Newsletter > November 2004 > "ANTITRUST IMPLICATIONS OF FRATERNITY MISTREATMENT BY COLLEGES"
ANTITRUST IMPLICATIONS OF FRATERNITY MISTREATMENT BY COLLEGES
Robert Manley, Manley Burke
That colleges can be illegal monopolists is well-settled law.1 Based upon this well-established principle of law, four fraternities sued Hamilton College when the College demanded that they sell their houses to the College so that the College could take total control of the local housing market and the market for food services to Hamilton College students. This gave Hamilton College monopoly power over student housing and food services in the vicinity of Hamilton College. The fraternities were Alpha Delta Pi, Delta Kappa Epsilon, Psi Upsilon and Sigma Phi.
The fraternities lost because the court defined the relevant market as the market for students who want to attend small, expensive liberal arts colleges in the northeastern part of the United States.2 Thus, Hamilton College got away with monopolizing the housing and food services market for its students and putting itself in a position of a monopolistic buyer. By forcing the house corporations to sell their houses, Hamilton College was the one buyer and that gave the Hamilton College monopoly power.
The fact is three of the four fraternities had to retreat from the litigation because they ran out of money. The fourth carried forward to a defeat. This dumped ice water on defenders of student rights who had hoped to rely upon the antitrust laws.
Recently, a thorough analysis of the issue was published in an article written by Mark D. Bauer.3 In the article entitled “Small Liberal Arts Colleges, Fraternities and Antitrust: Rethinking Hamilton College,”4 Professor Bauer argues persuasively that the Hamilton College case was decided incorrectly and that future cases will probably be decided differently. Indeed, he cites what happened at Hamilton College after the takeover of the fraternity houses as evidence of the monopolistic consequences of Hamilton College’s fraternity takeover.
To put it in context, the United States Congress passed the Sherman Antitrust Act in 1890 to “curb the power and monopolistic abuses of the trusts that had come to dominate the American econom[y].”5 The Sherman Act “prohibits every agreement in restraint of trade,” as explained by Professor Bauer in his article.
It should be clear that in regard to residential services provided by colleges and fraternities, the product market is the market for “residential services for college students at individual colleges, which include housing, meals, and social facilities.” Professor Bauer describes the Hamilton College case as providing a “helpful discussion,” but “unfortunately it does not represent settled or well-reasoned law.”
Before Hamilton took its action against fraternities, the College controlled 80% of the residential services market for Hamilton students. Around 1992, it began a campaign to take over the fraternity houses to expand its residential capacity.
After Hamilton College secured its monopoly power, charges for room and board at Hamilton College increased $2,310, exceeding the charges of its closest rival, Colgate University. At the same time, available living facilities were reduced and students were crowded into spaces designed for fewer people. Hamilton College students received lower quality services at higher prices. A similar issue is festering on the campus of Colgate University at the present time.
Professor Bauer’s analysis of the antitrust law suggests that there is life for future antitrust lawsuits against small colleges that force fraternities to sell their houses, because of the college’s intention to prohibit students from living in fraternity houses. It may be that the reason the fraternities lost at Hamilton College was that they did not have adequate funding for their litigation, including the mustering of effective expert testimony by economists.
It is unlawful for a college to attempt to monopolize the market, or to actually monopolize the market. If the market is defined to be the local market around the campus for housing services for students, what Hamilton has done and what Colgate is in the process of doing is unlawful under both state and federal antitrust laws.
It is undoubtedly true that there is a market for students who want to attend small liberal arts colleges in the northeastern part of the United States. Formerly having competed in that market, when the College ties in a mandatory use of student housing services provided only by the University, it is unlawfully monopolizing the market for student housing services. Professor Bauer explains this in detail in his analysis of the issues. When the College is successful in destroying competition between fraternities and the college dormitories for student housing services, the College solidifies a monopoly position which enables the College to produce poor quality facilities and services at higher prices. This is exactly the type of predatory practices that both the state and federal laws are designed to make unlawful.
1 Sunshine Books, Limited v. Temple Univ., 697 F. 2d 90, 91
(3d Cir. 1982).
2 Hamilton Chapter of Alpha Delta Phi, Inc., et al. v. Hamilton
College, et al., 128 F. 3d 59, 121 Ed. Law Rep. 956 at 59.
3 Visiting Assistant Professor, Chicago-Kent College of Law.
4 53 Catholic Univ. L. Rev. 347 (2004).
5 III Earl W. Kintner and Joseph P. Bauer, Federal Antitrust
Law 4 (1983).