United States v. American Bar Association; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. American Bar Association; Proposed Final

Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Secs. 16(b)-(h), that a proposed Final

Judgment, Stipulation, and Competitive Impact Statement have been filed

with the United States District Court for the District of Columbia in

United States of America v. American Bar Association, Civil Action No.

95-1211.

The Complaint in this case alleges that the defendant conspired to

violate Section 1 of the Sherman Act, 15 U.S.C. Sec. 1, allowing the

law school accreditation process to be captured by those with a direct

interest in its outcome. Among other things, the ABA adopted and

enforced law school accreditation Standards, Interpretations, and Rules

that unreasonably raised salaries paid to law school faculty, deans,

and other professional personnel.

The proposed Final Judgment enjoins the defendant from adopting or

enforcing any Standard, Interpretation, or Rule that conditions

accreditation on salaries and other benefits paid to law school

professional personnel and from using compensation data in connection

with the accreditation of a law school. It also enjoins the defendant

from refusing to accredit proprietary law schools and from prohibiting

ABA-accredited law schools from accepting transfer credits from state-

accredited law schools.

The proposed Final Judgment requires that the defendant establish a

commission to review accreditation standards regarding student/faculty

ratios, teaching loads, sabbaticals, and bar preparation courses. It

further requires changes in the composition of the defendant's

accrediting committees.

Public comment on the proposed Final Judgment is invited within the

statutory 60-day comment period. The comments and responses to them

will be published in the Federal Register and filed with the Court.

Comments should be directed to John F. Greaney, Chief, Computers and

Finance Section, Room 9903, U.S. Department of Justice, Antitrust

Division, 555 Fourth Street, NW., Washington, DC 20001 (telephone: 202/

307-6122).

Rebecca P. Dick,

Deputy Director of Operations Antitrust Division.

United States District Court for the District of Columbia

United States of America, Plaintiff, v. American Bar

Association, Defendant.

Stipulation

The undersigned parties, by their respective attorneys, stipulate

that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and venue of this action is

proper in the District of Columbia;

2. The parties consent that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon the motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. Sec. 16), and without further notice to any party or other

proceedings, provided that plaintiff has not withdrawn its consent,

which it may do at any time before the entry of the proposed Final

Judgment by serving notice thereof on defendant and by filing that

notice with the Court; and

3. Pending approval of the Final Judgment by the Court, defendant

agrees to be bound by the provisions of the proposed Final Judgment and

to be subject to the jurisdiction of this Court. If plaintiff withdraws

it consent, or if the proposed Final Judgment is not entered pursuant

to the terms of the Stipulation, this Stipulation shall be of no effect

whatsoever, and the making of this Stipulation shall be without

prejudice to any party in this or in any proceeding.

For Plaintiff United States:

Anne K. Bingaman,

Assistant Attorney General.

Joel I. Klein,

Deputy Asst. Attorney General.

Rebecca P. Dick,

Asst. Director of Operations.

John F. Greaney,

Chief, Computers & Finance Section.

Scott N. Sacks,

Asst. Chief, Computers & Finance Section.

Antitrust Division, U.S. Department of Justice,

D. Bruce Pearson,

Molly L. Debusschere,

Jessica N. Cohen,

James J. Tierney,

Attorneys, U.S. Department of Justice, Antitrust Division, 555

Fourth Street, NW., Room 9901, Washington, DC 20001, Tel: 202/307-

0809, Fax: 202/616-5980.

For Defendant American Bar Association:

[[Page 39422]]

Darryl L. DePriest,

General Counsel.

American Bar Association, 541 N. Fairbanks Court, Chicago, Illinois

60611, Tel: 312/988-5215, Fax: 312/988-5217.

Certificate of Service

On June 27, 1995, I caused a copy of the foregoing Stipulation to

be served by facsimile and first-class mail upon:

David T. Pritikin, Esquire Sidley & Austin, One First National Plaza,

Chicago, Illinois 60603.

Jessica N. Cohen

Final Judgment

Plaintiff, United States of America, filed its Complaint on June

27, 1995. Plaintiff and defendant American Bar Association (``ABA''),

by their attorneys, have consented to the entry of this Final Judgment

without trial or adjudication of any issue of fact or law. This Final

Judgment shall not be evidence or admission by any party with respect

to any issue of fact or law. Therefore, before any testimony is taken,

and without trial or adjudication of any issue of fact or law, and upon

consent of the parties, it is hereby Ordered, Adjudged And Decreed:

I

Jurisdiction

This Court has jurisdiction of the subject matter of this action

and of the parties consenting to this Final Judgment. The Complaint

states a claim upon which relief may be granted against the ABA under

Section 1 of the Sherman Act, 15 U.S.C. 1.

