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From Antitrust Law Daily, December 4, 2018

Antitrust claims against college application processor proceed

By Paul A. Ferrer, J.D.

Finding that the plaintiff had adequately alleged all seven of its antitrust claims against The College Application, Inc., which the plaintiff claims is the dominant online college application processing provider, a federal district court in Oregon denied The College Application’s motion to dismiss each one of those claims for failure to state a cause of action. Plaintiff CollegeNET, Inc., a competitor in the market for online college application processing services, alleged that The College Application’s agreements with its member institutions and other restraints had various anticompetitive effects in that market, and that CollegeNET was injured by the restraints, losing over 200 college customers to The College Application in the last 10 to 15 years. The court concluded that CollegeNET had sufficiently alleged each of its claims, at least at this stage of the proceeding. The court also denied The College Application’s motion to transfer the action to Virginia, where The College Application is located (CollegeNET, Inc. v. The Common Application, Inc., November 28, 2018, Hernandez, M.).

Background. The Common Application is a Virginia-based nonprofit corporation comprised of 549 nonprofit member colleges and universities. It offers a standard college application data service, application forms, and processing services. CollegeNET is a rival Oregon-based corporation that offers customized online application forms and processing services to higher education and nonprofit organizations. CollegeNET sued The Common Application under Sections 1 and 2 of the Sherman Act, asserting seven claims for relief: horizontal restraint of trade in the admissions markets and online college application processing market; exclusive dealing; tying; and monopolization, attempted monopolization, and conspiracy to monopolize. The court granted a previous motion to dismiss by The Common Application for failing to state a sufficient claim for antitrust injury, but that decision was reversed on appeal by the Ninth Circuit. After remand, The Common Application filed motions to dismiss all of CollegeNET’s claims for failure to state a cause of action and to transfer the action to the district in Virginia where The Common Application is located.

Antitrust claims. The court denied The Common Application’s motion to dismiss in its entirety, finding that CollegeNET had sufficiently alleged each of its antitrust claims against The Common Application. With regard to the horizontal-restraint claims, the court found that CollegeNET had adequately alleged horizontal agreements among The Common Application and its members amounting to a conspiracy to (1) insulate competitors in the application process, fix and reduce "Net Output" (defined as the net value derived by colleges and applicants from online college application processing), stabilize or increase the prices paid, or reduce the benefits received by applicants, and (2) refuse to deal or exclude rival providers in the market for online college application processing services in order to suppress demand for such services and prices paid below competitive levels.

The court concluded that CommonNET had also stated a valid claim that The Common Application had entered into de facto exclusive-dealing agreements with its members, and that such agreements foreclosed competition in a substantial share of the line of commerce affected. In particular, the court pointed out CommonNET’s allegations that The Common Application was a dominant supplier controlling 60% of the market through the exclusive-dealing agreements and that switching costs are high, which makes it unlikely that universities will terminate their memberships.

The court also held that CommonNET had adequately alleged that The Common Application had tied the purchase of the standard college application data service—the tying product—to the purchase of online application processing services—the tied product. The court rejected The Common Application’s argument that data services and processing services are one product market, not two, finding that CommonNET had adequately alleged two distinct products that can be purchased separately by colleges.

Finally, the court also found that CommonNET had sufficiently alleged each of its three monopolization claims. The Common Application disputed its share of the relevant markets—the validity of which is typically a factual element—but the court concluded that CommonNET had adequately alleged a total market share of roughly 60%, which was sufficient to constitute monopoly power in those markets. Moreover, the recent entry of one competitor into the market was not enough, in and of itself, to show that CommonNET cannot demonstrate the required barriers to entry.

Motion to transfer. The court also denied The Common Application’s motion to transfer the action to the Virginia district where the company is located. CommonNET’s choice of its home forum in Oregon was accorded substantial weight, and The Common Application did not make the strong showing of inconvenience required to upset CommonNET’s choice of forum. Party witnesses were located in each of the company’s home fora, and a transfer of venue to shift inconvenience from one party to another is inappropriate. In addition, The Common Application did not show that nonparty witnesses would be located primarily within the subpoena power of the Virginia federal court. Accordingly, the court declined to transfer the case, which has already been pending in the Oregon federal court for more than four years.

This case is No. 3:14-cv-00771-HZ.

Attorneys: David S. Steele (Perkins Coie, LLP) for CollegeNET, Inc. Claire L. Leonard (White & Case LLP) and Richard K. Hansen (Schwabe, Williamson & Wyatt, P.C.) for The Common Application, Inc.

Companies: CollegeNET, Inc.; The Common Application, Inc.

MainStory: TopStory Antitrust OregonNews

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