Advisory opinion concluding that the proposal to adopt and enforce certain accrediting standards on tuition and fees would not violate antitrust laws

977
ACCREDITING COMMISSION ON CAREER SCHOOLS 	977
Advisory Opinion
Re: 	The proposal to adopt and enforce certain accrediting
standards on tuition and fees would not violate antitrust
laws. 	[Accrediting Commission on Career Schools and
Colleges of Technology, P944015]
January 19, 1995
Dear Mr. Pelesh:
This letter responds to your request on behalf of the Accrediting
Commission on Career Schools and Colleges of Technology for an
advisory opinion on the permissible means, under the antitrust laws,
of adopting and enforcing an accrediting standard on tuition and fees,
as the Higher Education Amendments of 1992 require. 	You have
proposed three possible standards by which your organization might
assess tuition and fees, and asked us to provide guidance on the
permissibility of each.
On the basis of information you provided, the Commission has no
present objection to an accreditation program along the lines of your
third proposal, but believes your first and second proposals raise
substantial antitrust concerns.
I. BACKGROUND OF THE REQUEST
According to the request for advisory opinion, the Accrediting
Commission 	on 	Career Schools 	and 	Colleges 	of Technology
("ACCSCT") is a private, nonprofit organization that adopts and
enforces 	standards 	for 	accrediting 	and 	evaluating 	educational
institutions with trade and technical objectives. The United States
Department of Education ("DOE" or "Department") recognizes
ACCSCT under the Higher Education Act of 1965 as a reliable
authority on the quality of its accredited institutions, education and
trammg. 	To participate in federal student financial assistance
programs, a post-secondary institution of higher education must
maintain accreditation from a recognized organization such as
ACCSCT. ACCSCT is a membership organization, composed of the
accredited schools. 	Five of its eleven Commissioners have no
affiliation with any of the schools accredited by ACCSCT, while six
are owners or executives of accredited schools.

978 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	119 F.T.C.
In 1992, Congress re-authorized the student financial assistance
programs of the Higher Education Act with the Higher Education
Amendments of 1992. Through this re-authorization, Congress
specified in great detail the requirements that accrediting agencies
like ACCSCT must meet in order to receive DOE recognition. One
requirement is that their accrediting standards assess the institutional
"program length and tuition and fees in relation to the subject matters
taught and the objectives of the degrees or credentials offered." 20
U.S.C. 1099b(a)(5). ACCSCT will be eligible for re-recognition in
Fall of 1995, at which time DOE expects it to have adopted new
accreditation standards on tuition and fees.
The Department of Education's Notice of Proposed Rulemaking
("NPRM") included a commentary in which the Department proposed
that accrediting organizations use one of three ratios comparing
tuition to expected earnings to determine whether tuition and fees are
excessive. DOE stated that it could recognize an accrediting agency
even if its standards departed from these proposals, but that the
agency would bear the burden of justifying different standards. 59
Fed. 	Reg. at 22,273. 	The DOE rules implementing the statutory
requirements for accrediting standards repeat the statutory provisions,
without including the ratios in the NPRM commentary. 34 CFR
602.26(b)(7); 59 Fed. Reg. 22,250, 22,260 (April 29, 1994).
II. EFFECT OF THE 1992 HIGHER EDUCATION AMENDMENTS
ACCSCT has raised the possibility that Congress impliedly
exempted educational accrediting bodies from the antitrust laws when
it required them to adopt a standard assessing tuition and fees in order
to be recognized by DOE. 	It is well-established, however, that,
where antitrust immunity is not express, it is disfavored and to be
implied only where "necessary to make the ... [a]ct work, and even
then only to the minimum extent necessary." 	Silver v. New York
Stock Exchange, 373 U.S. 341,357 (1963); see also United States v.
Philadelphia National Bank, 374 U.S. 321, 348 (1963); Georgia v.
Pennsylvania Railroad Co., 324 U.S. 439, 456-57 (1945). Indeed,
except for industries in which Congress has committed pricing to
agency regulation rather than to normal market forces, see e.g.,
Keogh v. Chicago & Northwestern Railroad, 260 U.S. 156 (1922)
(Interstate Commerce Commission rates), the courts have found