II

Definitions

As used in this Final Judgment:

(A) ``ABA'' means the American Bar Association and all of its

components.

(B) ``Accreditation Committee'' means the Accreditation Committee

of the Section of Legal Education and Admissions to the Bar of the ABA.

(C) ``Board'' means the ABA Board of Governors.

(D) ``Council'' means the Council of the Section of Legal Education

and Admissions to the Bar of the ABA.

(E) ``Faculty'' means all persons who teach classes (except adjunct

professors), including administrators who teach, emeritus of senior

faculty, visiting professors, joint-appointed faculty, clinical

instructors, and instructors holding short-term appointments.

(F) ``Section'' means the ABA's Section of Legal Education and

Admissions to the Bar.

(G) ``Standards,'' ``Interpretations'' and ``Rules'' mean the

Standards for Approval of Law Schools and Interpretations and Rules of

Procedure for Approval of Law Schools and Polices of the Council of the

Section and its Accreditation Committee.

III

Applicability

This Final Judgment shall apply to the ABA and its governors,

officers, employees, and full-time consultants involved in law school

accreditation.

IV

Prohibited Conduct

The ABA is enjoined and restrained from:

(A) adopting or enforcing any Standard, Interpretation or Rule, or

taking any action that has the purpose or effect of imposing

requirements as to the base salary, stipends, fringe benefits, or other

compensation paid law school deans, associate deans, assistant deans,

faculty, library directors, librarians, or other law school employees,

or in any way conditioning the accreditation of any law school on the

compensation paid law school deans, associate deans, assistant deans,

faculty, library directors, librarians, or other law school employees;

(B) collecting from or disseminating to any law school data

concerning compensation paid or to be paid to deans, administrators,

faculty, librarians, or other employees;

(C) using law school compensation data in connection with the

accreditation or review of any law school; and

(D) adopting or enforcing any Standard, Interpretation or Rule, or

taking any action that has the purpose or effect of prohibiting a law

school from:

(1) enrolling a member of the bar or graduate of a state-accredited

law school in an LL.M. program or other post-J.D. program;

(2) offering transfer credits for any course successfully completed

at a state-accredited law school, except that the ABA may require that

two-thirds of the credits required for graduation must be successfully

completed at an ABA-approved law school; or

(3) being an institution organized as a for-profit entity.

V

Permitted Conduct

Nothing herein shall be construed to prohibit the ABA from: (1)

adopting or applying such other reasonable Standards, Interpretations

or Rules, consistent with all other provisions of this Final Judgment,

as are necessary to attract and retain a competent faculty; (2)

investigating or reporting on whether a law school is in compliance

with such Standards, Interpretations or Rules, or the cause of non-

compliance; or (3) requiring that a law school take remedical action to

comply with such Standards, Interpretations or Rules as a condition of

obtaining or maintaining ABA approval.

VI

Additional Relief

The ABA shall:

(A) require that all Interpretations and Rules be subjected to the

same public comment and review process and approval procedures that

apply to proposed Standards;

(B) permit appeals from Accreditation Committee Action Letters to

the Council;

(C) revise the Council's membership as follows:

(1) for a period of five years, all elections shall be subject to

Board approval;

(2) members shall serve staggered three-year terms, with a two-term

limit; however, officers may serve as officers for an additional term

beyond the six-year limit; and

(3) no more than 50% of the members shall be law school deans or

faculty;

(D) revise the Accreditation Committee's membership as follows:

(1) for a period of five years, all appointments shall be subject

to Board approval;

(2) all members shall serve staggered three-year terms, with a two-

term limit; and

(3) no more than 50% of the members shall be law school deans or

faculty;

(E) revise the Standards Review Committee's membership as follows:

(1) for a period of five years, all appointments shall be subject

to Board approval;

(2) members shall serve one three-year term; and

(3) no more than 50% of the members shall be law school deans or

faculty;

(F) require that no more than 40% of the members of the Nominating

Committee for officers of the Section shall be law school deans or

faculty;

(G) require that each site evaluation team include, to the extent

reasonably feasible, at least:

(1) one university administrator who is not a law school dean or

faculty member; and

(2) one practicing lawyer, judge or public member;

