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What the NACAC-DOJ Antitrust Investigation Might Mean for Independent Schools

Tuesday, September 3, 2019  
Posted by: Anna Taylor
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By Debra P. Wilson, SAIS President

 

The National Association of College Admissions Counselors (NACAC) has been managing the unenviable task of tangling with the Department of Justice (DOJ) Antitrust Division for the last two years. The scuffle started when NACAC convened a task force and updated their Code of Ethics and Professional Practices for colleges admissions officers. The CEPPs go into detail about early admission, when schools can recruit students in the admissions cycle, and other considerations of the college search process. DOJ served NACAC and many of the members of the task force that updated the CEPPs with subpoenas around the update. While it has been widely known that DOJ was investigating these principles, very little was publicly known about which parts of the code had caught DOJ’s attention. Until now.

On August 29, NACAC sent a communication to its members, noting that it needed advance membership approval of changes to their CEPPs at the upcoming annual meeting. This advance approval will allow NACAC to enter into a consent decree with the DOJ at some time after the annual meeting. A consent decree occurs when the DOJ and whomever they are investigating reach a settlement on the issue at hand and draft an agreement of how the organization will move forward. NACAC noted specific CEPP sections that will potentially change. DOJ believes that all but the first of the points below amount to “no-poaching” agreements between colleges and universities and therefore violations of antitrust laws.

  1. Incentives for early decision recruitment. The adopted CEPP language prohibited colleges and universities from providing financial or other incentives to early decision applicants. DOJ believes that the CEPP’s language and the practice restrain competition between institutions and should be deleted.
  2. Respecting college decisions once made. The adopted CEPP language prohibits colleges from continuing to try to recruit students once they have made a college decision. DOJ believes this prevents students from potentially lowering their college costs through continued offers from other colleges and should be deleted. 
  3. Not recruiting or offering enrollment incentives to students once they have enrolled, registered, declared their intent, or made deposits at other institutions. The adopted CEPP prohibits colleges from continuing to recruit students who have officially committed to another school. DOJ believes this language restrains competition among colleges for students and limits a student’s ability to lower costs and should be deleted.
  4. Transfer applications. Currently, colleges may not solicit transfer applications from previous pools unless students initiate contact and colleges can verify a student is not under contract with another college or the college permits transfer recruitment. DOJ believes this “severely hampers” the competition between colleges for transfer students and the language should be deleted.

Collectively, this means that colleges and universities may

  • offer additional incentives for early decision students
  • recruit students after commitment and well into the summer months
  • approach former applicants after they have already begun at another institution

Effectively, this means that admissions decisions may not be truly final until the very beginning of the school year, particularly for affluent families who may be able to pay for two full tuitions in any given year. 

Why is this important to independent schools?
Antitrust laws exist to ensure that fair competition occurs across all commercial enterprises and education is no different. The Trump Administration has been much more pro-active about enforcing antitrust laws and this pursuit of NACAC is a shot across the bow for all industries that have principles of good practice or other operating agreements between competitors that might limit free movement in the marketplace. This action and the potential consent decree make clear that these rules apply to the education industry as a whole and that DOJ is looking specifically at agreements that limit a student’s ability to receive better financial offers and make enrollment decisions after traditional enrollment dates or milestones, or an institution’s ability to give the student a better “deal.”

For independent schools, any agreements, principles, or written or unwritten understandings about students and their ability to move freely between institutions should be carefully reviewed in light of this investigation and its apparent outcome. Schools should be aware that similar legal analysis applies to the movement of faculty and staff among schools.

What does this look like in our industry?
In the independent school world, such principles are often not as involved as NACAC’s, but can be quite similar. A principle or understanding might include:

  • “Member schools do not knowingly recruit students enrolled at another member school unless the family approaches the school about a potential transfer.”
  • “If a school receives a transfer inquiry from a family at another member school, the school contacts the school where the student is currently enrolled to ensure that the student is not otherwise under contract.”
  • “Member schools do not continue to recruit a student who has already committed to another institution.”

Schools should understand that even if these terms are not explicitly written down and agreed to by the schools involved, but are terms understood between competitor schools, there can still be an antitrust violation.

What kind of liability is this?
Antitrust liability can be criminal or civil. DOJ is a criminal arm and actions against institutions can result in consent decrees, fines, or further penalties. Civil actions can also be brought. Antitrust cases are extremely expensive as they involve subpoenas for incredible amounts of documentation between competitors and such production may not be covered by the school’s insurance.

What do we do next?
Schools should make sure their practices, policies, agreements, and other operations do not illegally prohibit recruitment of students and staff. Given how pro-active this administration is in this area, schools should also be aware of other common antitrust concerns, including those related to setting salaries, tuitions, and other financial factors across the industry. For more information on that topic,
this article can help.

Is there any good news?
Yes. One of the concerns about this subpoena going to NACAC was whether DOJ would call out the admissions timetable as an antitrust violation. This timetable includes the agreed-upon admissions dates across the industry and is quite common among schools in some markets. This does not appear to be part of the potential consent decree and could be a signal that competitors agreeing to such dates is at least less problematic than these more significant anti-poaching agreements.

N.B. This article is intended for general educational purposes only. Schools should work with legal counsel when seeking particular legal advice.

Download a PDF version of this article here.


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