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Sued for LSAT Conspiracy
MANHATTAN (CN) - Kaplan Inc.
tried to corner the LAT test preparation market by cutting a secret deal with
a competitor, according to a federal antitrust class action. Named plaintiff
Corey Kearse says that Kaplan met with (nonparty) BAR/BRI in August 1997 and
agreed not to buy out BAR/BRI or offer bar review courses if BAR/BRI withdrew
its Law School Aptitude Test and other exam prep courses.
According to the complaint: "Kaplan is, and has been at all relevant times, the largest test preparation company in the United States. It provides preparation courses for virtually all college, professional school and related licensing examinations, including an exhaustive review course for the Law School Aptitude Test ('LSAT'). However, at all relevant times, Kaplan has offered no full service bar review course.
"In or about 1995, West Publishing Corporation ('West Publishing') formed West Bar Review ('West Bar') for the purpose of competing in the market of full service bar review courses to candidates for admission to the bar of the several states. West Bar competed against the long-time dominant firm, BAR/BRI, then a trade name of Harcourt General, Inc. BAR/BRI has provided a variety of bar review courses in most, if not all, 50 states for decades, and also has provided other examination preparation courses, including LSAT, over many years. During the relevant period, BAR/BRI represented that it prepared more than 95 percent of all students annually sitting for a bar exam.
"In 1996, the Thomson Corporation, now Thomson Reuters (together, 'Thomson'), acquired West Publishing. Shortly after the acquisition, Thomson decided to sell West Bar and negotiated a letter of intent to transfer assets of West Bar to Kaplan, whose portfolio lacked a bar review course.
"On information and belief, when BAR/BRI learned of the planned divestiture of West Bar to Kaplan, an executive of BAR/BRI contacted an executive at Kaplan, wherein they secretly agreed to a per se illegal market division in which BARIBRI agreed to withdraw certain exam preparation courses, including LSAT courses, from the market in which Kaplan was the dominate competitor. Kaplan, in turn, agreed not to enter the full service bar review business and to withdraw promptly from its agreement to acquire the pertinent assets of West Bar. This market division was kept secret from the general public, including members of the Class herein, until a lawsuit filed on April 29, 2005 alleged the existence of the market division agreement.
"After said secret agreement was entered into, West Publishing transferred West Bar's assets to BAR/BRI, including various bar review course materials. Absorption of West Bar's business into the already dominate BARIBRI eliminated substantial actual competition from the bar review course market. Without substantial competition, BAR/BRI's net prices per student then increased substantially in most states.
"Likewise, BAR/BRI's withdrawal from the LSAT preparatory course market eliminated a competitor with sufficient resources to challenge Kaplan's dominant position. Kaplan has controlled at least 50 percent of the LSAT test preparation review course market during the relevant period and is the only company offering full-service LSAT preparation courses on the national level. Eliminating BAR/BRI from the competitive landscape allowed Kaplan to continue its domination of the full service LSAT test preparation market."
As a result, Kearse says, Kaplan remained the "only company offering full-service LSAT preparation courses at the national level" - more than three times the size of the second-most popular course, The Princeton Review's.
Kearse claims that a class action filed in October 2006, Rodriquez v. West Publishing Corporation and Kaplan, Inc., blew the lid off the secret agreement, and contained an allegation of unlawful market allocation. That case was settled for $49 million.
"The Rodriguez settlement did not purport to cover the effect of the market allocation agreement upon the LSAT preparation market, or to release the claims of the Plaintiff and the Class in this action," Kearse's complaint states.
Since that case, Kearse says, Kaplan withdrew from the agreement and acquired two companies to provide courses for the Multistate Bar Exam: Preliminary Multistate Bar Review and the Study Group.
The proposed class of plaintiffs includes all of Kaplan's LSAT students from August 1997 to October 2006. Kearse estimates "there are, at minimum, thousands of members of the class and that their identities can be readily ascertained from Defendants' books and records."
Kearse is represented by Joe Whatley with Whatley Drake & Kallas.