(H) require the Accreditation Committee after each meeting to send

a

[[Page 39423]]

written report to the Council, that may be done on a confidential basis

if necessary, identifying all actions taken by it, including a list

identifying all law schools on report or under review, and for each law

school, identifying the areas of actual or apparent non-compliance and

the length of time the law school has been on report or under review;

(I) require the Council to send an annual report to the Board, that

may be done on a confidential basis if necessary, on its accreditation

activities during the preceding year, including a list identifying all

law schools on report or under review, and for each law school,

identifying the areas of actual or apparent non-compliance and the

length of time the law school has been on report or under review;

(J) require Council approval and Board receipt of annual and site

inspection questionnaires before they are sent to law schools;

(K) publish annually in The ABA Journal and the Section's Review of

Legal Education in the United States:

(1) all proposed Standards, Interpretations, Rules, and Policies,

and the name(s) of the sponsors of each; and

(2) the date, place, and names of the evaluators for each law

school and foreign program inspected; and

(L) hire, by October 31, 1995, an outside independent consultant

who is an expert on education and accreditation and who is not a legal

educator, to assist in validating all Standards and Interpretations, as

required by the Department of Education, and develop a plan for

validation by December 31, 1995.

VII

Special Commission

The ABA shall:

(A) establish a Special Commission to Review the Substance and

Process of the ABA's Accreditation of American Law Schools to determine

whether the Standards, Interpretations, and Rules, and their

enforcement governing the following subjects should be revised:

(1) faculty teaching-hours;

(2) leaves of absence, compensated or otherwise, for faculty and

other staff;

(3) the calculation of the faculty component of student-faculty

ratios;

(4) physical facilities;

(5) the allocation of resources to a law school by the law school

or its parent university; and

(6) the treatment of bar preparation courses;

(B) require that the Special Commission complete its review no

later than February 29, 1996. The Special Commission shall file its

report with the Board. Upon completing its review, the Board shall file

its report with the Court and the United States setting out its

analysis and any proposed revisions; and

(C) allow the Untied States 90 days in which to review the Special

Commission's report and determine whether to challenge any of the

proposals. The United States may challenge any such proposal and, if

the ABA chooses to defend it, the challenge will be decided by this

Court applying a Rule of Reason antitrust analysis.

VIII

Compliance Program

The ABA is ordered to maintain an antitrust compliance program

which shall include designating, within 30 days of the entry of this

Final Judgment, an Antitrust Compliance Officer with responsibility for

accomplishing the antitrust compliance program and with the purpose of

achieving compliance with this Final Judgment. The Antitrust Compliance

Officer shall, on a continuing basis, supervise the review of the

current and proposed activities of the ABA's law school accrediting

activities to ensure that they comply with this Final Judgment. The

Antitrust Compliance Officer shall be responsible for accomplishing the

following activities:

(A) reviewing the ABA's Standards, Interpretations, Rules, and

practices, and identifying and recommending the elimination of any

provisions or activities that violate or are inconsistent with Sections

IV or VI above to the Board or to the ABA's House of Delegates within

90 days of entry of this Final Judgment;

(B) distributing a copy of this Final Judgment within 30 days of

entry to:

(1) all members of the Board and officers of the ABA, the Section

and the Law Student Division;

(2) all members of the Council, Accreditation Committee and

Standards Review Committee;

(3) all university presidents with ABA-approved law schools, the

deans of all ABA-approved law schools, the Chief Justices or Judges of

the highest Courts of the States and other admitting jurisdictions, and

to make a best effort to notify the deans of all state-accredited law

schools; and

(4) all persons serving on site inspection teams during the term of

this Final Judgment;

(C) causing this Final Judgment to be published in the next issue

of The ABA Journal and the Student Lawyer following the entry of the

Final Judgment;

(D) providing the United States, during the term of the Final

Judgment, a copy of all proposed changes to these Standards,

Interpretations and Rules before they are acted on by the House of

Delegates, and a copy of all Standards, Interpretations and Rules

adopted by the House;

(E) briefing annually the Section's Officers, all members of the

Council, Committee and Standards Review Committee, the Consultant and

the Consultant's staff, and all participants at site inspectors'

workshops on the meaning and requirements of this Final Judgment;

(F) obtaining from all Section officers, all members of the

Council, Accreditation committee and Standards Review Committee, and

the Consultant and the Consultant's staff an annual written

certification that they: (1) have read, understand, and agree to abide

by the terms of this Final Judgment; and (2) are not aware of any

violation of this Final Judgment that they have not reported to the

Antitrust Compliance Officer; and

(G) obtaining from the Executive Director of The ABA, the

Consultant and the Consultant's staff, an annual written certification

that they have been advised and understand that their failure to comply

with the Final Judgment may result in conviction for contempt of court.

