Civil Rights and the Antitrust Laws
This article by Pranavaa Pishati focuses on antitrust laws, the relevant issues surrounding them, and their impact on civil rights in the education system of America. I. Introduction Monopolization is typically unreasonable to other businesses and customers since it reduces market production compared to a competitive industry, they would charge a higher price for their output, as monopoly… Read More »
This article by Pranavaa Pishati focuses on antitrust laws, the relevant issues surrounding them, and their impact on civil rights in the education system of America. I. Introduction Monopolization is typically unreasonable to other businesses and customers since it reduces market production compared to a competitive industry, they would charge a higher price for their output, as monopoly output is produced less efficiently and at a higher cost than competitive industry output. To curb...
This article by Pranavaa Pishati focuses on antitrust laws, the relevant issues surrounding them, and their impact on civil rights in the education system of America.
I. Introduction
Monopolization is typically unreasonable to other businesses and customers since it reduces market production compared to a competitive industry, they would charge a higher price for their output, as monopoly output is produced less efficiently and at a higher cost than competitive industry output. To curb these complications, the federal government enacted three main antitrust statutes: (Sherman Antitrust Act, Clayton Antitrust Act, Federal Trade Commission act).
These statutes restrict commercial tactics that unfairly deprive consumers of the benefits of competition, leading to increased product and service costs.
The major concern of anti-trust laws is the preservation of economic rights. However, these “economic rights” are, in general, “civil rights.” When the immediate effect of anti-trust laws is more visible in domains other than anti-trust, in fields other than economic, the anti-trust rules do not cease to apply[1].
II. The Three Anti-Trust Statutes
1. The Sherman Antitrust Act of 1890
In 1890, Congress established the nation’s first antitrust statute. The Sherman Act includes two major substantive clauses that ban trade restraint agreements and monopolies, respectively. These rules are enforced by the Department of Justice’s (DOJ) Antitrust Division, the Federal Trade Commission (FTC), and private plaintiffs.
Section 1 of The Sherman Act outlaws “every contract, combination, or conspiracy in restraint of trade or commerce,”. Despite this wide phrasing, the Supreme Court has concluded, based on the statute’s common law foundation, that Section 1’s ban applies only to agreements that unfairly restrict economic competition. In adopting this criterion, the Court has designated certain types of behavior as categorically irrational and hence illegal in and of themselves. The Court, on the other hand, examines most Section 1 claims using a criterion known as the “Rule of Reason”, a totality-of-the-circumstances approach that assesses whether a challenged restraint is generally good or bad for competition[2].
Section 2 of The Sherman Act deems monopolizing or attempting to monopolize “any part of the trade or business among the several States, or with foreign countries” illegal.
2. The Clayton Antitrust Act of 1914
The Clayton Antitrust Act of 1914 prohibits some forms of pricing discrimination and mergers that are likely to impair competition, in addition to the improvement of actions that are already illegal under the Sherman Act.
Section 2 of the Clayton Act forbids some types of price discrimination, making it illegal for a seller to charge different rates to buyers for commodities of “like grade and quality” when such discrimination is likely to harm competition.
Section 7 of the Clayton Act prohibits mergers that may damage competition. Section 7 discusses “horizontal” mergers between opponents as well as “vertical” mergers between firms at varying scales of a production chain.
3. Federal Trade Commission Act (FTCA)
Unlike the Sherman and Clayton Acts, the FTCA allows an accused party to enter into a consent agreement with the FTC in which the party does not acknowledge guilt but promises to refrain from engaging in the dubious behavior in the future[3].
Federal legislation was enacted in the United States in 1914 to establish the Federal Trade Commission (FTC) and provide the United States government with a comprehensive set of legal instruments to combat monopolistic and misleading activities in the marketplace. The statute was thus intended to achieve two linked goals:
- fair competition among enterprises and
- consumer protection against unscrupulous business activities.
To that aim, the act enabled the FTC to enforce the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914 provisions, and it particularly prohibited the use of deceptive or fraudulent advertising. Over the span of more than a century, the legislation has been revised multiple times to broaden the FTC’s authority and adapt its mandate to new industries.
III. The Clash with Civil Rights
There are two programs called Early Admission Programs: Early Decision (ED) and Early Action (EA), these programs allow high school students to apply to a college or university in November. The schools then provide students with a choice in early December, well ahead of the regular-decision application deadlines for other colleges.” Schools prefer ED programs because they allow them to limit financial aid outlays to a certain level while deciding early. Because ED applicants are often wealthy and less likely to seek financial aid than the general application pool, ED allowed colleges to reduce financial aid expenses[4].
