^^ Well, that’s completely FALSE as it is indeed illegal and the federal government (which gives many universities money for research grants) would come down heavily on any university that did so, as it’s considered collusion.
In fact, about 15 years, to avoid prosecution from the federal government, Princeton fired it’s entire Admissions staff for “accidentally spying” on Yale’s Admissions records:
http://www.nytimes.com/2002/07/26/nyregion/princeton-pries-into-web-site-for-yale-applicants.html
http://yaledailynews.com/blog/2002/07/25/princeton-officials-broke-into-yale-online-admissions-decisions/
http://articles.chicagotribune.com/2002-08-02/news/0208020195_1_princeton-officials-yale-web-site-princeton-and-yale
http://www.slate.com/articles/news_and_politics/chatterbox/2002/08/hack_me.html