IX

Certification

(A) Within 90 days after the entry of this Final Judgment, the ABA

shall certify to the United States whether it has designated an

Antitrust Compliance Officer and has distributed the Final Judgment in

accordance with Section VIII above.

(B) For 10 years after the entry of this Final Judgment, on or

before its anniversary date, the Antitrust Compliance Officer shall

certify annually to the Court and the United States whether the ABA has

complied with the provisions of Section VIII.

(C) At any time, if the Antitrust Compliance Office learns of any

past, current or anticipated violation of Sections IV or VI of this

Final Judgment, the ABA shall, within 45 days after such knowledge is

obtained, take action, or where appropriate initiate action, to

terminate or modify the activity so as to comply with this Final

Judgment.

X

Plaintiff Access

(A) To determine or secure compliance with this Final Judgment,

duly authorized representatives of the

[[Page 39424]]

United States shall, upon written request of the Assistant Attorney

General in charge of the Antitrust Division, and on reasonable notice

to the ABA, be permitted:

(1) access during the ABA's office hours to inspect and copy all

records and documents in its possession or control relating to any

matters contained in this Final Judgment; and

(2) to interview the ABA's officers, employees, or agents,who may

have counsel present, regarding such matters. The interviews shall be

subject to the ABA's reasonable convenience and without restraint or

interference by the ABA.

(B) Upon the written request of the Assistant Attorney General in

charge of the Antitrust Division, the ABA shall submit such written

reports, under oath if requested, relating to any of the matters

contained in this Final Judgment as may be requested.

(C) No information or documents obtained by the means provided in

this Section X shall be divulged by the United States to any person

other than a duly-authorized representative of the executive branch of

the United States, except in the course of legal proceedings to which

the United States is a party, or for the purpose of securing compliance

with this Final Judgment, or as otherwise required by law.

XI

Further Elements of Decree

(A) This Final Judgment shall expire 10 years from the date of

entry.

(B) Jurisdiction is retained by this Court for the purpose of

enabling either of the parties to this Final Judgment to apply to this

Court at any time for further orders and directions as may be necessary

or appropriate to carry out or construe this Final Judgment, to modify

or terminate any of its provisions, to enforce compliance, and to

punish violations of its provisions.

(C) Entry of this Final Judgment is in the public interest.

DATE:------------------------------------------------------------------

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UNITED STATES DISTRICT JUDGE

Certificate of Service

On June 27, 1995, I caused a copy of the foregoing Proposed Final

Judgment to be served by facsimile and first-class mail upon:

David T. Pritikin,

Esqurie Sidley & Austin One First National Plaza Chicago, Illinois

60603.

Jessica N. Cohen

United States of America, Plaintiff, v. American Bar

Association, Defendant.

Civil Action NO. 95-1211 (CR)

Filed: June 27, 1995

Competititve Impact Statement

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. Sec. 16(b), the United States submits this Competitive

Impact Statement relating to the proposed Final Judgment submitted for

entry with the consent of defendant American Bar Association (``ABA'')

in this civil antitrust action.

I

Nature and Purpose of the Proceeding

A. The Complaint

On June 27, 1995, the United States filed a civil antitrust suit

alleging that the ABA violated Section 1 of the Sherman Act in its

accreditation of law schools. The Complaint alleges that the ABA

restrained competition among professional personnel at ABA-approved law

schools by fixing their compensation levels and working conditions, and

by limiting competition from non-ABA-approved schools. The Complaint

also alleges that the ABA allowed its law school accreditation process

to be captured by those with a direct interest in its outcome.

Consequently, rather than setting minimum standards for law school

quality and thus providing valuable information to consumers, the

legitimate purposes of accreditation, the ABA at times acted as a guild

that protected the interests of professional law school personnel.

The United States and the ABA have agreed that the proposed Final

Judgment may be entered after compliance with the Antitrust Procedures

and Penalties Act. Entry of the Final Judgment will terminate this

civil action, except that the Court will retain jurisdiction for

further proceedings that may be required to enforce or modify the

Judgment, or to punish violations of any of its provisions.

B. Law School Accreditation

The Section of Legal Education and Admissions to the Bar (``Section

of Legal Education'') administers law school accreditation. It was

created in 1883 as the first Section of the ABA and assumed the role of

an accrediting agency in 1921.

