Shearman & Sterling LLP | Antitrust Blog | Oregon District Court Allows Claim Against Association Of Colleges And Universities To Proceed And Accepts Harm To Defendant’s Members As Evidence Of Antitrust Injury<br >  
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  • Oregon District Court Allows Claim Against Association Of Colleges And Universities To Proceed And Accepts Harm To Defendant’s Members As Evidence Of Antitrust Injury
     
    12/11/2018
    On November 28, 2018, Judge Marco A. Hernández of the United States District Court for the District of Oregon, on remand from the Ninth Circuit, reversed its prior grant of a motion to dismiss and held that plaintiff — which brought antitrust conspiracy claims against a non-profit corporation made up of 549 member colleges — sufficiently demonstrated antitrust injury by alleging harm to the member colleges.  CollegeNET, Inc. v. The Common Application, Inc., No. 3:14-CV-00771-HZ (D. Or. Nov. 28, 2018).
     
    Defendant The Common Application, Inc. (“TCA”) is a corporation comprised of several hundred non-profit member colleges and universities.  It offers a standardized, web-based application form through which prospective students may submit one common application form to multiple institutions of higher learning.  Plaintiff, CollegeNET, Inc. (“CollegeNET”), competes with defendant in providing education-related web-based services, including online college application forms and application processing.  Plaintiff alleged that defendant conspired to restrain trade in the college application processing market by, among other things, imposing “equal treatment” requirements that encouraged use of defendant’s common application over other applications.  Plaintiff also claimed that defendant employed exclusivity requirements that levied punishment against member colleges that used other application services.  The restrictions, plaintiff argued, constituted an unlawful group boycott and refusal to deal.  Plaintiff alleged that these practices excluded plaintiff from the market and suppressed plaintiff’s output, and also injured both member colleges and student applicants by stifling market innovation. In May 2015, the District Court granted defendant’s motion to dismiss, holding that plaintiff had not demonstrated antitrust injury because it primarily alleged harm to itself — a competitor in the marketplace — rather than harm to competition.  CollegeNET, Inc. v. Common Application, Inc., 104 F. Supp. 3d 1137 (D. Or. 2015), rev’d and remanded, 711 F. App’x 405 (9th Cir. 2017).  In October 2017, the Ninth Circuit reversed and remanded the case, holding:  “At this preliminary stage in the proceedings, it is sufficient that CollegeNET has alleged that TCA limited college choice, decreased the scope of services and price competition available to student applicants, and foreclosed rivals from entry to the market, thereby reducing overall market satisfaction ‘by leaving one dominant provider offering inferior products and services.’”  CollegeNET, Inc. v. Common Application, Inc., 711 F. App’x 405, 407 (9th Cir. 2017), cert. denied, 138 S. Ct. 1993 (2018). 
     
    On remand, the District Court once again considered plaintiff’s Sherman Act Section 1 claims, finding that plaintiff sufficiently alleged an agreement among competitors because, although defendant acts as a single entity comprised of hundreds of colleges and universities, it is the product of constituent agreements between competitors to collectively “limit their participation” in the marketplace for online student application processing.  The Court further found that plaintiff adequately alleged that defendant’s “equal treatment” and exclusivity requirements constituted unreasonable restraints of trade that limited the ability of member colleges to “purchase higher-quality, more innovative, or lower-priced … services from rival providers.”  The Court found that the challenged agreements resulted in less value to member colleges, including “a reduction in their ability to find good matches, poorer quality and innovativeness of the application process, and increased monetary costs.”
     
    The Court also considered, and rejected, defendant’s arguments that plaintiff could not support its additional claims of exclusive dealing, tying, monopolization, and attempted monopolization, finding that plaintiff adequately alleged putative antitrust violations and harm to competitors, consumers, and member colleges.  Notably, the Court did not explicitly apply an antitrust injury analysis to plaintiff’s claims.  However, the Court allowed the claims to proceed on the theory that defendant’s conduct injured its own members in addition to the market as a whole — suggesting that harm to an association’s own members is sufficient “antitrust injury” for an antitrust claim.
     
    Antitrust challenges frequently arise in the context of associations.  The CollegeNET decision is a good example of how associational conduct can give rise to antitrust claims, as the Court treated TCA’s members as separate entities that entered into “agreements” — triggering Section 1 of the Shearman Act.  The decision also suggests that injury to association members themselves can give rise to an antitrust claim.  In other words, the decision implies that an antitrust claim can be asserted based, at least in part, on the theory that an association’s members agreed to harm themselves.

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