An antitrust case launched more than a decade ago sent tremors throughout the academic community. Over the 1989 -91 period, the Department of Justice (DOJ) investigated a number of highly selective private colleges for price fixing. The investigation focused on “overlap group” meetings comprised of about half of the most selective private colleges and universities in the United States. The group included 23 colleges, from small liberal arts schools like Colby, Vassar, and Middlebury to larger research universities like Princeton and MIT. DOJ found that when students applied to more than one of the 23 institutions, school officials met to coordinate the exact calculation of such students’ financial need.
Although all of the overlap colleges attempted to use the same need formula, difficult-to-interpret information from students and parents introduced some variation into their actual need calculations. DOJ alleged that the meetings enabled the colleges to collude on higher tuition and to increase their tuition revenue. The colleges defended their meetings, saying that they needed coordination to fully cover the needs of students from low-income families. Although colleges want capable needy students to add diversity to their student body, no college can afford a disproportionate share of needy students simply because it makes relatively generous need calculations.
Although the colleges denied DOJ’s price-fixing allegation, they discontinued their annual meetings in 1991.
A. How would you determine if the overlap college meetings resulted in price fixing?
B. If price fixing did indeed occur at these meetings, which laws might be violated?