ACCREDITING COMMISSION ON CAREER SCHOOLS 	979
977 	Advisory Opinion
implied repeal very rarely and then only under extremely limited
circumstances.
The courts have found an implied repeal where Congress has
established a substantial regulatory scheme and there is a clear
repugnancy between that scheme and the application of the antitrust
laws to the conduct in question. 	Gordon v. New York Stock
Exchange, 422 U.S. 659 (1975) (statute provided for Securities and
Exchange Commission review of exchange's self-regulation of
commission rates so that application of antitrust laws conflicted with
SEC's vigorous supervision of such rates); United States v. National
Association of Security Dealers, 422 U.S. 694 (1975) (finding price
fixing on inter-dealer sales of mutual fund shares immune because of
conflict between antitrust laws and regulatory scheme:, Congress had
given agency power over such sales and agency had accepted practice
over long period); Rehagen v. Amateur Basketball Association of the
U.S., 884 F.2d 524, 529 (10th Cir. 1989) (court found an implied
repeal in rejecting the claim that the antitrust laws prohibited an
amateur athlete's exclusion from defendant Association; Amateur
Sports Act required the establishment of gatekeeping, governance
organizations to determine amateur eligibility); see also Thill v. New
York Stock Exchange, 433 F.2d 264 (7th Cir. 1970) (remanding for
determination whether restriction on sharing commissions was
necessary to meet the goals of the Securities Exchange Act).
Absent a clear repugnancy between the antitrust: laws and the
regulatory scheme, however, the courts have rejected the implied
repeal claim. Strobl v. New York Mercantile Exchange, 768 F.2d 22
(2d Cir. 1985), cert. denied sub nom. 	Simplot v. Strobl, 474 U.S.
1006 (1985) (no implied repeal because no conflict between antitrust
laws and Commodities Futures Trading Commission's oversight);
Typhoon Car Wash, Inc. v. Mobil Oil Corp., 770 F.2d 1085 (Temp.
Erner. Ct. App. 1985), cert. denied, 474 U.S. 981 (1985) (Robinson
Patman Act not preempted by regulations promulgated under the
Emergency Petroleum Allocation Act because no conflict between
statutes); Huron Valley Hospital v. City of Pontiac, 666 F.2d 1029
(6th Cir. 1981) (no implied repeal where no direct conflict between
antitrust 	laws 	and 	National 	Health 	Planning 	Act); 	Essential
Communications Systems v. AT&T, 610 F.2d 1114 (3d Cir. 1979) (no
implied repeal because no conflict between antitrust laws and Federal
Communication Commission's regulatory activities).

980 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	119 F.T.C.
The courts have refused to imply a repeal when the regulatory
scheme did not protect consumer interests by supervising the
challenged conduct. In rejecting a claim that the securities regulatory
scheme conflicted with the antitrust laws and thus implied antitrust
immunity, the Supreme Court noted that:
By providing no agency check on exchange behavior in particular cases,
Congress left the regulatory scheme subject to "the influences of* * * [improper
collective action] over which the Commission has no authority .... " .... Since
the antitrust laws serve, among other things, to protect competitive freedom ... it
follows that the antitrust laws are peculiarly appropriate as a check on the
anticompetitive acts of exchanges .... Should review of exchange self-regulation
be provided through a vehicle other than the antitrust laws, a different case as to
antitrust exemption would be presented.
Silver, 373 U.S. at 357 (no implied exemption because exchange's
rule that excluded non-members from access to exchange without a
hearing not necessary to make securities act work), quoting Georgia
v. Pennsylvania Railroad Co., 324 U.S. at 460.
The Commission believes the 	1992 Higher Education Act
amendments do not impliedly repeal the antitrust laws as they apply
to the technical school industry. 	Congress has not authorized the
Department of Education to supervise or review accrediting agency
self-policing of tuition and fees. The most persuasive argument for
an implied repeal is that Congress, in requiring that accrediting
agencies have a standard for assessing tuition, intended for them to
exclude any school with a tuition that is unreasonable in light of
expected earnings. 	Indeed, the tuition assessment standard seems
superficially similar to the eligibility standard at issue in the Behagen
case. There, the Amateur Sports Act authorized the U.S. Olympic
Committee to recognize and monitor a governance organization in
each sport to determine amateur eligibility and provide a mechanism
to assure compliance with the Act. 884 F.2d at 528. In dismissing a
group boycott claim against a governance organization for its refusal
to reinstate an athlete's amateur status, the Tenth Circuit held that the
defendant Association's "actions iq this case were clearly within the
scope of activity directed by Congress, and were necessary to
implement Congress' intent with regard to the governance of amateur
athletics." 	Id. at 527. 	The court noted that the Association's
"monolithic control exerted ... over its amateur sport is a direct
result of the congressional intent expressed in the Amateur Sports

