Northwestern, Other Universities Run Price-Fixing Cartel: Lawsuit

EVANSTON, IL — Northwestern University and more than a dozen other private universities face a federal antitrust lawsuit alleging they conspired to form a price-fixing cartel.

The universities are accused of working together to artificially inflate the price of attending for recipients of financial aid, according to a lawsuit filed Sunday by five former students, including two recent Northwestern graduates. It seeks class action certification that could potentially cover more than 170,000 past students.

Universities are exempt from antitrust restrictions on anticompetitive conspiracies as long as all students are admitted on a "need-blind" basis — without taking into account the ability of their family to pay.

That antitrust exemption is known as the 568 exemption, after the section in a 1994 education law that provides it.

In 2003, leaders of 16 elite institutions named as defendants in the suit, known as the "568 Presidents Group" or "568 Cartel," established the "consensus methodology" as a formula for students' ability to pay tuition, the complaint said.

Northwestern and eight of the other defendant universities have continued to consider the wealth of applicants and their families when making admissions decisions.

"At Northwestern, a separate admissions process exists for the wealthy and well connected," the complaint alleges, referencing remarks by President Morton Schapiro revealing that he personally reviewed applications associated with wealthy donors and so-called "legacy students."

According to the lawsuit, Northwestern has an endowment of about $11 billion. The median family income of its undergraduate student body is $171,200. It said less than 4 percent of its undergrads come from the bottom 20 percent of income distribution, but 14 percent come from the top 1 percent and 66 percent come from the top 20 percent.

A university spokesperson told the Daily Northwestern it does not comment on pending litigation.

The other seven schools, including the University of Chicago, "may or may not have adhered to need-blind policies, but they nonetheless conspired with the other [universities,]" the lawsuit said.

Outside of the Chicago area, the other defendants named in the suit are Brown University, the California Institute of Technology, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, the Massachusetts Institute of Technology, Notre Dame, University of Pennsylvania, Rice University, Vanderbilt University and Yale University.

Attorneys for the former students have established a website that offers former students an opportunity to sign up to potentially join on to the proposed class action.

According to the Wall Street Journal, which first reported the filing, one of them was also a lead prosecutor on the federal probe of a nationwide college admissions cheating scandal dubbed "Varsity Blues."

"In critical respects, elite, private universities like Defendants are gatekeepers to the American Dream. Defendants’ misconduct is therefore particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents," the suit alleges.

"The burden of the 568 Cartel’s overcharges falls in particular on low- and middle-income families struggling to afford the cost of a university education and to achieve success for their children," it said. "In addition, unlike prior admissions scandals, such as Varsity Blues, the 568 Cartel’s systematic suppression of financial aid is the official policy of its participants."

Related: Ex-Northwestern Student's Parents Guilty In Admissions Conspiracy