When you think of important antitrust cases nowadays, you might think of hotspots like Big Tech, streaming services, airlines, healthcare, and the steady drumbeat of new conquests from the nation’s financiers to monopolize and price fix industries the world over.
One area of American life you might not associate with antitrust violations, however, is higher education (“higher ed”). Yet in recent years, higher ed, a nearly three quarter of a trillion-dollar industry once vaunted and beyond reproach—an august and prestigious realm admired by Americans nearly as much as the military—has seen public confidence in it crater completely.
Simultaneously, higher ed has lost on one landmark issue after another in our nation’s courts and halls of power in recent years: on student-athlete compensation, affirmative action, public backlash against university leadership, corruption in admissions, free speech, concerns about return on investment, foreign influence, and other inflection points.
While declining confidence in higher ed is not news to many, neither is the broader populist direction the country has been headed over the last decade. Americans of all political persuasions look out at corporate, academic, and governmental institutions that have presided over one disaster after the next, and see an elite class disinterested if not outright hostile to their concerns. Americans’ declining trust in institutions is not surprising. Polls show the confidence of voters of both sides in big business and higher education are at all-time lows.
In recent years, the Supreme Court ruled that banning college athletes from compensation violated the antitrust laws in NCAA v. Alston. In Students for Fair Admissions v. Harvard, it ended affirmative action, which, according to polls, had become nationally unpopular. Celebrities went to prison for bribing their kids’ way into selective universities in Operation Varsity Blues. University presidents have resigned and been forced out over scandals, and they have bombed in high profile testimony before Congress. For reasons no one can identify, universities expect students and their families to pay costs of attendance that have soared into the mid six figures. This cost is balanced against an entry-level job market that U.S. businesses have pledged to destroy, leaving people questioning whether higher ed is worth it at all.
The LSAC litigation
Against this backdrop, a private antitrust suit against the Law School Admissions Council (LSAC) was filed last year in the Eastern District of Pennsylvania.
LSAC is a notorious organization in the legal field that is largely obscure to most people. It designs and administers the Law School Admission Test (LSAT) and operates the Credential Assembly Service (CAS) that applicants use to send their applications and records to law schools. Applicants pay LSAC fees to the take the LSAT, to register to use the CAS, and to submit applications.
While this sounds at first like a vapid, ho-hum business closer to a thankless task than something antitrust cases arise from, the named plaintiff would beg to differ.
Linvel James Risner, a law school applicant from Georgia, brought a putative nationwide class action against LSAC under Sections 1 and 2 of the Sherman Act, alleging that the 197 ABA-approved law schools—direct competitors for applicants—created and control LSAC and use it as a vehicle for price fixing and monopolization.
The complaint challenges two policies: (1) a Pricing Policy that fixes uniform CAS fees ($215 subscription plus $45 per school report) as a “price floor” every applicant must pay regardless of school, while fixing the schools’ own price for the platform at $0; and (2) an Exclusivity and Use Policy conditioning LSAC membership for law schools on exclusive use of its application platform, foreclosing rivals like the Common App or vendors such as Salesforce, Oracle, Technolutions, and others from competing.
The complaint alleges LSAC collects roughly $30 million a year in these fees—a markup of over 10,000 percent on actual processing costs, with around 74 percent of its revenue coming from rejected applicants—and redistributes the proceeds to member schools as grants, free services, and a rainy-day fund, while amassing $238 million in net assets. LSAC does all of this while holding itself out as a non-profit organization. The complaint alleges LSAC charges such high fees because law schools demand the revenue from these fees as direct payments and for numerous free and subsidized services. The complaint states that the “astronomical sum LSAC and its member schools receive from these fees is untethered to any actual costs or the value of LSAC’s Law School Application Platform in a competitive market.”
The complaint also alleges that LSAC trustees who are deans of member law schools issued a report to the full board of trustees that recommended denying full membership to certain schools that accept the LSAT. The trustees concluded that those schools could not be members because they do not use LSAC’s Application Platform and “thus do not contribute significantly to the revenue needed to support LSAC’s services to members.” Those schools have not been granted membership.
