Class Record Sales

Text (OCR of the scan at left; may contain errors)

In vue Marrer or CLASS RECORD SALES ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 7696. Complaint, Dec. 18, 1959—Decision, Feb. 24, 1960 Consent order requiring a Los Angeles manufacturer of phonograph records to cease disbursing concealed ‘“payola’—payment of money or other valuable consideration—to disc jockeys of radio and television programs to induce “exposure”’—playing of a record day after day, and several times a day— and promotion of certain of its records.

Decision 56 F.T.C.

Mr. John T. Walker and Mr. James H. Kelley for the Commission.

Mr. Benjamin T. Goodman, of Los Angeles, Calif., for respondents.

Initia, Decision sy J. Ear Cox, Heartne Examiner The complaint charges respondents, who are engaged in the manufacture, sale and distribution of phonograph records to independent distributors for resale to retail outlets and jukebox operators, with violation of the Federal Trade Commission Act, in that, alone or with certain unnamed record distributors, they have negotiated for and disbursed “payola,” i.e., the payment of money or other valuable consideration to disk jockeys of musical programs on radio and television stations, to induce, stimulate or motivate the disk jockeys to select, broadcast, “expose” and promote certain records in which the respondents are financially interested, on the express or implied understanding that the disk jockeys will conceal, withhold or camouflage the fact of such payment from the listening public.

After the issuance of the complaint, respondents, their counsel, and counse] supporting the complaint entered into an agreement containing consent order to cease and desist, which was approved by the Director and an Assistant Director of the Commission’s Bureau of Litigation, and thereafter transmitted to the hearing examiner for consideration.

The agreement states that respondent. Class Record Sales is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its principal office and place of business located at 8617 West Pico Boulevard, Los Angeles 19, California, and that individual respondent Leon Rene is the president of the corporate respondent. and formulates, directs and controls the acts and practices of said corporate respondent, his address being the same as that of the said corporate respondent.

The agreement. provides, among other things, that respondents admit all the jurisdictional facts alleged in the complaint, and agree that the record may be taken as if findings of jurisdictional] facts had been duly made in accordance with such allegations; that the record on which the initial decision and the decision of the Commission shall be based shall consist solely of the complaint and this agreement; that the agreement shall not become a part of the official record unless and until it. becomes a part of the decision of the Commission; that the complaint may be used in construing the CLASS RECORD SALES ET AL. 961 959 Order terms of the order agreed upon, which may be altered, modified or set aside in the manner provided for other orders; that the agreement is for settlement purposes only and does not constitute an admission by respondents that they have violated the law as alleged in the complaint; and that the order set forth in the agreement and hereinafter included in this decision shall have the same force and effect as if entered after a full hearing. Respondents waive any further procedural steps before the hearing examiner and the Commission, the making of findings of fact or conclusions of law, and all of the rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance with the agreement.

The order agreed upon fully disposes of all the issues raised in the complaint, and adequately prohibits the acts and practices charged therein as being in violation of the Federal Trade Commission Act. Accordingly, the hearing examiner finds this proceeding to be in the public interest, and accepts the agreement containing consent order to cease and desist as part of the record upon which this decision is based. Therefore, It ts ordered, That respondent Class Record Sales, a corporation, and its officers, and Leon Rene, individually and as an officer of said corporation, and respondents’ agents, representatives and employees, directly or through any corporate or other device, in connection with phonograph records which have been distributed, in commerce, or which are used by radio or television stations in broadcasting programs in commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Giving or offering to give, without requiring public disclosure, any sum of money or other material consideration, to any person, directly or indirectly, to induce that person to select, or participate in the selection of, and the broadcasting of, any such records in which respondents, or either of them, have a financial interest of any nature;

2. Giving or offering to give, without requiring public disclosure, any sum of money, or other material consideration, to any person, directly or indirectly, as an inducement. to influence any employee of a radio or television broadcasting station, or anv other person, in any manner, to select, or participate in the selection of, and the broadcasting of, any such records in which respondents, or either of them, have a financial interest of any nature. There shall be “public disclosure” within the meaning of this order, by any employee of a radio or television broadcasting station, or any other person, who selects or participates in the selec- Decision 56 F.T.C.

tion and broadcasting of a record when he shall disclose, or cause to have disclosed, to the listening public at the time the record is played, that his selection and broadcasting of such record are in consideration for compensation of some nature, directly or indirectly, received by him or his employer.

DECISION OF THE COMMISSION AND ORDER TO FILE REPORT OF COMPLIANCE Pursuant to Section 3.21 of the Commission’s Rules of Practice, the initial decision of the hearing examiner shall, on the 24th day of February, 1960, become the decision of the Commission; and, accordingly :

It ts ordered, That the above-named respondents shall, within sixty( 60) days after service upon them of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which they have complied with the order to cease and desist.