977
ACCREDITING COMMISSION ON CAREER SCHOOLS 	981
Advisory Opinion
Act." Id. at 528. The court added that the Association "could not be
authorized under the Act unless it maintained exactly that degree of
control over its sport that Behagen here alleges as an antitrust
violation." Id. at 529.
Unlike Behagen, the 1992 Higher Education Act Amendments do
not require accrediting agencies to fix tuition levels; they merely
require that accrediting agencies have a standard for assessing tuition
as one of many standards for determining accreditation. (ACCSCT's
submission of a less restrictive accreditation standard, requiring only
disclosure, indicates that setting tuition levels is not necessary to
achieve the statute's mandate to curb school loan abuse. Indeed, as
noted above, the Department stated that it would recognize an
accrediting agency even if its standards departed from DOE's
suggested tuition-to-expected-earnings ratios.) 	Thus, there is no
broad or inherent conflict between the antitrust laws and the
regulatory regime. 	Cf 	Rehagen, 884 F.2d at 529 ("Behagen
complains of exactly that action which the Act directs"); see also
Gordon, 422 U.S. at 692 (Stewart, J., concurring) ("The Court has
never held, and does not hold today, that the antitrust laws are
inapplicable to anticompetitive conduct simply because a federal
agency has jurisdiction over the activities of one or more of the
defendants").
III. ANALYSIS OF ACCSCT'S PROPOSED STANDARDS
A. First Proposed Standard
Under ACCSCT's first proposed standard, ACCSCT would
determine whether the tuition and fees charged by its accredited
schools are too high and enforce this standard by withdrawing
accreditation. 	The standard might use one of the following three
measures to cap tuition at a certain level: 	(1) a percentage of
annualized minimum wage, (2) a percentage of graduates' earnings
for their first year of employment, or (3) a percentage of average
annualized wages. 	ACCSCT believes that adopting this standard
would require it to collect tuition data from its members, define
acceptable tuition limits, and enforce its standard by potentially
withdrawing accreditation. Thus, ACCSCT members would in effect
be agreeing to charge no more than the ACCSCT standard would
allow.

982 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	119 F.T.C.
As ACCSCT recognizes, such a standard, like any system for
collective competitor regulation of prices, raises grave antitrust
concerns. Arizona v. Maricopa County Medical Society, 457 U.S.
332 ( 1982) (maximum price fixing is per se illegal); Kiefer-Stewart
Co. v. Joseph E. Seagram & Sons, 340 U.S. 211 (1951) (maximum
price 	fixing 	is 	per se 	illegal); 	McLean 	County 	Chiropractic
Association, 59 Fed. Reg. 22163 (April 29, 1994) (consent order
settling FTC charges that chiropractor association members fixed
maximum prices); see also American Medical Association (FTC
Advisory Opinion, February 14, 1994) (adopting fee peer review
program with disciplinary sanctions would present serious antitrust
concerns, because it would allow competitors to set the maximum
fees of their rivals) ("AMA Opinion").
Even under a rule of reason approach similar to the Third
Circuit's approach in United States v. Brown University, 5 F.3d 658
(3d Cir. 1993), ACCSCT's first proposal would pose significant
antitrust risks. An accrediting criterion based an tuition and fee level
would be inherently suspect because it sets prices and impedes the
ordinary functioning of the free market. Brown University, 5 F.3d at
674; 	see 	generally 	Massachusetts 	Board 	of Registration 	in
Optometry, 110 FTC 549 (1988).
Further, the only efficiency justification that ACCSCT could
coffer would be that the standard "protects" consumers, because
unfettered competition over tuition levels is unwise or dangerous.
The Courts have consistently rejected this argument as "nothing less
than a frontal assault on the basic policy of the Sherman Act."
National Society of Professional Engineers v. United States, 435 U.S.
679,695 (1978); see also FTC v. Indiana Federation of Dentists, 476
U.S. 	447, 	463 	(1986); 	Brown 	University, 	5 	F.3d 	at 	676-77.
Moreover, even if consumer protection justified regulation of tuition
levels, the first proposed standard is not reasonably necessary to
achieve this objective. 	Courts often rule that such overbroad
restraints are unreasonable and in violation of the antitrust laws. See
Brown University, 5 F.3d at 678-79; Bhan v. NME Hospitals, 929
F.2d 1404,.1413 (9th Cir. 1991); Fleer Corp. v. Topps Chewing Gum,
658 F.2d 139, 151-52 n.18 (3d Cir. 1981). The fact that ACCSCT
has proffered less restrictive alternatives that it believes can achieve
the statutory goal of assessing tuition and fees for trade school
consumers indicates that the proposed standard is not reasonably
necessary.

