Anti-competitive behavior in the land of College Admissions

Jed Applerouth, PhD
September 18, 2019
#
min read
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College admissions offices compete aggressively for students, but they must abide by a certain playbook to ensure competition doesn’t get out of hand. The rules of fair play in the admissions space are set by the National Association for College Admissions Counseling (NACAC) through its Code of Ethics and Professional Practice (CEPP). Recently, this playbook has come under the scrutiny of the Antitrust Division of the Department of Justice (DOJ).

Investigators at the DOJ were concerned that some of the ethics provisions set forth by NACAC were limiting competition, restraining trade and, thereby, hurting students - the end consumers. These provisions may have created a more civil landscape and created more stability for admissions offices, but at the cost of higher prices for students.

In November 2017, the DOJ opened an official investigation into NACAC’s ethics rules, to determine whether they violated federal antitrust laws. After a multi-year review, the investigators found that several provisions of the CEPP were problematic.

DOJ and NACAC have been negotiating to achieve a settlement that will resolve the matter without necessitating further legal action. The DOJ is seeking the removal of three CEPP provisions pertaining to student recruitment. The current proposed arrangement would allow NACAC to remove the questionable ethics provisions without having to admit guilt under antitrust law. Next week, the members of NACAC will vote at the annual conference in Louisville whether to comply with the DOJ’s demands or prepare for an expensive legal fight.

Which NACAC ethics rules does DOJ want eliminated to protect competition?

The DOJ has focused its attention on three specific practices within the CEPP that potentially restrain competition. Currently, NACAC prohibits colleges and universities from:

  1. Offering incentives (i.e., the promise of special housing, enhanced financial aid packages, and special scholarships) exclusively to students applying Early Decision (ED)
  2. Recruiting students once they have committed to attend another college and, in particular, recruiting or offering incentives to students after commitments become final on May 1 (with a few noted exceptions, such as students coming off waitlists and transfer students)
  3. Soliciting transfer students from a previous year’s applicant or prospect pool unless the students are driving the inquiry, are not currently enrolled at a college, or are enrolled in an institution that allows transfer recruitment.

Through their membership in NACAC, college admissions offices voluntarily bind themselves to these best practices, which are designed to keep the recruitment process relatively civil and minimize student poaching by admissions offices. It’s noteworthy that NACAC has never achieved full compliance with these best practices. To this day, some colleges ignore the May 1st deadline and continue to pursue students who have committed elsewhere in order to achieve their admissions targets. The DOJ is clearly a fan of more vigorous competition in the college marketplace and wants to remove these practices to allow colleges to compete more freely for students.

What are the potential implications for colleges and students?

If NACAC agrees to strike these provisions from its CEPP, colleges will be allowed to more aggressively compete for students. Colleges will be able to sweeten the deal for ED students and offer exclusive benefits (e.g., better housing and financial aid offers) to attract the best ED candidates. Colleges will no longer be bound by those May 1st deadlines and will be able to compete for students well into the summer and even up to the beginning of classes. And even once those students have matriculated, other colleges can come back to them and actively recruit them if a transfer spot opens up in their sophomore year or beyond. When one of my colleagues, a former admissions officer, read the news, her response was simply, “Yikes!”

This scenario is something of a nightmare for college admissions officers, as it will decrease their feelings of security about the classes they have built by the May 1st deposit deadlines. At a fundamental level, college admissions officers and enrollment managers crave stability and use many tools to limit the uncertainty inherent in their profession. They analyze student behaviors to determine their level of demonstrated interest. They conduct sophisticated predictive analysis to determine who to recruit and what aid package will yield what students. They load up on Early Decision students to manage discount rates and offset falling yield rates driven by higher application numbers. College Admissions offices do not want wild swings in their matriculation numbers, which can sow chaos for an institution, financially and logistically. Eliminating the three CEPP provisions opens up the door for more uncertainty and more stress for college admissions officers.

Minimizing stress for harried admissions offices is not the purview of the DOJ Antitrust Division: their mandate is simply to ensure competition and protect the end consumer - in this case, students. The DOJ believes that when colleges have to compete more openly, students will benefit. Students will be able to secure better ED offers and will benefit from colleges having longer to recruit them using a variety of incentives well after the May 1st deposit deadline.

Scott Jaschik outlined some of the concerns posed by this potential change to the CEPP, particularly focusing on the threats to the system outlined by Jon Boeckenstedt. Boeckenstedt is worried about the increase in student poaching that may come to pass with the new policies. He’s also anticipating potential increases in the amount colleges charge students for their deposits, to mitigate the risks of students walking away from their commitments. Boeckenstedt anticipates an uptick in the use of ED and ED incentives, more financial negotiations following May 1st deadlines, increased demands on high school counselors after May 1st deadlines, and “general downward pressure on net costs for students.”

College admissions officers are not happy about this, but they have few tools with which to fight the DOJ. Litigation would be expensive, lengthy and involved, and according to a memo issued by the president and CEO of NACAC,complying with the DOJ seems the best course of action. NACAC members will vote in a week, and if they consent to the DOJ’s proposed settlement, significant changes are coming to the college admissions process.

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