University of Chicago Is First To Settle in ‘568 Cartel’ Lawsuit

Facing discovery motions and depositions threatening to expose admissions practices, more universities could quickly follow suit.
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Mark J. Drozdowski, Ed.D., is a senior writer with BestColleges. He has 30 years of experience in higher education as a university administrator and faculty member and teaches writing at Johns Hopkins University. A former columnist for The Chronicle ...
Published on April 24, 2023
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  • The 568 Cartel case involves 17 elite private universities accused of colluding to cap financial aid awards.
  • A class-action suit seeks damages for more than 200,000 students.
  • Other universities might follow Chicago's lead given pending discovery motions and depositions.

The University of Chicago is settling claims in the "568 Cartel" case, becoming the first to do so among 17 elite private colleges charged with antritrust violations.

While the terms of the settlement remain undetermined, a preliminary analysis suggests settlements in this case could collectively cost the defendants billions of dollars.

Elite Universities Charged With Price-Fixing

The "568 Cartel" moniker refers to the now-defunct 568 Presidents Group, which included six Ivy League schools and other top institutions such as Northwestern University, Vanderbilt University, California Institute of Technology, Massachusetts Institute of Technology, and Johns Hopkins University.

These universities operated under an antitrust exemption known as Section 568 of the Improving America's Schools Act of 1994, a congressional sanction allowing colleges to formulate common approaches to awarding need-based financial aid — as long as they strictly adhered to need-blind admissions.

Section 568 expired last September.

A class-action suit — Henry et. al. vs. Brown University et. al., filed in 2022 — claims 10 of these colleges are in violation of the Sherman Antitrust Act because they didn't uphold a commitment to need-blind admissions as required by Section 568 and, therefore, weren't entitled to its protections.

The remaining seven institutions may or may not have adhered to need-blind admissions policies, the complaint claims, but they "nonetheless conspired with the other Defendants," which would make them equally guilty of antitrust violations.

Absent the commitment to need-blind admissions, the suit alleges, what these colleges were doing was illegal.

As a result of this conspiracy, says the claim, these universities artificially reduced financial aid awards and increased the net cost of attendance through the use of a "consensus methodology" for determining aid. More than 200,000 students paid higher tuition and incurred larger debt absent competition among these institutions.

Last August, a District Court judge denied the defendants' motions to dismiss the suit.

"The Court concludes that, regardless of which interpretation of 'need-blind' it adopts, the plaintiffs have plausibly alleged that the defendants do not admit all students on a need-blind basis," wrote District Judge Matthew F. Kennelly in the court's opinion.

More Colleges May Settle In 568 Cartel Lawsuit

A brief letter to Kennelly from the attorneys says both the plaintiffs and the university "have reached an agreement in principle" that, if approved by the Court, would resolve the case.

Details of the settlement remain to be determined.

"We look forward both to hammering out the details of the settlement with the University of Chicago and to presenting it to the court in the near future to begin the class settlement approval process," said Robert D. Gilbert, an attorney for the plaintiffs. "In the meantime, we are focused on continuing to litigate aggressively against the sixteen remaining defendants on behalf of the proposed class of university students."

It would not be surprising to see many of these remaining universities follow Chicago's lead. A February hearing with university attorneys and Kennelly focused on discovery motions and depositions, which could not only lay bare defendants' private admissions practices but also require testimonies from presidents and other institutional leaders.

What's more, documentation submitted to the court and obtained by BestColleges suggests a ruling in favor of the plaintiffs could result in damages in excess of $4 billion. Even settling out of court could cost these universities a nine-figure sum, collectively.

This story is developing and will continue to be updated.