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From Antitrust Law Daily, May 18, 2015

Common Application's impact on “net output” did not demonstrate antitrust injury

By Jeffrey May, J.D.

Finding no support for “the proposition that an injury solely based on less innovation and choice is sufficient to state a claim for antitrust injury,” the federal district court in Portland, Oregon, has dismissed an antitrust action against The Common Application, Inc., brought by rival online college application processing provider CollegeNET, Inc. The court did, however, grant CollegeNET leave to amend to offer facts sufficient to demonstrate an antitrust injury resulting from the defendants' alleged efforts to monopolize and restrain trade and foreclose rival providers in the admissions and online college application processing markets (CollegeNET, Inc. v. The Common Application, Inc., May 15, 2015, Hernandez, M.).

CollegeNET identified a number of ways in which it was purportedly harmed by the alleged anticompetitive conduct of The Common Application, which is alleged to be a “dominant online college application processing provider.” CollegeNET contended that it was prevented or significantly limited in its ability to offer customized application processing services to colleges and applicants in competition with The Common Application. The plaintiff reportedly lost more than 200 college customers to The Common Application in the last 10 to 15 years. Moreover, the defendant's conduct purportedly made it prohibitively expensive for colleges to use rival services.

The court explained, however, that an antitrust plaintiff must demonstrate injury to competition in the market as a whole, not merely injury to itself as a competitor. CollegeNET attempted to demonstrate harm to competition by alleging that The Common Applicaton's challenged restraints injured both colleges and applicants, as well. Still, the court concluded that CollegeNET failed to offer sufficient factual allegations of harm to either group of consumers.

According to CollegeNET, the challenged conduct reduced “Net Output,” defined as “the net value derived from Online College Application Processing services by both Colleges and applicants.” Despite an increase in college applications, the alleged result of the restraints has been worse college matching, reduced choice, lower-quality, less innovative college application processing services, and higher effective prices to students, the plaintiff asserted.

The court rejected the plaintiff's suggestions that colleges and applicants were harmed by a system that increased the number of applications to colleges, regardless of an applicant’s likelihood of acceptance to any particular college, and that colleges and applicants did not want to participate in an increased “application churn.” The court found that it was equally probable that colleges and applicants desired the “application churn”—a system that facilitated increased applications in an efficient way. For instance, colleges wanted an increase in applications because the boost increased application fees and rankings.

While decreased innovation and choice can be relevant to antitrust injury, CollegeNET failed to support its allegation that diminished quality alone was sufficient to establish injury, it was noted. “The Court declines to make new law here and open the door for antitrust claims to be brought by any plaintiff who claims to have a higher quality product that consumers should be choosing.”

Because the lack of antitrust injury disposed of the entire case, the court declined to reach the parties’ additional arguments regarding the merits of the specific claims.

The case is No. 3:14-cv-00771-HZ.

Attorneys: Sarah J. Crooks (Perkins Coie LLP) for CollegeNET, Inc. Thomas M. Triplett (Schwabe, Williamson, & Wyatt, P.C.) and Dominique Malata Perez (Morgan, Lewis & Bockius LLP) for The Common Application, Inc.

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

MainStory: TopStory Antitrust OregonNews

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