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CollegenNET, Inc. v. Common Application, Inc.

United States District Court, D. Oregon

May 15, 2015

COLLEGENET, INC., a Delaware Corporation, Plaintiff,
v.
THE COMMON APPLICATION, INC., a Virginia corporation, Defendant

For Plaintiff: Sarah J. Crooks, Scott D. Eads, PERKINS COIE, LLP, Portland, OR; David S. Steele, Shylah R. Alfonso, Catherine S. Simonsen, Susan E. Foster, PERKINS COIE, LLP, Seattle, WA.

For Defendant: Thomas M. Triplett, Richard K. Hansen, SCHWABE, WILLIAMSON, & WYATT, P.C., Portland, OR; Dominique Malata Perez, Frank M. Hinman, Jacqueline S. Delbasty, Sujal J. Shah, Susan J. Welch, MORGAN, LEWIS & BOCKIUS LLP, San Francisco, CA; Thane D. Scott, MORGAN, LEWIS & BOCKIUS LLP, Boston, MA.

OPINION & ORDER

MARCO A. HERNÁNDEZ, United States District Judge.

Plaintiff CollegeNET, Inc. brings this antitrust action against Defendant The Common Application, Inc., contending that Defendant violated the Sherman Act, 15 U.S.C. § § 1, 2. Plaintiff alleges collusion among competitor colleges[1] and conspiracy with their joint-venture entity, Defendant, to monopolize and restrain trade and foreclose rival providers in the admissions and online college application processing markets. Plaintiff brings the following claims in its First Amended Complaint[2] : (1) Horizontal Restraint of Trade in the Admissions Markets; (2) Horizontal Restraint of Trade in the Online College Application Processing Market; (3) Exclusive Dealing; (4) Tying; (5) Monopolization; (6) Attempted Monopolization; and (7) Conspiracy to Monopolize.

Defendant moves to dismiss Plaintiff's Amended Complaint. Because Plaintiff fails to adequately allege antitrust injury, a required element for each of Plaintiff's claims, the Court grants Defendant's motion.

BACKGROUND

Plaintiff is a Portland, Oregon-based company that provides " web-based on-demand technologies to institutions of higher education and non-profits." Am. Compl. ¶ 35. Plaintiff offers a " suite of web-based administrative services, including customized online application forms and processing services and contact management services." Id. at ¶ 6.

Defendant is an association of 549 non-profit member colleges and universities. Id. at ¶ 7. According to Plaintiff, Defendant is not a single entity, but rather a " consortium of competitors." Id. at ¶ 84. Defendant was formed in 1975 to assist students by simplifying the college admissions process by providing one " common" student application form (the " Common Application" ) for students to submit basic background information in a standardized way as they applied to member colleges. Id. at ¶ ¶ 13, 38. Defendant provided a common, standardized (paper) application form for use at each of the member institutions. Id. at ¶ 38. Applicants could fill out this Common Application once, photocopy it, and submit it to any member institution. Id. Membership was limited to " selective" colleges. Id. at ¶ 42.

Over time, Defendant has grown to be a " dominant online college application processing provider," as colleges join the association in order to access Defendant's " national pipeline of applicants" and use Defendant as their common application developer and processor. Id. at ¶ ¶ 14, 23, 48. Today, membership is open to almost any college. Id. at ¶ 83. As Defendant's membership ranks grow, so do the number of student applicants using that service and, therefore, the number of applications members receive. Colleges compete to attract applicants not only to secure " high-value students" but also because an increase in the number of applications increases the application fees a college generates and lowers its admission rate, thereby raising its selectivity rating and college ranking. Id. at ¶ 31. Defendant has a three-tiered membership structure. Id. at ¶ 74. All members must (1) use

Defendant's Common Application for all form and payment processing--including Institutional Supplements--for Common Applicants; (2) accept all Common Applicant evaluation forms (including final transcripts) online, for schools that choose to send them online; and (3) accept the Common Application fee waiver. Id. at ¶ 75. In addition, " Exclusive I" members must also use the Common Application as their only admission application for full-time, undergraduate, degree-seeking applicants, and " Exclusive II" members must further (1) establish uniform fees for all applicants; (2) use the Common Application as their only transfer application; and (3) use Slideroom.com for their Arts Supplement (if they offer one). Id. at ¶ ¶ 76, 77. According to Plaintiff, the " penalties" [3] for choosing to be a Non-Exclusive versus Exclusive II member are " extreme." Id. at ¶ 78.

Plaintiff alleges that Defendant's agreements with its members have reduced " Net Output," which Plaintiff defines as the net value derived from Online College Application Processing services by both Colleges and applicants:

Net Output increases as the quality, functionality, features, ease of use, and level of innovativeness of Online College Application Processing services improve. Net Output also increases as those services better enable Colleges to discover and matriculate students who are good matches for their College, applicants to discover and matriculate at Colleges that are good matches for them, and Colleges to predict yield (how many accepted applicants will matriculate). Net Output decreases as the amount of resources (e.g. money and time) expended by Colleges and applicants in connection with using Online College Application Processing services in the college admissions process increases.

Id. at ¶ 21. Plaintiff alleges that Defendant has reduced Net Output by imposing the following membership restrictions and restraints (thereinafter, " Challenged Restraints" ): tying and bundling/forced purchase requirements, exclusivity restrictions, an " equal treatment" requirement, and uniformity requirements. Id. at ¶ 15. According to Plaintiff, Defendant's Challenged Restraints have led to a significant growth in Defendant's membership and revenue, yet none of them are necessary to achieve any legitimate or procompetitive goal. Id. at ¶ 16.

Plaintiff hosted Common Application Institutional Supplements[4] and supported Common Application member colleges in a variety of ways prior to Defendant's adoption and enforcement of the " Challenged Restraints." Id. Plaintiff alleges that it has been injured because it has been prevented or significantly limited in its ability to offer customized application processing services to colleges and applicants. Id. at ¶ 160. Plaintiff alleges that it has lost over 200 college customers to Defendant in the last 10-15 years due to Defendant's " anticompetitive and exclusionary conduct." Id. at ¶ 37.

As to the tying and bundling/forced purchase requirements, Plaintiff alleges that Defendant has tied access to the applicant pipeline generated by its Standard College Application Data service to members' use of Common Application's Online College Application Processing services. Id. at ¶ 153. Plaintiff contends that Defendant's tying arrangement harms competition in the relevant markets by limiting college choice, limiting the scope of services and price competition available to student applicants, and foreclosing rival providers from capturing colleges' and applicants' business. Id. at ¶ 153.

Plaintiff alleges that Defendant's exclusivity provisions have further disadvantaged and foreclosed rival providers by making it prohibitively expensive for members to use and offer to applicants those rivals' services. Id. at ¶ 154. The exclusivity provisions charge a lower per-application fee for members who agree to use the Common Application exclusively. Id. at ¶ 47.

Defendant's " equal treatment" requirement requires members to encourage the use of the Common Application by ensuring that the fee for Common Applicants is no more than for other accepted applications, providing an equally prominent link to the Common Application Online whenever the college posts a link to another online application, and offering any special benefits to students regardless of what kind of application they choose.[5]Id. at ΒΆ 46. Plaintiff alleges that Defendant's " equal treatment" requirement is " tantamount to an agreement among members to suppress demand for Online College Application Processing services" and also operates ...


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