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MIT Summation Labels Antitrust Suit 'Myopic...'

MIT's landmark antitrust battle against the government over financial aid went into the hands of US District Court Judge Louis C. Bechtle in Philadelphia last Thursday evening (July 9). Veteran courthouse reporters anticipate a ruling sometime in September.

"This is a case that is intended to expand the reach of the antitrust laws beyond where they have ever been taken before," MIT's attorney, Thane D. Scott, of Palmer and Dodge, said in a passionate 36-minute closing argument. (See more complete excerpts of Mr. Scott's summation on page 10.)

He quoted the words of US Supreme Court Chief Justice William Rehnquist in his dissent in the 1984 NCAA-Oklahoma football case.

The Chief Justice said: "No decision of the United States Supreme Court suggests that associations of nonprofit educational institutions must defend their self-regulatory restraints solely in terms of their competitive impact, without regard for the legitimate non-economic values they promote."

Mr. Scott said, "The claims that the Antitrust Division has made in this case are myopic and misguided. They're based on a one-size-fits-all approach under the antitrust laws to police commercial competition.

"But MIT is unlike any institution that the Antitrust Division has encountered. MIT's function is to teach, to discover and to build. It is to leave to the next generation a better and more knowledgeable world. . . Yet, in the eyes of the Antitrust Division, such an institution is indistinguishable from a manufacturer of toaster ovens or porcelain fixtures," he said.

Referring to the policies of admission on merit and guaranteeing financial aid based on need, Mr. Scott said, "This is a program to achieve meritocracy, and that is the highest democratic ideal."

Referring to testimony by Irma Sanchez, a guidance counselor at Ysleta High School in El Paso, Tex., Mr. Scott said that low income and minority scholars "were told, 'Reach for the stars!' and they did. Why would these students overcome economic adversity, social adversity, linguistic adversity, cultural adversity? Because the practices of the overlap schools gave these students something that the Antitrust Division economists cannot quantify. . . What the overlap practices gave these students was hope!"

The landmark trial came to a close after 10 days of testimony . The government called three witnesses and read depositions from seven others. MIT's lawyers produced 13 witnesses-including four former and current college presidents-in defense of the agreement of MIT and the Ivy League 1. to award aid based solely on need; 2. to define need equitably through the professional judgment of financial aid administrators, and 3. to hold an annual "overlap" meeting to make sure the specific financial need of commonly admitted students was equitably calculated on the basis of professional judgment.

The Justice Department's antitrust division, in its civil suit against MIT, attacked the colleges' agreement not to give non-need or "merit scholarships" to students who can afford to attend college without financial aid. The students may receive non-need scholarships from other sources, but not from the colleges' own funds.

The Antitrust Division asserted the agreements constituted price-fixing. It seeks an injunction for 10 years against the practice and other exchanges of information among the colleges. The government would order a college official to monitor any violations by other officials. College officials who discussed prospective percentage increases in financial aid self-help, tuition or faculty salaries before they are officially published could be subject to criminal penalties.

MIT countered that the financial aid procedures were necessary to maintain the Institute's need-blind admissions policy and its guarantee to meet the financial need of any student admitted; to establish an equitable system of financial aid, and to make sure that MIT's scarce financial aid resources were spent only on students who needed aid in order to attend the college.

MIT noted that the cost of education per student at MIT has been double the tuition for more than 20 years. In Fiscal 1991, the last year for which final figures are available, the cost of education was $31,436 per student, not including room and board. Tuition that year was $15,600. The difference, $15,836, was provided through the endowment and other income as a subsidy to all students, whether or not they received financial aid.

Mr. Scott summarized the situation in his closing remarks.;"This case raises three specific behaviors . . . First, the schools agreed with each other many, many years ago to award their scarce financial aid resources based on the demonstrated financial need of needy student populations.

"Second, the schools met and tried to reach principal definitions of what that need would be.

"And, third, they tried to apply those definitions in individual cases to be sure that need that did exist was met. Need that did not exist left resources to pass along to other students who were needy."