ABA approval is critical to the successful operation of a law

school. The bar admission rules in over 40 States require graduation

from an ABA-approved law school in order to satisfy the legal education

requirement for taking the bar examination. In addition, the ABA is the

only agency recognized by the United States Department of Education as

a law school accrediting agency.

In 1973, the ABA adopted its current Standards for the Approval of

Law Schools (``Standards''), setting forth the minimum requirements for

legal education that must be met to obtain and maintain ABA approval.

Law schools were required to be in full compliance with the Standards

commencing with the 1975-76 academic year. The Standards and their

Interpretations covered many aspects of the operation of a law school,

including its salary structure, student-faculty ratios, faculty leave

policies, faculty workloads, and physical facilities.

The Section of Legal Education is governed by its Council, which

has supervisory authority on all accreditation matters. The Council has

established a Standards Review Committee that reviews the Standards and

their ``Interpretations'' and recommends changes to the Council. The

Council has also established an Accreditation Committee, which closely

oversees the inspection of new law schools and the sabbatical

reinspections of previously approved law schools, and make the initial

recommendations regarding ABA approval.

The Accreditation Committee enforces the Standards through

extensive on-site inspections of law schools. Provisionally approved

law schools are inspected every year until receiving full approval, and

fully approved law schools are inspected every seven years, except for

an initial visit three years after first gaining full approval. Site

inspection teams prepare detailed reports for the Accreditation

Committee. The Accreditation Committee may ``continue'' the

accreditation of an approved law school, require additional information

from a law school in actual or apparent non-compliance with the

Standards or about whom the Accreditation Committee has ``concerns,''

or require a show cause hearing for law schools in apparent non-

compliance with the Standards or their Interpretations.

The day-to-day operation of the ABA's accreditation process is

directed by the ABA's Consultant on Legal Education. The Consultant

prepares ``Action Letters'' that inform the law school deans and

university presidents of the Accreditation Committee's findings and

conclusions.

[[Page 39425]]

II

Description of the Practices Involved in the Alleged Sherman Act

Violation

At trial, the United States would have proved the following:

A. Anticompetitive Standards And Practices

1. Capture Of The Accreditation Process. Legal educators, including

current and former law school dean, faculty, and librarians, control

and dominate the ABA's law school accreditation process. Approximately

90% of the Section of Legal Education's members are legal educators. In

substantial part, this is because of the Section of Legal Education's

Faculty Group Membership Program, under which ABA-approved law schools

may obtain a group discount on dues for their faculty. Many law schools

pay their faculty's dues and the faculties of about 145 of the 1774

ABA-approved law schools hold ABA membership through the Faculty Group

Membership Program.

All current members of the Standards Review Committee and a

majority of the current members of the Accreditation Committee are

legal educators. The typical site inspection team has 5-7 members, all

or nearly all of whom are legal educators. The Consultant's position

has traditionally been held by a legal educator. The incumbent has

served as Consultant for over 20 years and is a former dean and a

current law school faculty member.

2. Professional Staff Compensation. ABA Accreditation Standard

405(a) required that faculty compensation be comparable with that of

other ABA-approved schools. In practice, this Standard was extended to

cover deans' and professional librarians' salaries. The ABA collected

extensive, detailed salary information, among other data collected, in

annual questionnaires that ABA-approved law schools were required to

complete. Often, the comparable schools consisted of a ``peer group''

of schools chosen by the professional staff of the inspected school.

The ``peer group'' could be and at times was manipulated to include

higher-rated law schools or law schools located in higher-cost areas.

Law schools also at times were placed on report under Standard 405(a)

by the Accreditation Committee because of unfavorable salary structure

comparisons, not because of poor faculty quality.

3. Boycotts of non-ABA-approved schools. The ABA prohibited an ABA-

approved school from granting any transfer credits for courses

successfully completed at state-accredited or unaccredited law schools,

but permitted a law school, under certain conditions, to allow credits

for courses taken at a foreign law school (Standard 308 and its

Interpretation). The ABA also prohibited ABA-approved law schools from

matriculating graduates of state-accredited or unaccredited law

schools, but permitted, under certain circumstances, the matriculation

of graduates of foreign law schools (Interpretation 3 of Standard 307).

The ABA rejected a 1979 amendment that would have allowed law schools

the discretion to admit any bar members to their graduate programs. In

practice, the ABA permits only the law school, and not the affected

individual, to apply for a waiver of the Interpretation, and such

applications have been denied. Standard 202 prohibited the

accreditation of proprietary law schools. The ABA has never approved a

proprietary law school and the Accreditation Committee twice

recommended against approval of one proprietary law school.

