Tuition Plans Are Discussed by Preschools

By BARBARA MARTINEZ And JOSEPH DE AVILA

Some Manhattan preschools trade information about planned tuition increases before setting rates each year, a practice that some lawyers say is potentially problematic.

Officials at four of 17 preschools contacted by The Wall Street Journal said they discuss future tuition increases but denied colluding to set prices, which would be against the law.

In December, Liz Hirsch, the director of the 14th Street Y, sent an email to 58 nursery schools that said, "I am wondering what folks may be thinking about in terms of percentage of rate increases if any for next year."

Ms. Hirsch said one recipient quickly told her that exchanging such information would be illegal and the discussion ended there. Eventually, the 14th Street Y raised tuition by 4%. It will cost $8,580 for two half days a week and $15,498 for five full days in the 2010 school year for members of the Y.

Ms. Hirsch, who wrote the email in December surveying competitors' plans, said she wasn't aware that asking other schools about their tuition could pose a problem. After Ms. Hirsch found out, she deleted any responses without reading them, said a spokeswoman for the Educational Alliance, the umbrella organization that includes the 14th Street Y.

The email wasn't an isolated incident, however. Ellen Offen, co-director of the Park Preschool, near City Hall, says tuition is a topic that comes up regularly when school directors in Lower Manhattan meet. Sometimes directors will object discussing the subject, she said. "They try to put a stop to it, they say that's collusion," she said. But when those objectors aren't around, "we talk about it. Sometimes one person will send out a survey" via email to get information on future tuition plans.

Park boosted tuition 5% starting in September to a range of between $6,500 and $19,000.

At the Blue School, on the Lower East Side, which currently goes from preschool to first grade, co-founder Matt Goldman said, "Absolutely we check with other schools." Tuition at the school increased 4% for the 2010 school year. In a subsequent interview, Mr. Goldman denied ever having had a conversation with another school, saying, "That just never happened."

State and federal laws prohibit competitors from agreeing to set prices together. Even discussing the future direction of prices is risky, say antitrust lawyers, because having information about a competitor's plans might affect the final decision a given school reaches.

"If these persons reached agreements on price, it is unlawful," says Stephen Calkins, a former general counsel to the Federal Trade Commission and an expert on antitrust law. "If they failed to reach agreement, it is still inappropriate and ill-advised."

A spokesman for the state attorney general's office said "it would be inappropriate" to comment without more details.

The Blue School came to its tuition prices by checking the websites of the two highest priced schools in New York and the two lowest priced schools, Mr. Goldman said in the second interview. The school chose a tuition that was in the middle of that range.

Mr. Goldman said that his previous statement about talking with other schools about tuition was a "miscommunication."

Both Ms. Offen and Mr. Goldman said their price increases stemmed from costs and a desire to give teachers raises, not what they learned from other schools.

Marisa Goldsmith, director at the Philip Coltoff Center at Greenwich Village, a school of the Children's Aid Society, also said she had price-increase conversations with other directors, "We don't think of each other as competitors," she said. The school is raising tuition 10% in the fall.

Most of the preschools contacted by The Wall Street Journal denied discussing prices with competitors. "We don't ask, 'What are you doing next year?'" said Ellen Ziman, of First Presbyterian Church Nursery School in Greenwich Village. Instead, she says she only talks about tuition increases with others "until after the fact."

"We do not discuss rates with the other directors," said Linda Adams, communications director of the Educational Alliance, the umbrella group for the 14th Street Y preschool. She said that the group's senior executive team makes all final decisions on tuition and that Ms. Hirsch was asked for her recommendation. Ms. Adams added that the 4% tuition increase was a result of an estimated 4% increase in costs, including a 4% raise to teachers.

"If private preschools are talking to each other about pricing it's more unfair than if other businesses do it," said Michael Abrams, the father of a 3-year-old at the 14th Street Y.

"You have a greater interest in staying at one place for more than one year," he said, making it difficult to move a small child to a different school if you object to their business practices.

Average nursery school prices for an academic year in Manhattan range between $8,000 and $30,000, and price increases average 3% to 6% a year, said Victoria Goldman, author of The Manhattan Directory for Private Nursery Schools.

She said she wasn't surprised that nursery schools were consulting each other, but added that hikes are motivated by rising health-care costs, salaries and rent.

"No one is getting rich running a nursery school," Ms. Goldman said.

Write to Barbara Martinez at Barbara.Martinez@wsj.com and Joseph De Avila at joseph.deavila@wsj.com