Mr. Scott told the court, "Your Honor, this case is not to enforce compliance with the Congressional Methodology. If that had been the case, it would easily have been done in a dusty basement at the Department of Education in an administrative proceeding.

"The fact is that the methodology that is in use was fully consistent with the Congressional Methodology. It has been no secret from the Department of Education, it has been no secret from federal regulators that participants at the overlap schools have gone on to the Department of Education. The Department of Education has known about overlap for many, many years. And their activities have been to promote intercollegiate cooperation on the subject of need analysis and other aspects of financial aid. . . ."

"We heard about newspaper articles that discussed overlap. Overlap is the least secret, best documented 'conspiracy' in antitrust history.

"If the intention had been to address whether Congressional Methodology was being respected, this would have been another forum. But this case is brought under the antitrust laws not to seek compliance with Congressional Methodology. This is a case that is intended to expand the reach of the antitrust laws beyond where they have ever been taken before.

"Unfortunately, it seems to be the nature of government to expand until someone says stop. But we have learned some things over the last few decades. One, we have learned that more government is not necessarily better. And, two, we have learned that the marketplace will not solve every problem.

"And if the government is not to expand into every human activity, and if the market cannot solve every human problem, what other mechanisms do we have? Well, we have a mechanism that lies halfway between the market and the government. And that mechanism is private charity. And private charity has very much been a part of our community since this country was founded."

Mr. Scott praised the work of economist Dennis Carlton, who did a multiple regression statistical analysis and determined that overlap did not increase the revenue of the schools. Mr. Scott criticized the changing analytical techniques of the government economist, Dr. Keith Leffler.

"What we needed to hear from Dr. Leffler is a real answer to a real question. And the real question is, what do you do when the money runs out? We know what happens in the real world. Look at Brown University. At Brown University, the money has run out. At Brown University, needy students are turned away.

"The only place the money doesn't run out, the only world in which this doesn't happen, is where you can print money or you need not worry about balancing your books. And, under those circumstances, the money never runs out."

Mr. Scott urged the judge to examine the data on low income families, who he said benefitted from overlap.

"This high need student population exists, they are real and they must be heard. You cannot silence them with a motion to strike their testimony as the government tried with Miss Sanchez. They will be heard."

Mr. Scott compared the commercial world of antitrust law and corporations to the non-profit world.

"It would be unwise to force the charitable world to perform under the commercial standards of a world in which they don't reap the commercial benefits," he said. He added, "in a case like this, there are many charitable institutions, there are many charitable benefactors, there are many needy students who will be affected" by the court's decision.

"The culture of this community could be destroyed by the wrong result in this case. It is a culture of cooperation and of mutual support. It is a culture in which the colleges participate in accreditation in setting standards for each other. There are academic consortia agreements, there are athletic agreements, there are agreements that loosely could be characterized in commercial terms as territorial agreements. And, Dr. Bowen spoke of one, not a territorial agreement like you would find in the commercial world. Dr. Bowen was interested in, if I get out of this quote - market, will these students be served by somebody else?

"In conclusion, Your Honor, I believe that even the government witnesses would agree that American higher education is the envy of the world.

"These achievements have been accomplished through a unique partnership of private charities and public institutions all seeking a common objective. That objective is to make education accessible to every student without regard to family financial circumstance. It is built on cooperation, it has taken generations to build. And, it will take generations to rebuild if destroyed," Mr. Scott said.

Other articles:
Schools Made No Gain from Overlap, Expert Says
Presidents Say Need-Based Aid Is Fair
16 Witnesses Take Stand in Student Aid Trial
Manual Endorses Overlap; Merit Aid Profit Barred
Excerpts from Thank Scott's Closing Statement
Nonprofit vs. For-Profits Have `Crucial' Differences
Bill Permits Need-Based Aid PactsMerit Aid Can Create `Second Class Citizen'

A version of this article appeared in the July 15, 1992 issue of MIT Tech Talk (Volume 37, Number 1).

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