These Standards, Interpretations, and their application have

unreasonably restricted competition in the market for the services of

professional law school personnel. The salary Standard and its

application had the effect of ratcheting up law school salaries. The

Standard relating to proprietary law schools erected an unnecessary

barrier to competition from these schools, which often provide their

professional staff with lower salaries and fewer amenities than do ABA-

approved schools. The restrictions on enrolling graduates of non-ABA-

approved schools, and on offering transfer credits for course work

completed at those schools, were unreasonable restraints of trade aimed

at deterring effective competition from law schools that are likely to

pay less in salaries and benefits to their professional staffs.

B. Other Accreditation Standards And Practices

4. Student-To-Faculty Ratios. In its Interpretations of Standards

201 and 401-405, the ABA declared that a student-to-faculty ratio of

20:1 or less is presumably in compliance with its accreditation

standards but that a faculty ratio of 30:1 or more is not. While the

Interpretation counts a part-time student as two-thirds the equivalent

of a full-time student, the ABA has counted only full-time, tenure-

track professors as ``faculty,'' thereby excluding from the count

administrators who teach, emeritus or senior faculty who teach, some

visiting professors, joint-appointed faculty (faculty holding

appointments in two departments in a university) who teach, adjunct

professors, clinical and other instructors holding short-term

contracts, and tenured faculty teaching part-time because of family

responsibilities. Although part of the policy supporting reduced

student-faculty ratios is the desirability of smaller classes and

increased student-faculty contact, the ABA did not measure actual class

size or effectively measure actual student-faculty contacts. The growth

of full-time faculty at ABA-approved law schools substantially exceeded

the growth of student enrollment at such schools in the past 10 years.

5. Teaching Loads. Standard 404 sets a maximum 8-hour-per-week

teaching load or, if a course is duplicated, a 10-hour load. In

practice, an hour was defined as 50 minutes.

6. Compensated Leaves Of Absence. Standard 405(b) required that

faculty members be afforded a ``reasonable opportunity for leaves of

absence and for scholarly research.'' In some instances, this Standard

has been applied in practice to require paid sabbaticals, summer

stipends, and other forms of research compensation.

7. Bar Preparation. While Standard 301 requires a law school to

maintain an educational program designed to qualify its students for

admission to the bar, Standard 302(b) prohibits a law school from

offering a bar preparation course for credit or requiring one for

graduation, even for students identified as being at risk of failing

the bar examination. A bar preparation course cannot be offered as a

required course, even when a law school meets the ABA minimum credit

requirements without counting the bar preparation course.

8. Facilities. Standard 701 requires an ``adequate'' physical

plant. Nearly all ABA-approved law schools occupy new facilities or

have made substantial renovations to existing facilities since the new

Standards were adopted in 1973. Despite this, over one-third of all

ABA-approved schools were put on report for ``inadequate facilities''

by the Accreditation Committee in 1994, including law schools of

recognized distinction.

9. Resources. Standard 201 requires that a law school have the

necessary resources to provide a sound legal education, and Standard

209 requires adequate resources to sustain a sound educational program.

These Standards have been applied at times by the Accreditation

Committee to place law schools on report for alleged shortcomings. In

1994, about 50 law schools, including many of recognized high quality,

were on report for

[[Page 39426]]

allocating inadequate resources to their law school program.

Some of the Standards, Interpretations, and other factors described

in paragraphs 4 through 9 may reflect relevant considerations in

assessing the quality of a law school's educational program. At times,

however, they too have been applied inappropriately to restrict

competition in the law school labor market.

III

Explanation of the Proposed Final Judgment

Prohibited Conduct. The proposed Final Judgment prohibits the

recurrence of conduct that is plainly anticompetitive. Specifically,

the Final Judgment will eliminate the adoption or enforcement of any

Standard, Interpretation or Rule, or the taking of any action that

imposes requirements as to the base salary, stipends, fringe benefits,

or other compensation paid to law school faculty, administrators or

other law school employees. The Final Judgment also will eliminate the

collection or dissemination of compensation data for deans,

administrators, faculty, librarians, or other employees, and the use of

compensation data in connection with the accreditation of any law

school. In addition, the Final Judgment eliminates any Standard,

Interpretation or Rule prohibiting the enrollment of a member of a bar

or a graduate of a state-accredited law school in a post-J.D. program,

or the acceptance of any transfer credits from state-accredited law

schools. The ABA is also prohibited from accrediting only law schools

organized as not-for-profit institutions.

