CollegeNET, Inc. v. Common Application, Inc.

• Citation: 355 F.Supp.3d 926
• Decision Date: 28 November 2018
• Docket Number: No. 3:14-cv-00771-HZ,3:14-cv-00771-HZ
• Parties: COLLEGENET, INC., a Delaware Corporation, Plaintiff, v. The COMMON APPLICATION, INC., a Virginia Corporation, Defendant.
• Court: U.S. District Court — District of Oregon

355 F.Supp.3d 926

COLLEGENET, INC., a Delaware Corporation, Plaintiff,

v.The COMMON APPLICATION, INC., a Virginia Corporation, Defendant.

No. 3:14-cv-00771-HZ

United States District Court, D. Oregon.

Signed November 28, 2018

Sarah J. Crooks, PERKINS COIE LLP, 1120 NW Couch Street, Tenth Floor, Portland, OR 97209, Susan E. Foster, Shylah R. Alfonso, David S. Steele, PERKINS COIE LLP, 1201 Third Avenue, Suite 4900, Seattle, WA 98101, Jon B. Jacobs, PERKINS COIE LLP, 700 Thirteenth Street, NW Suite 600, Washington, DC 20005, Attorneys for Plaintiff

Thomas Triplett, Richard K. Hansen, SCHWABE, WILLIAMSON & WYATT, P.C., 1900 Pacwest Center, 1211 SW Fifth Avenue, Portland, OR 97204, J. Mark Gidley, WHITE & CASE LLP, 701 Thirteenth Street, NW, Washington, DC 20005, Heather M. Burke, WHITE & CASE LLP, 3000 El Camino Real, 2 Palo Alto Sq., 9th Floor, Palo Alto, CA 94306, Attorneys for Defendant

OPINION & ORDER

HERNÁNDEZ, District Judge:

Plaintiff CollegeNet, Inc., brings this antitrust action for violations of Sections 1 and 2 of the Sherman Act against Defendant The Common Application, Inc. Plaintiff brings seven claims for relief: (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 all of Plaintiff's claims and transfer this action to the Eastern District of Virginia. The Court denies Defendant's Motions to Dismiss and Transfer.

BACKGROUND

I. The Parties

Plaintiff CollegeNET is a Portland-based corporation that offers various web-based administrative services to higher education and non-profit organizations, including customized online application forms, processing services, and contact management services. First Am. Compl. ("FAC") ¶ 6, ECF 75. Defendant The Common Application is a Virginia-based non-profit corporation comprised of 549 non-profit member colleges and universities. Id. at ¶ 7. It offers a standard college application data service, application forms, and processing services. Id.

Defendant was formed in 1975 as a limited group of selective colleges seeking to simplify the college admissions process. Id. at ¶¶ 13, 38. The application was initially a paper form that was universally accepted by all member colleges, eliminating the need for applicants to write their basic information more than once. Id. at ¶ 13. According to Plaintiff, Defendant has since "transformed itself into a dominant online college application processing provider." Id. at ¶ 14. As it grew, Defendant's members began to "understand that Common Application was providing tangible monetary benefits to them at the expense of applicants. What started out as a service to simplify the college application process for students had become a pipeline of applicants" Id. at ¶ 48. According to Plaintiff, membership grew "not to serve students but in part to secure a boost in applications, application fees, and rankings." Id.

Plaintiff alleges that Defendant is not a single entity, but rather a "consortium of competitors" that have participated with Defendant as co-conspirators in connection with the alleged antitrust violations. Id. at ¶¶ 8, 84. A majority of Defendant's steering committee or board of directors is made up of admissions officers from member colleges. Id. at ¶ 85. The board discusses and approves membership agreements, Common Application changes, and restraints. Id. at ¶ 86. Each year, member colleges sign an agreement with Defendant to abide by its rules and regulations. Id. at ¶ 88.

II. Evolution of Defendant's Unlawful Conduct

Plaintiff alleges various anticompetitive behavior resulting from membership restrictions and restraints, including but not limited to: (a) Tying and Bundling/Forced Purchase Requirements; (b) Exclusivity Restrictions; (c) the "Equal Treatment" Requirement; and (d) Uniformity Requirements. Id. at ¶ 15. Plaintiff suggests that none of these requirements—which Defendant operated without for 25 years—is necessary to achieve any legitimate or procompetitive goal of the Common Application. Id. at ¶ 16. According to Plaintiff, these restraints "have the primary effect of suppressing competition to provide online college application processing services to applicants and colleges, reducing net output, and excluding rival providers." Id. They "are not ancillary to or reasonably necessary to carry out Common Application's official mission." Id. at ¶ 159.