The complaint alleges three counts—(1) horizontal price fixing in law-school application, (2) a buyers’ cartel and exclusion in platform markets, and (3) monopolization of a law-school centralized application platform submarket, where LSAC allegedly holds at least an 85 percent share. The suit seeks treble damages, an injunction, and certification of a class of everyone in the United States who paid LSAC platform fees since 2021.
One particularly questionable industry policy was that if an applicant has taken the GRE and the LSAT, and wishes to apply to law school using a GRE score that is stronger than their LSAT score, the law school was obligated to preference the LSAT score as it is required to be reported for rankings purposes, and thereby held against the student.
LSAC’s sordid history
Law school admissions, as I wrote about back when I was in law school, is deeply corrupt.
LSAC recently had to change the LSAT to remove the notorious “Logic Games” section after losing a lawsuit brought by a blind applicant alleging these test sections were impossible for students with visual disabilities.
In 2014, LSAC entered a consent decree with the Justice Department related to wide-ranging discrimination against people with disabilities alleged against the organization.
Law schools, and most of higher ed maintain they use a “holistic” approach to reviewing applications. It’s well known in legal education, however, that LSAT scores and undergraduate GPA make or break applications for the vast majority of applicants. A quick trip to the Law School Numbers website reveals hard cutoffs for applicants—scores of whom apply under the false promise of holistic consideration but nonetheless are summarily rejected—remunerating significant fees to law schools to discard the applications of applicants who never had a chance. Simultaneously, these condemned applicants—who are a cash cow to LSAC—responsible for about 74% of LSAC CAS revenue—help drive down member law schools’ acceptance rates, boosting the schools’ rankings. In other words, a racket.
LSAC, throughout its history, has used underhanded tactics to stymie competition. In one particular episode, LSAC sicced its lawyers on one of the most respected LSAT prep sites—making the company’s founder remove hundreds of hours of educational videos he made that coached students looking to get better at the exam, under threat of ruinous litigation. Having whacked the competition, LSAC then went on to begin selling its own test prep products.
The judge overseeing the case, Judge John Murphy, had sharp questions for LSAC’s lawyers in the oral arguments. His opinion dismissing the initial complaint due to a defect recognized the merits of the case and invited an amended complaint, which he recently refused to dismiss upon LSAC’s motion. The case will now go forward.
This history is significant not because of the relatively narrow legal industry, but because of all of the other players in the education-admissions stack who, similar to LSAC, serve as tollbooth operators collecting supracompetitive fees from students and their families for tasks with de minimis costs, driving up the cost of education. If this suit succeeds, it would serve as precedent for challenges to other businesses and entities in higher ed that extract cash from students and families from similar schemes and practices. In other words, precedent favorable to the plaintiff in the LSAC case could imperil the broader admissions racket.
Business models such as operating a league of athletes who are not compensated because they are students, or anticompetitive and nefarious admissions grifting, arise out of decades of impunity in higher ed, where no one would have conceived of bringing challenges against these institutions. As a result, many of the entrenched practices and business models of higher ed were not built to withstand scrutiny and are premised on meager justifications, sending the entire industry on a losing streak in recent years when it is challenged.
After Judge Murphy recently denied LSAC’s motion to dismiss the plaintiffs’ amended complaint, the case will move towards a class-certification decision, and if class is certified, towards a jury trial. As modern juries are increasingly comprised of Americans who have deep skepticism of corporate power, as described above, LSAC will have difficulty convincing jurors it is in the right in an already difficult case.
If LSAC loses on liability, the dispute will turn towards remedies. Given the small size of LSAC, dramatic remedies would be extremely unlikely. Instead, similar to the Epic v. Apple case in California, the court likely would set remedial, reasonable applicant fees compared to LSAC’s supracompetitive fees.
Americans continue to have negative views towards elite power centers that have long operated with impunity. There is a growing intellectual curiosity for asking “why” once respected institutions are actually just ripping them off. We can expect even more of these kinds of cases, giving long ignored but nonetheless unjust practices overdue scrutiny.
Tom Blakely is a Boston-based attorney and federal judicial law clerk who served in the United States Department of Justice, the Massachusetts Office of the Senate Counsel, and practiced at an international law firm. He frequently writes about numerous legal topics. Tom serves on the board of Boston College Law School where he hosted the Just Law Podcast. Tom is an avid sports fan, enjoys the outdoors and splits his time between Cape Cod and Washington, DC.