Ascensus LLC is facing federal antitrust litigation in Rhode Island after a company that created a college savings app accused the firm of organizing a monopolistic campaign to push it out of the market.
Filed in the U.S. District Court for the District of Rhode Island, the lawsuit says Ascensus participated in a “longstanding, unlawful, deceptive and anticompetitive” campaign against UNest Holdings, which developed an app for parents of all income levels to invest and save for children’s education.
UNest says Ascensus launched a campaign that would, “undermine UNest’s business model, muscle UNest out of the industry and ultimately monopolize the market.” UNest also argues that Ascensus is a dominant provider of management services to 529 plans and other college savings plans, and that it leveraged that market power to exclude UNest from the CollegeBound 529 plan administered by the Rhode Island Office of the General Treasurer, otherwise known as the RI program.
The lawsuit notes that UNest had first filed suit in Rhode Island state court in November 2019 to prevent Ascensus from terminating UNest’s access to its clients’ accounts in the RI program. UNest had filed suit against both Ascensus and the distributor for the RI program.
While the three entities were able to reach a settlement in the state court action, UNest says Ascensus was unwilling to comply with the settlement’s terms, alleging that Ascensus attempted to block UNest from transferring its clients’ accounts out of the RI program and into the 529 College Savings Plan in New York.
UNest then filed suit in the District of Rhode Island in December 2019 to prevent Ascensus from terminating UNest’s access to its clients’ accounts in the RI program while UNest worked to find a new 529 plan for those accounts. UNest also accused Ascensus of pushing it out of the market to develop its own app to compete with UNest, which Ascensus denied.
However, UNest said in court documents that this denial was false, pointing to the fact that Ascensus debuted its READYSAVE 529 mobile app this February. Along with unveiling a 529 college savings app, UNest says Ascensus’ key account management features, along with its look and feel, were “materially similar” to the UNest app.
As a result, UNest says it was terminated from other states’ 529 plans, can no longer market 529 plan investments to its clients and was forced to change its business model to offering accounts now known as Uniform Transfers to Minors Act (UTMA) accounts. The company says this change “disrupted its growth trajectory, undercut its efforts to raise capital funds based on a fair valuation of the UNest App and caused UNest to lose clients, all resulting in significant financial losses and damages to UNest.”
UNest is seeking damages with interest under Sections 1 and 2 of the Sherman Act, along with Section 6-36-5 of the Rhode Island Antitrust Act. The company is also requesting awards for litigation costs and fees.
In an email response to PLANADVISER, an Ascensus spokesperson said, “We believe the claims are without merit and we intend to vigorously defend against them.”