In 2003, Defendant "redefined its ‘equal treatment’ requirement." Id. at ¶ 46. Specifically, it began requiring members to "encourage the use of the Common Application" by "(1) charging an application fee to Common Applicants that was ‘no greater than the fee charged for [their] other accepted applications; (2) providing ‘an equally prominent link to the Common App Online wherever [they] post[ed] a link to another online application; and (3) not ‘explicitly offer[ing] any special benefits to students regardless of the application they choose.’ " Id. It also began charging non-exclusive members a higher fee per application than was charged to exclusive members. Id. at ¶ 47.

In 2005–06, Defendant entered into agreements with Naviance and ApplyYourself ("AY"). Naviance is the "largest provider of planning and advising systems for secondary schools" with an "electronic document transmission system ... integrated into more than 5,500 schools." Id. at ¶ 55. Defendant became "tightly integrated" with Naviance's system, and college counselors familiar with Naviance "encourage[d] students to apply to college through the Common App." Id. Defendant also awarded an "exclusive Online College Application Processing Services contract" to AY from 2007 to 2013. Id. at ¶ 56.

During this time, Defendant also made several changes to its services and pricing structure. Plaintiff alleges that Defendant's "typical pattern was to begin by offering additional ‘optional’ services and then, after a few years, (1) bundle the services with its core offering, (2) make their use mandatory, and/or (3) impose penalties on members who did not agree to use Common Application's services exclusively." Id. at ¶ 58. In the mid-2000's, for example, Defendant introduced supplemental forms and payment processing services. Id. at ¶ 59. Initially, members could pay for membership, applications, application payment processing, supplemental applications, and maintenance of supplemental applications separately. Id. But, in the late 2000's, Defendant "bundled all of its distinct services (except for payment processing) into a single offering for one all-in fee." Id. at ¶ 61. In other words, Common Application still charged a membership fee and a fee per application, but the supplemental application and other services were "free." Id. In addition, members who were fully exclusive and did not use other application providers were charged $4.00 per application processed as opposed to the standard $5.50 fee per application. Id. at ¶¶ 61–62. Defendant also began "restricting member institutions' ability to customize and personalize their Institutional Supplements." Id. at ¶ 64.

In 2011, Defendant announced its intent to end its contract with AY and—in 2014 with its fourth-generation system "CA4"—to bring the online processing staff, software, and infrastructure in-house. Id. at ¶ 66. According to Plaintiff, Defendant was equipping itself to " ‘handle the full volume of the entire American college application process.’ " Id. at ¶ 67.

Plaintiff alleges that CA4 was a "woefully deficient, technologically backwards, glitch-riddled product that would never survive in a competitive marketplace." Id. at ¶ 68. By further homogenizing the college application process, CA4 made it "harder for applicants and Colleges to identify good ‘matches.’ " Id. at ¶ 79. CA4 eliminated file uploads and used text boxes that were limited to 650 words. Id. Applicants were further limited in the number of versions of essays they could upload and to answering four specific essay prompts. Id. at ¶¶ 80–81.

In addition, Defendant made further changes to its pricing and membership structure. Under its new three-tiered membership structure, all members had to (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 chose to send them online; and (3) accept the Common Application fee waiver. Id. at ¶¶ 74–75. In addition, "Exclusive I" members had to use the Common Application as their only admission application for full-time, undergraduate, degree-seeking applicants, and "Exclusive II" members had to (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 offered one). Id. at ¶¶ 76, 77. According to Plaintiff, the "penalties" for choosing to be a Non-Exclusive versus Exclusive II member are "extreme." Id. at ¶ 78.

Since 2000, Defendant's membership has grown substantially, reaching 549 members in the 2014–2015 academic year. Id. at ¶ 44. With that growth, its total revenue increased from $339,046 in 2003 to $14.5 million in 2013. Id. It processed 3.45 million applications in the 2013–2014 application cycle. Id. at ¶ 82. In addition, in 2014 Defendant eliminated its "holistic admission membership requirement," allowing "virtually any College ... to join Common Application." Id. at ¶ 83.

III. Anticompetitive Effects and Injury

Plaintiff alleges that Defendant's agreements and the challenged restraints have had various anticompetitive effects. They have harmed competition in the Admissions and Online College Application Processing Markets. Id. at ¶ 149. They have resulted in lower "Net Output," defined as the net value derived from Online College...