Antitrust, the ABA, and Analysis of Law School Cost Variables

Cite this Article
Keith Sharfman, Antitrust, the ABA, and Analysis of Law School Cost Variables, Truth on the Market (April 04, 2006),

Josh’s interesting post re the sunsetting of the ABA’s antitrust consent decree, as well as David Zaring’s, are worth some further thought.

One problem with the consent decree is that it is widely misunderstood. All that antitrust law forbids the ABA to do is impose minimum salaries and other conditions of employment. But that is a far cry from a rule against studying compensation levels (as distinct from imposing them) for the purpose of assessing whether a school is using its scarce resources wisely. Nothing in antitrust law forbids that, so long as there’s no agreement to fix compensation at any particular level. When a law school does a self-study in preparation for an ABA site visit, a great deal of data is collected and evaluated to help the site inspection team assess how well the school is doing. Faculty compensation is an important variable in a school’s success, and omitting that variable from study is neither sensible nor required by antitrust. Analysis of faculty compensation levels is no different from analysis of a school’s other strategic expenditures–on plant and equipment, on the library and technology, on student aid, and the like. The consent decree should not be used as a basis for shielding compensation levels from analysis and scrutiny. If, say, spending on academic faculty at a particular school has increased at a lower rate over the the last decade than spending on clinical faculty or on administrative staff, the ABA report ought to be able to note that fact and comment upon it. While antitrust forbids requiring schools to maintain minimum compensation levels, analysis of expenditures in the compensation area without the imposition of any mandates is not forbidden.

Imagine if a large company like GM were to hire a management consulting firm like McKinsey to study its operations and make recommendations. Wouldn’t it be bizarre for McKinsey not to look at GM’s compensation practices? Without looking at that, it would be very hard to get a full picture of GM’s choices and even harder to make any sort of sensible recommendations. Just so with the ABA. It’s hard to write a sensible report evaluating how well a law school is doing relative to its peers without having any sense of how the school is compensating its faculty, which is surely a key variable in the equation. So long as ABA site inspectors aren’t permitted to look at compensation, it will be difficult for them to do ther jobs.