If a college did accept underprivileged ED applicants, the students were obligated to the institution and could not compare financial aid packages or negotiate a higher reward. many people presume that while limiting their options, they may occasionally consider the race element and stereotype they cannot afford it while limiting their selections, colleges and institutions carefully preserve their admissions data, hence nothing is known about how ED and racism interact.
Federal regulations empower the government to withhold funds from institutions that have policies that disproportionately affect certain racial or ethnic groups. As a result, if schools continue to provide ED programs, they risk losing federal support.
Schools that compensate for ED losses risk violating the Supreme Court’s Equal Protection reasoning; schools that do not adjust risk violating Title VI of the Civil Rights Act of 1964. Although civil rights are the dominant legal framework in educational reform, the antitrust analysis provides a compelling alternative legal critique of ED programs, shifting the focus from race to class and removing the results reveals.
In the United States v. Brown University, the government filed a lawsuit against MIT and the other eight Ivy League schools and universities: Brown University, Columbia University, Cornell University, Dartmouth College, Harvard University, the University of Pennsylvania, Princeton University, and Yale University. The nine institutions, according to the government, violated Section 1 of the Sherman Act by conspiring to limit price competition for students receiving financial aid.
Every Ivy League school signed a consent decree agreeing to discontinue the challenged cooperative activity; however, MIT refused to sign, instead opting to go to trial. The District Court ruled that MIT had violated Section 1 of the Sherman Act. “The court can conceive of few components of higher education that are more commercial than the price charged to students,” the court concluded, dismissing MIT’s claim that the disputed conduct was not commercial activity.
Though the court agreed with the government that the Overlap behavior damaged trade and thus was subject to Sherman Act scrutiny, the court refused to declare the Overlap procedure illegal in and of itself. The court noted that “just because a practice carries a name that fits within the categories of constraints deemed to be per se unreasonable does not entail that a court must instinctively consign that practice to per se treatment[5].”
The court had found that because the Ivy Overlap Agreements are clearly anti-competitive, the Rule of Reason placed a “high burden” on MIT to “show an affirmative defense that competitively justifies this apparent deviation from the operations of a free market.”
The court determined that information demonstrating that the challenged activity had no effect on the prices charged by the Overlap schools did not offer an affirmative defense for the conduct. The court dismissed MIT’s Overlap reasons, concluding that “The court is not to consider whether social policy goals can ever justify an otherwise competitively unjustifiable limitation.” The Supreme Court ruled that it cannot.
On appeal, the Third Circuit focused more on MIT’s ostensibly anti-competitive grounds for the Overlap Group. Although the Overlap Group appeared to violate the Sherman Act by interfering with graphic representation, MIT maintained that certain aspects of the arrangement actually increased competition by providing assistance and options to underprivileged people who would not otherwise have been able to attend Overlap schools without limiting the options of their wealthier peers; that controlling price increased competition between institutions along other dimensions, such as school system and campus life options; and, eventually, that Overlap schools could only attend Overlap schools by organizing segregation.
Because financial aid resources are limited, MIT suggested that without Overlap, schools would compete aggressively for outstanding students through financial aid, to the expense of their less glamorous but equally needy classmates, dramatically reducing the availability of need-based help.
The Third Circuit found that, rather than suppressing competition, Overlap may simply regulate it in order to promote it, while still receiving certain societal benefits, and hence the stated procompetitive and social welfare characteristics of the Overlap Agreement warranted more examination.
The court underscored education’s unique position as a social good that should be publicly distributed. It remanded the issue to the district court so that the court may conduct a more thorough investigation into MIT’s procompetitive and non-economic arguments. The complaint was settled by the Antitrust Division on terms similar to the consent decrees for the other Overlap institutions[6].
[1] ‘Civil Rights And The Anti-Trust Laws’ (1951) 18 Civil Rights and the Anti-Trust Laws Available Here accessed 11 August 2021
[2] Skyes J, ‘Anti Trust Law: An Introduction ‘ (Fas.org, 2019) Available Here accessed 12 August 2021
[3] ‘Federal Trade Commission Act | United States [1914]’ (Encyclopedia Britannica, 2021) Available Here accessed 11 August 2021
[4] AFRAM R, ‘Civil Rights, Antitrust, And Early Decision Programs’ (2006) 115:880 The Yale law journal
[5] Robertson E, ‘Antitrust As Anti-Civil Rights? Reflections On Judge Higginbotham’s Perspective On The “Strange” Case Of United States V. Brown University’ (digital commons law yale, 2002) Available Here accessed 11 August 2021
[6] ‘Civil Rights And The Anti-Trust Laws’ (1951) 18 Civil Rights and the Anti-Trust Laws Available Here accessed 11 August 2021