ACCREDITING COMMISSION ON CAREER SCHOOLS 	983
977 	Advisory Opinion
B. Second Proposed Standard
Under the second proposed standard, ACCSCT would collect and
analyze tuition information from accredited schools to compare the
tuition charged for a given program at a particular school with that
charged for similar programs and schools. 	Any tuition in the
ninetieth percentile or above of similar programs would trigger
requirements that the school explain why its tuition was so high and
provide this information to students and prospective students.
This approach appears to be less restrictive than the first,
primarily because, rather than denying accreditation, it would require
that a school disclose and justify its relative tuition. 	Nonetheless,
because it targets for attention institutions charging prices of a certain
top percentage or level, the standard may have the same effect as the
first proposed standard. 	Hence there is a substantial danger that
implementation of this standard may violate the antitrust laws. See
Maricopa, 457 U.S. at 332.
In evaluating the reasonableness of the standard, the Commission
would find the following factors particularly relevant. First, targeting
would identify high tuition schools, opening them up to pressure to
conform. Indeed, that appears to be the very purpose of the standard.
Second, the Commission in reviewing association fee peer review
programs has emphasized the increased potential for antitrust
problems where participation is mandatory. See AMA Opinion, at 6;
Iowa Dental Association, 99 FTC 648 (1982) (advising association
not to discipline members who refuse to use peer review process or
accept its guidance). 	Here, the mandatory nature of ACCSCT's
proposed standard compounds the antitrust concerns.
Third, the potential for antitrust concern is reduced when peer
review programs involve mediation of specific fee disputes. A peer
review program based on tuition or fees runs a more serious antitrust
risk when it involves review of all schools' tuition levels, particularly
in the form of a systematic exchange of data and identification of
schools with high tuition. See Iowa Dental Association, 99 FTC at
649 ("Competition will be best protected if all concerned parties view
fee peer review as a means of mediating specific fee disputes, rather
than a process for the collective sanctioning of fee levels or particular
practices").
Finally, as discussed above, the antitrust laws do not condone a
restraint that is not reasonably necessary to achieve its stated

984 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	119F.T.C.
procompetitive objective. See Brown University, 5 F.3d at 678-79;
Fleer Corp., 658 F.2d at 151-52 n.18. Thus, the availability of a less
restrictive plan (ACCSCT's third proposed standard) suggests that its
second proposed standard would fail to meet this test.
C. Third Proposed Standard
As a third alternative for assessing tuition and fees, ACCSCT
proposes a standard requiring schools to inform students in the
catalog, enrollment agreement, and other publications that they may
obtain information about tuition charges for comparable programs
from ACCSCT. 	ACCSCT would collect tuition information from
accredited schools and make it available to students who could use
the information to compare the cost of similar programs at other
institutions.
Based upon the information ACCSCT has provided, there appears
to 	be little cause for 	concern 	that 	the 	information exchange
contemplated by ACCSCT will have any anticompetitive effects.
The school tuition information ACCSCT proposes to collect already
is widely available and easily accessible to the industry, alleviating
the concern that members would use the exchange to set prices. Cf
United States v. Container Corp of America, 393 U.S. 333, 335
( 1969) (striking down exchange among competitors of information
that "was not available from another source"); Cement Manufacturers
Protective Association v. United States, 268 U.S. 588, 605 (1925)
(when information is publicly available, court will not infer purpose
to fix prices).
The procompetitive effects of increasing consumers' access to
information about relative trade school tuition levels could outweigh
any potential anticompetitive concerns raised by the collection of
tuition data. 	See Maple Flooring Manufacturers Association v.
United States, 268 U.S. 563 (1925) (association survey of members'
prices held not unlawful under rule of reason). 	To the extent
ACCSCT's proposal wi\l provide information useful to trade school
consumers, it is likely to promote competition. See AMA Opinion, at
3. Indeed, ACCSCT could require other disclosures, e.g., how the
tuition level compares to graduates' earnings for their first year of
employment, 	as 	a 	condition 	of accreditation 	without 	injuring
consumers or violating the antitrust laws.

