University of Chicago to Pay $13.5 Million in Settlement of ‘568 Cartel’ Lawsuit

Last April, the University of Chicago agreed to settle claims in the “568 Cartel” class-action suit against 17 elite private universities. Now, we finally know the terms: $13.5 million, according to federal court filings.

The 568 Cartel case involves six Ivy League schools and other highly selective institutions such as Northwestern University, Vanderbilt University, California Institute of Technology, Massachusetts Institute of Technology, Johns Hopkins University, and the University of Chicago.

Until last September, 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.

A class-action suit — Henry et. al. vs. Brown University et. al., filed in 2022 — claims 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.

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

As a result of this conspiracy, argues 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. Since 2004, more than 200,000 students have paid higher tuition and incurred larger debt absent competition among these institutions.

According to a news release, the plaintiffs’ counsel believes the $13.5 million settlement will benefit all students in the class-action suit, not just those who attended the University of Chicago.

“The $13.5 million is a significant sum,” Ted Normand, a partner at Freedman Normand Friedland, one of the plaintiffs’ lead counsel, said in the release. “It will help to compensate plaintiffs for their injuries, to deter the misconduct that plaintiffs have alleged, and to enable further compensation from the remaining defendants for the alleged injury to their alumni and current students.”

What’s more, the university agreed to provide information to the plaintiffs that will aid them in prosecuting their claims against the universities remaining in the case. This includes additional documents and a witness interview.

Such sources can reveal inside information about how elite college admissions operate. At another recent court hearing in this case, an attorney representing Dartmouth College said the institution has considered donations when making admissions decisions.

“We put forth a witness last week who gave testimony to the effect that each year in certain admissions decisions, candidates who were on the fence, if you will, would be admitted because of the interest of the alumni affairs and development office,” Terri Mascherin said in a court transcript obtained by The Dartmouth, the college’s student newspaper.

Assuming the judge in the case grants plaintiffs’ motion and approves the settlement, all alumni and students involved in the class-action suit will be notified of the financial ramifications of the settlement. The court has yet to set a date to decide whether to approve the settlement.

Meanwhile, the case proceeds for the remaining 16 defendants. Many may choose to follow Chicago’s lead, especially given the sensitive and rather damning nature of the documents being shared and witnesses being questioned.

When all the dust settles, so to speak, total damages paid by the defendants could be in the hundreds of millions, if not billions, of dollars. That’s the price you pay for deceit, say the plaintiffs’ attorneys.

“This case will serve as an important reminder that the antitrust laws are a critical source of protection against exploitation by cartels and monopolies for all citizens, including students,” Eric Cramer, another lead attorney for the plaintiffs, said in the release. “Because universities play such an important role in our society, it is all the more important that they avoid collusion in the provision of financial aid and in the setting of their prices.”