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IN RE MAGAZINE ANTITRUST LITIGATION

February 5, 2004.

In Re: Magazine Antitrust Litigation


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 separate order.

I. BACKGROUND

  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 Circulations Page 2

  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 Page 3 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 on Page 4 their subscription sales. Even when agents are involved, the magazines are generally ...


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