The opinion of the court was delivered by: RICHARD CASEY, District Judge
MEMORANDUM OPINION AND ORDER
On June 30, 2000, Plaintiffs Heather Huffman, Kathy Gerlach, and
Michele Grabell filed in this Court a putative class action complaint
asserting claims under the federal antitrust laws against the Hearst
Corporation; Time, Inc.; The Conde Nast Publications, Inc.; The Reader's
Digest Association, Inc.; TV Guide, Inc.; Meredith Corporation; Gruner
Jahr Printing & Publishing Company, Rodale Press, Inc.; Ziff-Davis, Inc.;
Newsweek, Inc.; International Data Group, Inc.; and Magazine Publishers of
America (collectively defendants"). Presently before the Court is a
Proposed Settlement submitted jointly by both parties and a Petition for
the Award of Attorneys' Fees submitted by Plaintiffs, which Defendants
have agreed not to oppose. This memorandum opinion addresses only the
issue of attorneys' fees; the proposed settlement has been approved in a
This suit arises out of industry guidelines adopted by the Magazine
Publishers Association ("TV1PA"), a trade association of consumer
magazine publishers in the United States, and the standards established
by the Audit Bureau of Circulations ("ABC"), an independent audit bureau
consisting of publishers, advertisers, and advertising agencies.
A. The Magazine Publishers Association and the Audit Bureau of
The MPA is the trade association for consumer magazine publishers in
the United States. As of February 1998, it included among its membership
approximately 190 domestic magazine publishing companies that collectively
published approximately 780 magazines. MPA membership includes most of the
larger publishers, whose magazines account for a substantial percentage
of all magazine advertising revenue. The purpose of the MPA is to promote
the magazine industry and to protect its interests.
The Audit Bureau of Circulations ("ABC") is a not-for-profit auditing
organization consisting of publishers, advertisers, and advertising
agencies. All advertisers, advertising agents, newspapers, magazines,
electronic publications and business and farm magazines are eligible for
membership in ABC. The ABC board is made up of thirty-four directors, of
which eighteen are representatives of advertisers and advertising
agencies, eight are representatives of newspapers, four are
representatives of U.S. consumer magazines, and four are representatives
of farm publications, business publications, and Canadian magazine
members. The ABC By-Laws require that the chairman of ABC's board of
directors be a representative of an advertiser or advertising agency.
The stated objectives of ABC are "to issue standardized statements of
circulation data or other data reported by a member, to verify the
figures shown in these statements by auditors' examination of any and all
records considered by the Bureau to be necessary; and to disseminate data
for the benefit of advertisers, advertising agents and others interested
in the advertising and publishing industry." (ABC By-Laws, Article 1,
Jeffries Affidavit ¶ 6). Each Defendant other than the MPA is a
member of ABC, along with most other significant magazine and newspaper
publishers in the United States.
ABC has adopted a detailed set of bylaws and rules that govern, among
other things, the
process of measuring and reporting the circulation of print publications
in the United States. Upon admission to ABC, each member agrees to abide
by ABC's bylaws and rules. Failure to abide by any applicable bylaw or
rule can result in expulsion. Additionally, the bylaws provide that one
publisher can bring charges against another for failure to comply with any
applicable bylaw or rule, resulting in a hearing and adjudication by the
ABC Board of Directors.
B. The Fifty Percent Rule
In 1916, ABC implemented the "50% rule," which provides that a magazine
publisher may not count as part of the magazine's "paid circulation" any
subscription sold to a consumer at a price less than 50% of the "basic"
price of a subscription to that magazine. (ABC Rules § B 1.2.) The "basic"
price is defined as the price "at which the publication may be purchased
by anyone, at any time, for a definite duration." (Id. § B 1.2.) Thus, if
a publisher sells a subscription at less than 50% of the magazine's basic
price, that subscription sale cannot be included in the paid circulation
figures reported to advertisers, on which a publisher's advertising rates
are based. This rule is also used by the U.S. Postal Service in
determining whether a magazine qualifies for preferred postage rates.
Under ABC rules, a magazine publisher whose "unpaid" circulation
exceeds 30% of the magazine's total circulation is classified as a
publication without paid circulation, and must report its circulation
figures to advertisers in a manner that is distinguishable from magazines
with 70% or more paid circulation.
Magazine subscriptions are marketed by the publishers' own employees
and by independent sales agents. Although many publishers promote
subscription sales through their own direct mail marketing and other
methods, there is a large network of independent sales agents that market
magazine subscriptions on behalf of the publishers and earn a commission
their subscription sales. Even when agents are involved, the magazines
are generally ...