PHILADELPHIA, JUNE 25 -- The Justice Department fired the opening salvo today in its groundbreaking case charging that Massachusetts Institute of Technology conspired with Ivy League counterparts to fix prices paid by students to attend those institutions.
"There was no economic justification that these most wealthy, most expensive universities had to collude on their most basic commercial activity -- the price they charge students and their parents," Justice Department attorney D. Bruce Pearson said in opening remarks before U.S. District Judge Louis Bechtle.
At issue is a series of annual meetings at which financial-aid officials of MIT and the eight Ivy League universities agreed to award aid to students based solely on need, agreed on general principles to determine level of need and negotiated financial aid for individuals who applied to at least two of the institutions.
The result was that a student's cost of attending any of the schools, known as the Ivy Overlap Group, was approximately the same.
Neither party disputes these facts. But the Justice Department charges that such agreements eliminated competition and resulted in a higher bill for many families, violating federal antitrust law. Pearson peppered his opening remarks with such phrases as "price-fixing" and "Overlap cartel."
MIT attorney Thane Scott, however, described Overlap activities as "a group of charities acting cooperatively to meet the needs of the community." MIT contends that it did not save money by participating in the group but simply wound up giving some students more aid and others less.
The suit, filed in May 1991, is unusual because it applies antitrust law intended to uphold fair competition in trade and commerce to the nonprofit, scholarly setting of respected universities.
Soon after the filing, the Ivies originally named as defendants -- Harvard, Yale, Brown, Dartmouth, Columbia, Princeton, Cornell and Pennsylvania -- signed a consent decree admitting to no wrong but agreeing to stop Overlap activities in question. MIT officials, however, decided to defend their financial-aid practices, saying in court documents that their ability to continue providing adequate aid would be "jeopardized" without Overlap cooperation.
MIT is one of a small group of colleges nationwide that promises to admit students without regard to need and to provide full financial aid to all of those admitted.
The Overlap group had been meeting for about 30 years by 1990 when college officials decided to suspend the group in light of the federal probe. Thus, when financial aid was distributed this spring, there were more discrepancies than usual among applicants to the Ivies and MIT.
"Most of us have seen some increase in the number of inquiries from students who received differing awards," said Robert Durkee, vice president for public affairs at Princeton. "Clearly, we have some students receiving awards that may be higher than a more sophisticated assessment of need might have produced" through Overlap.
Regardless of the outcome of the non-jury trial, the universities may receive legislative help.
Under a Higher Education Act reauthorization approved last week by a congressional conference committee, colleges and universities could agree voluntarily to base financial aid solely on need and could discuss among themselves and adopt aid-award principles. The bill would not allow discussion or negotiation of aid for individuals.
Key issues in the trial involve whether students and their parents paid more for an MIT education, which is to cost $23,565 next year, because of Overlap cooperation, and whether MIT made a profit from such practices.
Pearson referred to a 1988 comparison of aid awards for students accepted at MIT and Stanford. He said MIT expected families to contribute an average of $2,521 more than did Stanford. Generally, the more the family contributes, the less aid is awarded.
Pearson said Stanford was invited to join the Overlap group because its members "were losing students to Stanford for financial reasons."
Scott, however, referred to a study by Dennis Carlton, a University of Chicago economist and antitrust specialist, who found that Overlap practices did not result in greater expected family contributions and had no effect on net per-student revenue. The trial is expected to last about two weeks.