Two Utah universities accused of competing unfairly with local businesses

Jul 9, 2013

A report released Monday from the Office of the Legislative Auditor General accuses state institutions of higher education of unfair competition with the private sector.

The legislative audit says universities across the state are violating rules set by the Utah Board of Regents and the Universities themselves that should limit competition. The Board of Regents policy R555 allows for only limited sales of goods by universities to the public and prohibits advertising to the public.

The audit reads, “Business enterprises operated by colleges and universities have advantages over private businesses, making direct competition concerning to some in the private sector.”  Some of these advantages include special tax exemptions and housing in taxpayer supported facilities.

The audit focused on the University of Utah’s Red Zone Stores, which sell U of U merchandise off-campus, as well as the University Inn and Conference Center at Utah State University, which is accused of targeting non-university related visitors and advertising to the general public.

The audit claims that Logan-area hotel owners expressed  USU’s University Inn hurt their businesses by subsidizing their prices, which the University denies.

The Audit recommends  the legislature to pass a law regulating competition and that the Board of Regents provide better oversight and enforcement of current policies as well as an updated policy.

In a written response to the audit, David Buhler from the Utah System of Higher Education said the organization was aware of the sensitivities which come from perceived competition with private businesses. 

“At the same time, I am also very much aware of the pressures non-state funded auxiliaries at our institutions face to earn sufficient revenue to be able to provide important services for the institution’s students, faculty and staff. This is not always an easy balance to achieve,” Buhler wrote.

In an additional written response, the U of U said the Red Zone stores are in compliance with R555 and do not undercut local businesses. The University also stated Red Zone is a self-supporting business.

In a similar statement from USU, officials said the University Inn is a self-supporting enterprise and since its establishment in 1981, other local businesses have opened and were able to compete. Additionally, the University said it provides the public use of its facilities because similar services are not available in the community.

Both Universities say  they are open to policy change, but  they currently follow the guidelines set by the Board of Regents. The Board and the Legislature decide what happens next.