977
ACCREDITING COMMISSION ON CAREER SCHOOLS 	985
Advisory Opinion
Thus, insofar as ACCSCT merely collects tuition information and
disseminates that information to students, it would not be likely to
run into any antitrust risks. 	ACCSCT, however, could violate the
antitrust laws if it combined its data collection activities with any sort
of coercion or admonishment of its members to adhere to certain
tuition levels. See Maple Flooring Manufacturers Association, 268
U.S. at 563; cf. American Column & Lumber Co. v. United States,
257 U.S. 377 (1921).
IV. CONCLUSION
Accordingly, the Commission does not presently object to
ACCSCT's third proposed standard to assess tuition, insofar as it calls
for ACCSCT merely to collect and disseminate tuition information.
The Commission believes that the first and second proposals, because
they involve ACCSCT acting against members due to their tuition
levels, may involve a significant risk of violating the antitrust laws.
This advisory opinion, like all those that the Commission issues,
is limited to the proposed conduct that your request describes. It does
not constitute approval for specific aspects of the proposal that may
become the subject of litigation before the Commission or any court,
since application of the proposal in particular situations may injure
competition 	and 	consumers 	and 	violate 	the 	Federal 	Trade
Commission Act. The Commission reserves the right to reconsider
the questions involved, and with notice to the requesting parties in
accordance with Section 	l.3(b) of the Commission's Rules of
Practice, 	to 	rescind 	or revoke 	its 	opinion 	in 	the 	event 	that
implementation 	of 	the 	third 	proposal 	results 	in 	significant
anticompetitive effects, should the purposes of the proposal be found
not to be legitimate, or should the public interest so require.

986 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	119F.T.C.
Letter of Request
August 4, 1994
Dear Mr. Clark:
On behalf of the Accrediting Commission of Career Schools and
Colleges of Technology ("ACCSCT" or the "Commission"), I hereby
request an advisory opinion on the permissibility under the antitrust
laws of ACCSCT's adoption and enforcement of an accrediting
standard on tuition and fees. 	In order to ensure that this request is
considered 	by 	the 	Department 	or 	agency 	with 	appropriate
jurisdiction, we nave also filed a request for a business review letter
on the same subject with the Antitrust Division of the Department of
Justice. 	We respectfully ask that the FTC and Antitrust Division
coordinate a response to these requests.
Description of ACCSCT. The Commission is a private nonprofit
organization with exclusively educational purposes. 	It adopts and
applies standards for the accreditation and evaluation of educational
institutions with trade and technical objectives. The Commission is
recognized by the U.S. Department of Education under the Higher
Education Act of 1965 an a reliable authority as to the quality of
education and training offered by its accredited institutions. (Pub. L.
No. 89-329, 79 Stat. 1219, codified as amended in scatterecfsections
of 20 U.S.C.). 	As a result of this recognition, accreditation by the
Commission, together with licensure by a state and certification by
the 	Department, 	make 	a 	post-secondary 	institution 	of higher
education eligible to participate in the student financial assistance
programs authorized by the Act. (20 U.S.C. 1088). The Commission
currently accredits approximately 950 schools located in all 50 states,
the District of Columbia and Puerto Rico. These schools educate and
train 450,000 students and employ 16,000 instructors.
The 	Commission 	is 	a 	membership 	corporation. 	The
Commissioners 	serve 	as 	the 	board 	of directors; 	five 	of the
Commissioners are public members (i.e., they have no affiliation with
any of the schools accredited by the Commission), and six of the
Commissioners are school 	members (i.e., 	they are owners or
executives of accredited schools). The members of the corporation
are the accredited schools; membership status is coterminous with
accreditation. Further, the rights of the members are restricted: They