Additional Relief. The proposed Final Judgment also contains

structural provisions to ensure that the law school accreditation

process is governed by persons other than those with a direct economic

interest in its outcome and that the process is brought more into

public view. As the Complaint states, it is the view of the United

States that during the past 20 years, the law school accreditation

process has been captured by legal educators who have a direct interest

in the outcome of the process. Most of the process, as it applied to

individual law schools, was carried out by the Accreditation Committee

and the Consultant's office and was kept from public view and the

supervision of the ABA's Board of Governors and House of Delegates. In

addition, the individuals who serve on the Accreditation Committee and

in the Consultant's office had been in these positions for many years.

Finally, the Interpretations of the accreditation Standards were in

some cases more plainly anticompetitive than the Standards themselves,

yet their adoption was not subject to the same public comment and

hearings requirements as amendments to the Standards.

Accreditation matters for individual law schools often remained

before the Accreditation Committee because it required repeated reports

from law schools under review, thereby lengthening the accreditation

process. At one point in 1994, 56% of ABA-approved law schools were

under continuing Accreditation Committee review and 16% more were

undergoing sabbatical reinspections that school year.

As remedies, the proposed Final Judgment provides:

1. Proposed Interpretations will be subject to the same public

comment and hearings requirements as proposed Standards. All proposed

Interpretations, Standards, Rules, and Policies must be published

annually in the ABA Journal and the Review of Legal Education in the

United States.

2. Law schools may take immediate appeals to the Council from

adverse Accreditation Committee Action Letters. The Accreditation

Committee must also report to the Council following each meeting all

accreditation actions that it took during the meeting.

3. Elections to the Council will be subject to the Board of

Governors' approval, no more than 50% of the Council membership may be

law school deans or faculty, and members will be subject to a two-term

limit. Only 40% of the members of the Nominating Committee may be law

school deans or faculty.

4. Appointments to the Accreditation Committee will be subject to

Board approval. No more than 50% of the Accreditation Committee may be

law school deans or faculty, and members will be subject to a two-term

limit. The same requirements apply to the Standards Review Committee,

except that its members are limited to one term.

5. To the extent reasonably feasible, accreditation site inspection

teams will include at least one practicing lawyer, judge or public

member, and one non-law school university administrator. The ABA will

annually publish the names of those who participated in domestic and

foreign site inspections and the schools they inspected.

6. The Council must annual report to the Board on its accreditation

activities, including identifying all schools under accreditation

review and the reasons the law schools are under review.

7. The Council must approve, and the Board review, all annual and

site inspection questionnaires sent to law schools.

8. By October 31, 1995, the ABA will hire an outside independent

consultant, who is not a legal educator, to assist in evaluating the

ABA's accreditation Standards and Interpretations and develop a plan

for their validation by December 31, 1995.

Special Commission. The ABA has established a Special Commission To

Review The Substance And Process Of The ABA's Accreditation Of American

Law Schools. A number of subjects of the accreditation process raise

legitimate educational policy issues, but were applied at times to

achieve anticompetitive, guild objectives, as discussed in Section II

above. These subjects are: Faculty teaching-hour requirements;

compensated and other required leaves of absence for faculty and other

staff; the manner in which the ABA calculated the faculty component in

calculating student-faculty ratios; physical facilities; the allocation

of resources to the law school, and bar preparation courses. The

Special Commission will review these subjects and report to the Board

of Governors no later than February 29, 1996. Upon completing its

review, the Board will file its report with the United States and the

Court. The United States may challenge any proposal in the report

within 90 days of the Commission's report. Any such challenge will be

decided by the Court applying an antitrust analysis. This is novel

relief in a government antitrust case, resulting from a recognition

that some accreditation practices implicate both antitrust and

educational policy concerns. Since the ABA had initiated the Special

Commission in response to academic criticism of its accreditation

process and its perception of possible antitrust problems, the United

States has agreed that the ABA may first attempt to reconcile antitrust

and educational concerns through its Special Commission.

IV

Remedies Available to Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages suffered, as well as costs and reasonable attorneys' fees.

Entry of the proposed Final Judgment will neither impair nor assist the

bringing of such actions. Under the provisions of Section 5(a) of

[[Page 39427]]

the Clayton Act, 15 U.S.C. Sec. 16(a), the Judgment has no prima facie

effect in any subsequent lawsuits that may be brought against the

defendant in this case.

