Yale, Duke and Columbia among elite schools settle price-fixing case

For nearly a quarter century, a group of the nation's most elite universities had a legal shield: They would be exempt from federal antitrust laws if they shared formulas to measure the financial needs of prospective students.

But the provision included a crucial requirement: that the collaborating universities' admissions procedures would be “need-blind,” meaning they could not take into account whether a prospective student was wealthy enough to pay.

But a court filing on Tuesday evening revealed that five of those universities — Brown, Columbia, Duke, Emory and Yale — have jointly agreed to pay $104.5 million to settle a lawsuit in which they are essentially accused of weighing their financial capacity when deliberating over the fate of some applicants.

Although the universities did not admit to their wrongdoing and fought back against accusations that their approach had harmed students, the settlements nevertheless raise questions about whether the schools, which for years have praised the generosity of their financial aid, did everything they could to reduce tuition to lower.

Brown University maintained that all financial aid decisions were made in the “best interests of families and within the law,” but said in a statement Tuesday evening that resolving the matter will allow it to “focus its resources on further growing generous aid for students.”

The five universities' agreements came months after the University of Chicago agreed to pay $13.5 million to settle its portion of the case. Other schools, including Cornell, Georgetown, Johns Hopkins, MIT and the University of Pennsylvania, remain embroiled in the lawsuit, with no trial date set.

The vast court case targeted 17 schools that were or were members of the 568 Presidents Group, named for the legal provision that provided antitrust coverage. The case argued that universities did not actually adhere to the need-blind admissions mandate when deliberating on waitlisted applicants, making their financial aid protocols illegal.

For example, Vanderbilt University said on one of its websites in 2018 that it “reserves the right to be aware of needs in admitting waitlisted students,” echoing previous statements by university officials.

Nashville-based Vanderbilt told the court last year that it planned to settle.

By considering necessity in any context, the lawsuit argued, the universities were defying the terms of their antitrust exemption. The case complicated the path for the universities by drawing strength from a legal doctrine that holds that members of a group are responsible for the actions of others in the same group.

Ultimately, the lawsuit alleged, about 200,000 students were overcharged for about two decades because the 568 Group eliminated cost competition, thereby “artificially inflating” the net price of attendance.

If universities had competed more aggressively for financial aid, students could have received more aid and spent less to attend college, according to the lawsuit.

The antitrust shield expired in 2022 and the 568 Group has been dissolved.

Although the University of Chicago said the lawsuit was “without merit” when it settled the case, it agreed to share data that could be valuable in the lawsuit against the other universities.

A handful of other universities have since made similar calculations, admitting no guilt while limiting both their financial risk and the risk of damaging disclosures in documents or statements.

“While we believe that the plaintiffs' claims are without merit, we have reached a settlement in the best interests of our continued focus on providing talented scholars from all social, cultural and economic backgrounds with one of the world's best undergraduate educations and the opportunity to graduate debt-free,” Vanderbilt, which is still finalizing the settlement, said in a statement.

For plaintiffs, the planned settlements offer an advantage beyond the enormous amount of money to be distributed among students and lawyers: By shrinking the ranks of defendants, they also streamline a case that could prove exceptionally complex at trial.

Emory and Yale are both expected to pay $18.5 million, with Brown settling for $19.5 million. Columbia and Duke have agreed to pay $24 million each. Separately from Tuesday's filing, Rice University said in a recent financial statement that it had agreed to pay nearly $34 million.

In their filing on Tuesday, plaintiffs' attorneys said the settlements “were not reached as a group or all at once, but instead were pursued individually over time.” The lawyers added that they had “adopted a strategy of increasing settlement amounts with each successive agreement or series of agreements to put pressure on non-settlement defendants to reach an agreement at short notice or risk having to pay significantly more by to wait.”

The financial aid practices at elite universities have long been under antitrust scrutiny. In the late 1980s, the Justice Department opened an investigation into price-fixing, which led to a series of settlements in the 1990s as Ivy League schools sought to avoid potentially huge legal battles. (MIT initially refused a settlement and opted for trial. It later also reached an agreement with the government, with the settlement's language becoming something of a template for Section 568.)

Last year, the Justice Department issued a filing expressing support for some of the legal arguments underlying this current civil case that schools are settling.

Stephanie Saul reporting contributed.