ACCREDITING COMMISSION ON CAREER SCHOOLS 	987
977 	Advisory Opinion
elect the school-affiliated Commissioners and two of five members
of a nominating committee, receive various informational reports,
and approve (but may not initiate) amendments to the articles of
incorporation 	and 	bylaws, 	mergers 	and 	other 	fundamental
transactions, 	and 	dues 	and 	assessments. 	The 	Commission 	is
unaffiliated with any trade association. It has applied for tax-exempt
status under Section 501(c) (3) of the Internal Revenue Code.
Higher Education Amendments of 1992. In 1992, Congress
reauthorized the student financial assistance programs of the Higher
Education Act by enacting the Higher Education Amendments of
1992. 	(Pub. L. No. 102-325, 106 Stat. 448, codified in scattered
Sections of 20 U.S.C.). This reauthorization formally provided for
a "Program Integrity Triad" of accrediting agencies, the states and the
Department of Education to control access to the student financial
assistance programs. Although such a Triad effectively had existed
prior 	to 	the 	1992 reauthorization, 	abusive 	practices 	of some
institutions of higher education impelled Congress to specify in
greater detail the gatekeeping responsibilities of each leg of this
Triad.
Thus, the statute specifies numerous requirements that accrediting
agencies like the Commission must meet in order to be recognized by
the Department of Education. One of these requirements is that an
agency's accrediting standards must assess 	12 areas, including
"program length and tuition and fees in relation to the subject matters
taught and the objectives of the degrees or credentials offered." (20
U.S.C. 1099b(a)(5)).
The Department of Education has now completed the rulemaking
to implement the statutory requirements for the recognition of
accrediting 	agencies. 	In regard to 	accrediting 	standards, 	the
regulations 	simply 	repeat the 	statutory provisions. 	(34 	CFR
602.26(b)(7); 59 Fed. Reg. 22,250, 22,260 (April 29, 1994)). In the
commentary accompanying the regulations, the Department noted
that its original proposals, which elaborated on the statute, had
prompted 	substantial 	adverse 	comment. 	Nonetheless, 	the
Department's commentary stated that those proposals provided a
"sound 	framework" 	for 	an 	assessment 	of the 	12 	areas, 	and
summarized them. The summary for program length and tuition and
fees was as follows:

988 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	119F.T.C.
An accrediting agency's standard for assessing this area should generally
address the appropriateness of an institution's program length and tuition and fees,
taking into account such factors as program objectives and content, the types and
locations of instructional delivery, the knowledge and skills necessary for students
to reach competence in the field being taught, and generally accepted practices in
higher education.
(Id. at 22,273).
The Notice of Proposed Rulemaking ("NPRM") more extensively
addressed how to judge the "appropriateness" of tuition and fees. It
specified that, in developing a standard for tuition and fees, an
accrediting agency should take into account the factors quoted above
and "[f]or any pre-baccalaureate vocational education program,
consideration of the remuneration that can reasonably be expected by
students who complete the program." (59 Fed. Reg. 3,578, 3,597
(January 24, 1994)). In the commentary accompanying the proposed
regulations, the Department explained that the basis for this proposal
was its concern that tuition and fees for pre-baccalaureate vocational
education programs may be "excessive." 	(Id. at 3,586). 	The
commentary also suggested three possible approaches under which
annualized tuition and fees for a program could not exceed: ( 1) a
percentage of the annualized minimum wage; (2) a percentage of
graduates' earnings for their first year of employment; and (3) a
percentage of average annualized wages. (Id. at 3,587). The NPRM
provided no specifics on these various maximum percentage levels.
Although the Department stated that an agency could still be
recognized even if its standards departed from the original proposals,
it also stated that the agency would bear a burden of justifying the
appropriateness of different standards. (59 Fed. Reg. at 22,273).
Development of ACCSCT Standard. In order to comply with the
statutory and regulatory requirements described above, ACCSCT will
have to adopt and apply an accrediting standard that assesses tuition
and fees. It has created a committee of Commissioners to study the
issue and develop a proposal. In addition to the inherent difficulty of
the task, the Commission is concerned that any standard it adopts not
be violative of the antitrust laws.
As explained above, the Commission is a private body consisting
in substantial part of school-affiliated Commissioners who could be
viewed 	as 	competitors. 	Further, 	the 	Commission 	is 	legally
classifiable as a form of association, although it is not a trade
association in the conventional sense that seeks to advocate and

