A & I Record Distributing Co., Inc.

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In the Matrer or A & I RECORD DISTRIBUTING CO., INC., ET AL. CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 7746. Complaint, Jan. 12, 1960—Decision, Feb. 24, 1960 Consent order requiring a Cincinnati, Ohio, distributor of phonograph records to independent distributors for resale, to cease disbursing concealed “payola’—payment of money or other valuable consideration to disc jockeys of radio and television programs—to induce the ‘‘exposure’—playing of a record day after day and several times a day—and promotion of its records. Mr. John T. Walker and Afr. James H. Kelley for the Commission.

Young & Young, by Mr. H. W. Young, of Cincinnati, Ohio, for respondents.

Initia, Decision py J. Fart Cox, Hearing EXaMINnEer The complaint charges respondents, who are engaged in the offering for sale, sale and distribution of phonograph records to independent distributors for resale to retail outlets and jukebox operators in various states of the United States, with violation of the Federal Trade Commission Act, in that respondents, alone or with certain unnamed record manufacturers, have negotiated for and disbursed “payola,” i.e, the payment of money or other valuable A & I RECORD DISTRIBUTING CO., INC., ET AL. 963 962 Decision 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 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 counsel 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 A & I] Record Distributing Co., Inc. is a corporation existing and doing business under and by virtue of the Jaws of the State of Ohio, with its office and principal place of business located at 1000 Broadway, Cincinnati, Ohio, and that individual respondent Isadore Klayman is the president of the corporate respondent, and formulates. directs and controls the acts and practices of said corporate respondent, the address of the individual respondent being the same as that of 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 terms of the order agreed wpon, 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 Jaw, 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 Decision 56 F.T.C.

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, Lt is ordered, That respondents A & I Record Distributing Co., Inc., a corporation, and its officers, and Isadore Klayman, 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 materia] 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 any 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 selection 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 is ordered, That respondents A & I Record Distributing Co., MORTON'S, INC., ET AL. 965 962 Findings Inc., a corporation, and Isadore Klayman, individually, and as an officer of said corporation, 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.