Antitrust Complaint for College Applications
PORTLAND, Ore. (CN) - The creator of the Common Application for college conspires with colleges to restrain trade, limit competition and pump application volume, to the detriment of competitors and students, a competitor claims in an antitrust complaint.
CollegeNET Inc. sued The Common Application Inc., in Federal Court.
The Common Application is a nonprofit that provides college admission application and processing services to more than 500 colleges and universities in the United States and six foreign countries. It reported $13 million in revenue in 2011, and processed approximately 3.3 million applications in the 2013-2014 cycle as of February 2014, according to the lawsuit.
Portland-based CollegeNET claims that the Common Application system has turned "a once vibrant, diverse and highly competitive market into a straitjacketed ward of uniformity."
Before colleges adhered to the Common Application system, they used application service providers such as CollegeNET to develop applications that marketed their particular attributes, distinguished them from competitors, and offered different benefits for different types of applications, according to the lawsuit.
CollegeNET offers online application forms and processing services to higher education and nonprofits throughout the Unites States and the world. It claims its forms let colleges customize their applications, allowing for independence with respect to the questions students must answer and the answers accepted.
It claims it has lost 229 college customers to Common Application in the past 10-15 years.
"Today, that diversity and competition have been virtually eliminated among 'elite' colleges, approximately 85 percent of whom are members of the Common Application," the complaint states. "And, as colleges are increasingly compelled to join the Common Application, Common Application is poised to eliminate competition in the broader market within a few short years.
"Publicly, Common Application and its members promote that the purpose of this competitor collaboration is to simplify the admissions process for students (belied, however, by Common Application's processing catastrophe of fall 2013), and provide for 'holistic' admissions (belied by the straitjacket imposed by Common Application on the ability of the schools to solicit through their application forms a more individualized and distinctive profile from students). Privately, however, participants acknowledge that the real benefit to member colleges is a 20-40 percent increase in application volume derived from banding together. Because Common Application has removed differentiation from the application form, it is easier for students to 'press the button and pay' as they file more and more forms. As submission volume consequently increases, next year's applicants are compelled to file still more forms in an attempt to increase their odds of acceptance. This self-reinforcing increase in volume not only drives increased revenue for colleges; it drives a market misperception created by the artificially higher selectivity rating published by U.S. News & World Report - a misperception that is more valuable to member schools than providing an honest accounting of motives to students, families and the public. Owing to the influence of the rankings, and the disadvantage to schools that don't play the game, the consortium is able to force even reluctant colleges to use and promote its inferior, dumbed-down 'common' application and accede to its increasingly restrictive membership rules which both limit colleges' ability to compete and foreclose or limit rival application providers' ability to compete.
"Common Application's purported promise of simplification is overstated and misleading. Its real purpose is uniformity directed towards pumping application volume. Real efficiencies are largely unrealized - particularly in view of the debacle which has been CA4, Common Application's fourth-generation online application forms and processing system. During the catastrophic fall 2013 processing season, CA4 was unsupported by even a single live customer service representative. Common Application's inept build-out and operation of CA4 created a nightmare for students, parents, colleges and school officials alike. In any competitive market, such incompetence would have driven away members and deterred new ones. Yet since the debacle, Common Application's member base has expanded instead of retracting. It is the Common Application's relentless efforts to expand its scope, limit differentiation beyond the standard college application data service it was originally formed to provide, and leverage the collective power of its members to exclude competitors which is the crux of this complaint." (Parentheses in complaint).
CollegeNET claims Common Application has abused its power and conspired with member colleges to limit competition through price restraints, non-compete agreements, product limitations, bundling of products and services, and a group boycott.
"In a national climate where the cost of tuition continues to skyrocket beyond the
Consumer Price Index and student debt has surpassed $1 trillion, Common Application's scheme to both eliminate competition between colleges and eliminate third party servicers from the marketplace is accelerating the cost per student of applying to college and limiting the opportunities available to students (and competitors) that would otherwise be available in a free market economy. Neither CollegeNET nor any other company is safe to invest in innovation for streamlining and reducing higher education costs if it faces the risk of colleges later banding together to quash innovation and competition." (Parentheses in complaint).
CollegeNET says Common Application's expanding market share impedes innovation, increases application costs and harms students and competitors.
Common Application has announced its third-highest one-year increase in the number of new members ever, from 517 in 2013-2014 to approximately 557 in 2014-2015, according to the lawsuit.
"Common Application also moved members' Institutional Supplements entirely within the Common Application online system," the complaint adds. "Prior to 2013-2014, members had the option of offering their Institutional Supplements as standalone online forms available for completion on their own websites (albeit at the penalty of paying the 'standard' member rates, and at the cost of developing, hosting, and processing their own Institutional Supplements, along with that portion of the fee bundled into the Common Application fee). With CA4, they were required to offer their Supplements within the CA4 system, losing any flexibility they ever had to brand their Supplements, market themselves within them, and hire a competent, reliable vendor to develop, host, and process them. In short, Common Application now insulates members from competing with one another for applicants virtually in any way, at any stage, and through any facet of the application cycle." (Parentheses in complaint).
CollegeNET seeks an injunction and damages for antitrust violations.
It is represented by Sarah Crooks with Perkins Coie.
Scott Anderson, a spokesman for Common Application, declined to comment on the lawsuit.
"The Common Application is a voluntary, not-for-profit membership association that has a nearly 40-year history of integrity, reliability, and equity in the college admission process," Anderson said in an email. "We are fully committed to promoting college access through the use of holistic admission."