V

Procedures Available for Modification of the Proposed Judgment

As provided by the Antitrust Procedures and Penalties Act, any

person believing that the proposed Final Judgment should be modified

may submit written comments to John F. Greaney, Chief, Computers and

Finance Section, U.S. Department of Justice, Antitrust Division, 555

4th Street, N.W., Room 9903, Washington, D.C. 20001, within the 60-day

period provided by the Act. These comments, and the Department's

responses, will be filed with the Court and published in the Federal

Register. All comments will be given due consideration by the

Department of Justice, which remains free to withdraw its consent to

the proposed Final Judgment at any time prior to entry. The proposed

Final Judgment provides that the Court retains jurisdiction over this

action, and the parties may apply to the Court for any order necessary

or appropriate for modification, interpretation, or enforcement of the

Final Judgment.

VI

Determinative Materials/Documents

No materials or documents of the type described in Section 2(b) of

the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16(b), were

considered in formulating the proposed Final Judgment.

VII

Alternatives to the Proposed Final Judgment

The United States considered other relief in addition to the

remedies contained in the proposed Final Judgment. In particular, early

in the investigation, the United States proposed injunctive relief

eliminating: the ABA's prohibition of credits for a bar review course:

the ABA's practice of attributing no value to teachers other than full-

time tenure-track faculty in calculating student-faculty ratios; the

maximum teaching hour limits; the faculty leave of absence

requirements; and the requirement that substantially all first-year

courses be taught by full-time faculty. Later the United States

proposed other relief, all of which is included in the proposed Final

Judgment. The United States made these proposals during the negotiating

process as its investigation proceeded and as it learned more about the

ABA's practices and their competitive effects.

The United States eventually concluded, on the basis of the

evidence it had gathered, that mere amendment of the ABA's Standards

and practices would not provide adequate or permanent relief and that

reform of the entire accreditation process was needed. While a

prohibition of some of the rules was warranted, as is accomplished by

the proposed Final Judgment, the larger and more fundamental problem of

regulatory capture also had to be addressed.

Moreover, a number of the Standards, Interpretations and practices

at issue, although sometimes misapplied to further guild interests in

the past, concern matters of legitimate educational concern. The United

States concluded that appraisal of whether the provisions and practices

listed in Section IV.D of the Complaint are anticompetitive or set a

procompetitive minimum educational standard for law school programs

should be made in the first instance by the ABA itself, subject to

subsequent review. The United States agreed to submit the first four of

the practices initially of most concern to it, along with others about

which it had developed concern, to review by the ABA's Special

Commission. (In the case of first-year teaching requirements, on the

basis of evidence it subsequently gathered the United States abandoned

its initial opposition). If the Special Commission fails to consider

adequately the antitrust implications of continuing the ABA's past

practices in these areas, the Final Judgment permits the United States

to challenge the Special Commission's proposals and seek further

injunctive relief from the Court.

The United States had also earlier proposed that the ABA's Special

Commission be separately constituted as an antitrust review committee

whose membership would be one-third practitioners, judges, and public

members; one-third non-law school university administrators; and one-

third law school administrators and faculty. Although the Government

recognized that a number of members of the Special Commission had

participated in the accreditation process in the past, it also

considered that the Special Commission was already constituted and had

progressed in its work, that ABA leadership was now familiar with and

sensitive to antitrust concerns, and that the Commission report was

subject to challenge by the United States and review by the Court.

Another alternative to the proposed Final Judgment is a full trial

of the case. A trial would involve substantial cost both to the United

States and to the defendant, and is not warranted since the Final

Judgment provides all substantial relief the Government would likely

obtain following a successful trial.

Dated: July 14, 1995.

Respectfully submitted,

D. Bruce Pearson

James J. Tierney

Jessica N. Cohen

Molly L. DeBusschere

Attorneys, U.S. Department of Justice, Antitrust Division, 555 4th

Street, N.W., Room 9903, Washington, D.C. 20001, Tel: 202/307-0809,

Fax: 202/616-8544.

Certificate of Service

On July 14, 1995, I caused a copy of the United States' Competitive

Impact Statement to be served by facsimile and first-class mail upon:

Ronald S. Flagg, Esquire, Sidley & Austin, 1722 Eye Street, N.W.,

Washington, D.C. 20006, fax: (202) 736-8711

David T. Pritikin, Esquire, Sidley & Austin, One First National Plaza,

Chicago, Illinois 60603, fax: 312/853-7036

and

Darryl L. DePriest, 541 N. Fairbanks Court, Chicago, Illinois 60611,

fax: 312/988-5217.

James J. Tierney

[FR Doc. 95-18946 Filed 8-1-95; 8:45 am]

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