977
ACCREDITING COMMISSION ON CAREER SCHOOLS 	989
Advisory Opinion
advance the interests of its members. (See Parsons College v. North
Central Ass'n. of Colleges and Sch., 271 F. Supp. 65, 70 (N.D. Ill.
1967); Transport Careers v. National Home Study Council, 646 F.
Supp. 1474 (N.D. Ind. 1986)). Thus, the Commission would appear
to be a combination subject to Section 1 of the Sherman Act. ( 15
U.S.C. 1).
Association activities which limit or set maximum prices are
vulnerable to attack as price-fixing. (Arizona v. Maricopa County
Medical Soc., 457 U.S. 332 (1982); McLean County Chiropractic
Ass 'n., 5 Trade Reg. Rep. (CCH) <][23, 524 (FfC Consent Order to
Cease and Desist Complaint, Dkt-3491, April 7, 1994)). 	The
nonprofit and educational nature of the Commission does not
necessarily exempt it from such antitrust liability. (See United States
v. Brown University, 5 F.3d 658 (3d Cir. 	1993) (colleges and
universities not immune from 	antitrust laws for price-fixing);
Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) (no "learned
professions" exemption); American Soc. of Mechanical Engineers,
Inc. v. Hydro/eve! Corp., 456 U.S. 556 (1982) (nonprofit nature of
organization does not shield it from antitrust liability)). Moreover,
paternalistic aims, such as protection of students, which unduly
restrict competition are not a defense to such liability. (See National
Soc. of Professional Engineers v. United States, 435 U.S. 679 (1978);
Federal Trade Commission v. Indiana Federation of Dentists, 476
U.S. 447 (1986)).
Of particular importance to this request, the FTC recently issued
an advisory opinion which found violative of the antitrust laws a
physician fee review program proposed by the American Medical
Association and state and local medical societies which provided for
the imposition of disciplinary sanctions for "fee gouging" or fees that
were deemed by peer review panels to be "excessive." (American
Medical Ass'n., 5 Trade Reg. Rep. (CCH) <][ 23,602 at 23,284-87,
(FfC Advisory Opinion, Feb. 14, 1994 ). In contrast, the FfC found
permissible sanctions for abusive conduct in connection with fees,
such as misrepresentation, deception, or the exertion of undue
influence. (Id. at 23,284). Private, non-binding advice on fee levels,
not based 	upon benchmarking of fees, 	and requirements, 	for
disclosure 	of fee-related 	information 	were 	also 	found 	to 	be
permissible. (Id. at 23,283; accord, Iowa Dental Ass 'n., 99 FfC 648
(FfC Advisory Opinion, April 3, 1982)).

