needy students to non-needy students. If that occurs, need-blind admissions can't be sustained."

In 1991, the U.S. Department of Justice filed an antitrust suit against the Overlap Group, which included MIT and 23 other schools, including the eight Ivy League schools. The Justice Department claimed that the Overlap Group colluded by agreeing on need-based financial aid, establishing standards to measure financial need, and meeting annually to consider the financial aid award of "overlap" students, who were admitted to more than one of the colleges.