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Ivy Universities Deny Price-Fixing But Agree to Avoid It in the Future

Ivy Universities Deny Price-Fixing But Agree to Avoid It in the Future
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May 23, 1991, Section A, Page 1Buy Reprints
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Facing Justice Department charges that they violated Federal antitrust laws, the eight colleges and universities in the Ivy League have agreed to stop sharing information on student financial aid and to avoid collaborating on tuition increases.

Under a consent agreement signed yesterday and announced in Washington by Attorney General Dick Thornburgh, the eight institutions -- Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, the University of Pennsylvania and Yale -- agreed to end their policy of jointly agreeing to base all financial aid awards solely on need, without considering a student's merit or trying to compete with the others to get the choicest students by offering them more aid. Though the joint policy is ended, individual institutions can still offer aid strictly on need.

The universities also agreed to stop holding an annual meeting at which they and 15 other prestigious Northeastern institutions jointly discussed the financial aid applications of 10,000 students who had been accepted to more than one institution in the group. The purpose of this "overlap meeting" was to agree to uniform financial aid offers.

Although the universities were not specifically charged with sharing information on increases in tuition and faculty salaries and have consistently denied such collaboration, they agreed not to exchange such information in the future.

Federal Justice Department officials said the universities were using a standard formula for determining how much a family could pay for a college education and sharing other information that deprived some students of the financial aid they might have received were there more competition among the institutions.

"Students and their families are entitled to the full benefits of price competition when they choose a college," Mr. Thornburgh said at a news conference in Washington. "This collegiate cartel has denied them the right to compare prices and discounts among schools, just as they would in shopping for any other service or commodity.

"The most unfortunate aspect of this conduct is that it had a disproportionate impact on the students who needed the financial aid the most."

Benno C. Schmidt Jr., the president of Yale, called Mr. Thornburgh's statement "grossly unfair." Daniel Steiner, vice president and general counsel at Harvard, said, "Our practices served the good social purposes of making sure that a limited amount of financial funds went to the neediest students."

By consenting to end their 40-year-practice of cooperating on financial aid, the universities avoided a costly legal battle with the Justice Department, which began an investigation almost two years ago into possible antitrust violations at several dozen universities.

The consent decree was a quick response to a complaint filed yesterday morning by the department in the Federal District Court in Philadelphia. The complaint charged the institutions with violating the Sherman Antitrust Act by illegally conspiring to restrain price competition on financial aid to prospective students.

One other institution that had been under investigation, the Massachusetts Institute of Technology, refused to sign the consent decree. Justice officials yesterday said M.I.T. could end up in court. M.I.T. Provost Defiant

The institute's provost, Mark S. Wrighton, said it refused to sign the consent decree because it believed it had done nothing wrong. "We do not believe that our processes, including the overlap meetings, violated the antitrust laws," he said.

The Ivy League institutions, M.I.T. and 14 other colleges and universities in the Northeast met openly each spring to review financial aid applications from students admitted to two or more of the member institutions.

The Justice Department refused to comment on other institutions that might still be under investigation. Originally 57 institutions were asked to provide records to the Government, but many university officials say the Government was most interested in pursuing those in the group that held the overlap meetings each year. Little Effect Next Year

The consent decree will not affect students accepted at the eight Ivy League colleges this year and is not expected to have any wide-ranging impact on students who apply next year. Most of the eight institutions said that they would continue awarding financial aid solely on need, as they did now, but that they would end their cooperative yearly meetings.

Officials at Columbia University said they would try to get Congress to enact laws that would make cooperation permissable.

The Justice Department's investigation came to light almost two years ago when the 57 institutions were asked to provide records on financial aid and tuition.

The Justice Department would not comment on the investigation at the time, but many university officials believed that the Government was looking not only at financial aid policies but also at collusion on tuition increases and teachers' salaries. Timing of Tuition Rises

Such collusion has been suspected for many years, because tuition increases for the Ivy League institutions came in virtual lockstep. At most of them, the total cost of tuition, room and board and fees exceeds $20,000 a year.

By wresting an agreement from the eight Ivy League institutions, the Justice Department has in effect put an end to the annual meeting to review overlapping applications, even though 15 of the group's 23 members are not covered by the decree. The group had already canceled the meeting it would have held this spring, citing uncertainties brought on by the investigation.

Ivy League officials continue to support the concept behind cooperatively determining financial aid.

"Awards in excess of need either divert resources from needy students or require an increase in revenues or reductions in other programs to support aid above the level of need," said Harold T. Shapiro, the president of Princeton University. Skeptical Parents

By keeping financial aid awards standard, university officials said, students can then decide where to go based solely on academic and personal considerations.

But some students and their parents don't buy that argument. "I think they're just making sure they're not outbidding each other," said Maria G. Desmond of Baltimore, whose 17-year-old son, William, was accepted by Harvard, Princeton and Yale this spring. Harvard offered a package of grants, loans and work study of $12,000 a year toward the roughly $21,000 annual cost of tuition, room and board and fees. Yale offered $12,300; Princeton $11,575.

"If a matter of price fixing like that had happened in the commercial field, there would be all sorts of charges," Mrs. Desmond said. Her son has turned down all three offers to attend Loyola of Baltimore, where his tuition is free because both his parents teach there.

Government officials would not say what would happen to the other institutions involved in the investigations.

"The matter is still open," said James F. Rill, assistant attorney general in charge of the antitrust division.

In addition to the Ivy League members and M.I.T., the other 14 institutions in the overlap group are Amherst College, Barnard College, Bowdoin College, Bryn Mawr College, Colby College, Middlebury College, Mt. Holyoke College, Smith College, Trinity College, Tufts University, Vassar College, Wellesley College, Wesleyan University and Williams College.

A version of this article appears in print on  , Section A, Page 1 of the National edition with the headline: Ivy Universities Deny Price-Fixing But Agree to Avoid It in the Future. Order Reprints | Today’s Paper | Subscribe

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