990 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	119 F.T.C.
In view of the regulations promulgated by the Department of
Education, the Commission appears to be obliged to consider
adoption of an accrediting standard under which it would determine
whether the tuition and fees charged by its accredited schools are too
high 	and 	enforce 	this 	standard 	potentially 	by 	withdrawing
accreditation. 	Such a standard might use one or more of the three
approaches suggested in the NPRM with tuition capped at a
percentage 	of expected 	earnings. 	Yet, 	such 	action 	by 	the
Commission could be viewed as price fixing under the antitrust laws
since the Commission is arguably a combination which would be
limiting the pricing discretion of competitors.
It might be argued that Congress impliedly exempted accrediting
bodies 	like the 	Commission from 	the antitrust laws 	when 	it
conditioned recognition of accrediting agencies upon the adoption of
a standard for the assessment of tuition and fees. 	(See Behagen v.
Amateur Basketball Ass'n of the United States, 884 F.2d 524 (10th
Cir. 1989) (private governing board for amateur basketball exempt
when it set and enforced player qualifications pursuant to Amateur
Sports Act)). However, this is an uncertain basis for actions which
could have extremely severe consequences. Congress did not speak
directly to the issue, and such exemptions are disfavored. (Silver v.
New York Stock Exchange, 373 U.S. 341,357 (1963)).
The Third Circuit's holding in Brown University indicates that
the rule of reason would be applied to evaluate a tuition and fees
standard. 	Under the rule of reason, it might be argued that the
standard is designed not to inhibit competition but to protect students
who lack the knowledge and sophistication to make informed
choices. However, such a paternalistic justification was rejected by
the Supreme Court in National Society of Professional Engineers and
Indiana Federation of Dentists. Further, less restrictive means may
be available to achieve the pro-competitive aims of correcting
information deficiencies in the market. 	(See Brown University,
supra).
Alternatively, the Commission might collect tuition information
from its accredited schools and analyze this information to determine
how the tuition charged for a given program at a particular school
compares to similar programs and schools. If the tuition were in the
top tenth percentile of all similar programs, for example, the
Commission might then require the school to explain why its tuition
was so high and to provide this information to students and

ACCREDITING COMMISSION ON CAREER SCHOOLS 	991
977 	Advisory Opinion
prospective students. Under this approach, the school would retain
its pricing discretion and remain free to charge the tuition that it
wished. 	A standard establishing this procedure would provide
students with useful information on which to base a decision to attend
an institution and improve the functioning of the market.
Even this approach may present difficulties under the antitrust
laws. 	In its advisory opinions on the fee review proposals in
American Medical Ass'n. and Iowa Dental Ass'n., the FTC cautioned
that the associations should not systematically collect fee data,
develop any explicit or implicit "benchmarking" scheme, or publicly
disclose their review of particular fees. 	The alternative approach
described 	above 	could 	be 	viewed 	as 	inconsistent 	with 	these
conditions. 	The heart of the accrediting standard would be the
systematic collection of tuition data and the disclosure to students of
information comparing and explaining the school's tuition in relation
to other schools. 	Since schools may wish to avoid this disclosure
because it could inhibit students' decisions to attend, the standard
could be regarded as an implicit form of benchmarking, with the
benchmark as the range of tuition levels where disclosure would not
be mandated by the Commission.
A final possibility would be an accrediting standard which
required schools to inform students in the catalog, enrollment
agreement and other publications that they may obtain information
about tuition charges for comparable programs from the Commission.
The Commission would again collect tuition information from
accredited 	schools 	about 	their 	programs, 	and 	assemble 	this
information in a data base. Students could access this information to
determine the cost of similar programs at other institutions. The data
base might also contain other information useful to consumer choice,
such as geographic location, size of the institution, and other
programs and services offered at the school.
This approach would avoid any benchmarking of acceptable
tuition levels. 	Schools would retain full discretion to price their
services. The accrediting standard would be formulated to address
directly the underlying problem of lack of consumer information by
providing students with the data necessary to make informed choices.
By assembling, categorizing and providing context to the data, the
commission 	would still 	meet the requirements 	of the Higher
Education Amendments of 1992. since it would be "assessing" the
tuition and fees of schools. The Antitrust Division recently released

992 	FEDERAL TRADE COMMISSION DECISIONS
Advisory Opinion 	119F.T.C.
a business review letter stating that a similar type of fee survey
should not be subject to challenge under the antitrust laws. (Trade
Regulation Reports (CCH), No. 322 at 3 (July 6, 1994)).
Request for Guidance. 	The Commission respectfully requests
guidance on the permissibility under the antitrust laws of the
approaches to an accrediting standard on tuition and fees outlined
above. The Commission will in the near future begin the process to
renew its recognition by the Department of Education. As part of that
process, the Commission will have to demonstrate its compliance
with the statutory and regulatory recognition criteria, including the
requirement for a standard to assess tuition and fees. Your review of
the approaches under consideration by the Commission will be of
substantial assistance as it seeks to continue to demonstrate that it is
a reliable authority as to the quality of the education and training
offered by its accredited institutions. Accordingly, we respectfully
urge expedited consideration of this request.
Sincerely,
Mark L. Pelesh
Counsel to ACCSCT