## Facts

- The United States sued nine elite universities, alleging a horizontal agreement restricting competition in undergraduate financial aid in violation of § 1 of the Sherman Act.
- The universities formed an “Overlap Group” and agreed to award aid based only on financial need, use a common formula to calculate expected family contribution, and meet annually to reconcile differences for students admitted to multiple member schools.
- The reconciliation process effectively coordinated the “family contribution” required from aided students, treating that contribution as the net price of attendance for those students.
- Eight universities settled through a consent decree without admitting liability; Massachusetts Institute of Technology (MIT) refused to settle and litigated.
- After a bench trial, the district court found MIT’s participation unlawful, treating the arrangement as price fixing but applying an abbreviated (“quick look”) rule-of-reason analysis rather than per se illegality.
- MIT appealed, arguing the conduct was not “trade or commerce” under the Sherman Act given its nonprofit educational mission and that the district court used the wrong antitrust standard.

## Issues

1. Whether coordinated financial-aid practices among nonprofit universities constitute “trade or commerce” subject to § 1 of the Sherman Act.
2. Whether a horizontal agreement that aligns net prices for aided students may be condemned under per se or abbreviated analysis, or instead requires a full rule-of-reason inquiry.
3. How claimed benefits (e.g., socioeconomic diversity, access for needy students, academic-quality objectives) factor into the antitrust evaluation of such an agreement.

## Decision

- The Third Circuit held the challenged conduct fell within “trade or commerce” because it affected the net price paid for undergraduate education by financial-aid recipients.
- The court agreed the arrangement was a horizontal restraint with prima facie anticompetitive features that could eliminate price competition for aided students.
- The court vacated the judgment against MIT and remanded, holding the district court erred by using an abbreviated analysis and by not adequately considering MIT’s asserted benefits and the agreement’s actual market effects.
- The court required a full rule-of-reason analysis, including consideration of competitive effects, justifications, and less restrictive alternatives.

## Legal Principles

- Nonprofit status and educational or charitable aims do not categorically exempt conduct from § 1 scrutiny when the conduct regulates the price-related terms of a product or service offered in a market.
- Horizontal coordination affecting the net price paid by consumers can establish a prima facie restraint of trade even when implemented through financial-aid calculations rather than list tuition.
- Abbreviated or “quick look” condemnation is inappropriate where the restraint arises in a setting that plausibly presents efficiency, quality, or access-related justifications requiring factual examination.
- A full rule-of-reason inquiry must assess actual effects on price, output, and quality; weigh those effects against substantiated benefits; and evaluate whether less restrictive alternatives could achieve legitimate objectives.

## Conclusion

The Third Circuit confirmed that coordinated financial-aid pricing among competing universities is subject to the Sherman Act, but it rejected truncated condemnation and required a conventional rule-of-reason proceeding to evaluate competitive harms, claimed benefits, and potential less restrictive means.


United States v. Brown Univ., 5 F.3d 658 (3d Cir. 1993)