Apollo Records N.Y. Corp.

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which they have complied with the order to cease and desist.. Ix THE J\fA TIER APOLLO RECORDS N.Y. CORP., ET AL.

CONSENT ORDER , ETC. IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COl\f1\fISSION ACT Docket 7915. Complaint, J'1l1te S, 1960-Decision, Sept. 1960 Consent order requiring a New York City distributor of phonograph records to cease giving concealed payola to disc jockeys and other personnel of radio and television musical programs to induce frequent playing of its records in order to increase sales.

CO1\-IPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Apollo Records Y. Corp., a corporation, and :Th1elvin Albert, individually and as an officer of said corporation, hereinafter referred to as respondents have violated the provisions of said Act, and it appearing to the Conm1ission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Apollo Records N.Y. Corp. is a, corporation organized, existing and doing business under and by virtue of the laws of the State of New York, with its principal office and place of business located at 1780 Broadway, in the city of New York, State of New York , APOLLO RECORDS N. Y. CORP. , ET AL. 605 604 Complaint Respondent :Melvin Albert is an officer of the corporate respondent. l-Ie formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent.

PAR. 2. Respondents are now, and for one year last past have been, engaged in the distribution, offering for sale, and sale, of phonograph records to distributors.

PAR. 3. In the course and conduct of their business, respondents now cause, and for some time last past have caused, their said records, when sold, to be shipped from one state of the United States to purchasers thereof located in various other States of the United States, and maintain, and at all times mentioned herein have maintained, a course of trade in said phonograph records in commerce as "commerce" is defined in the Federal Trade Commission Act. PAR. 4. In the course and conduct of their business, and at all times mentioned herein, respondents have been in competition, in commerce, with corporations, firms and individuals in the sale of phonograph records.

PAR. 5. After 'Vorld 'Var II when TV and radio stations shifted from "live " to recorded performances for much of their programming, the production, distribution and sale of phonograph records e-merged as an important factor in the musical industry with a sale.s volume of approximately $400 000 000 in 1958. Record manufacturing companies and distributors ascertained that popular disk jockeys could, by "exposure" or the playing of a record day after day, sometimes as high as 6 to 10 times a day, substantially increase the sales of those records so "exposed." Some record manufacturers and distributors obtained and insured the "exposure of certain records in which they were financially interested by disbursing "payola" to individuals authorized to select and "expose records for both radio and TV programs.

Payola, among other things, is the payment of money or other valuable consideration to disk jockeys of musical programs on radio and TV stations to induce, stimulate or motivate the disk jockey to select, broadcast expose" and promote certain records in which the payer has a financial interest.

Disk jockeys, in consideration of their receiving the. payments heretofore described, either directly or by implication, represent to their listening public that the records "exposed" on their broadcasts have been selected on their personal evaluation of each record' merits or its general popularity with the public, whereas, in truth , 606 FEDERAL TRADE COMJ.\IISSION DECISIONS Complaint ;37 F. and in fact, one of the principal reasons or motivations guaranteeing the record's "exposure" is the "payola" payoff. PAR. 6.. In the course and conduct, of their business, in commerce, during the last several years, the respondents have engaged in unfair and deceptive acts and practices and unfair methods of competition in the following respects:

The respondents alone or with certain unnamed record distributors negotiated for and disbursed "payola" to disk jockeys broadcasting musical programs over radio or television stations broadcasting across state lines, or to other personnel who influence the selection of the records "exposed" by the disk jockeys on such programs.

Deception is inherent in "payola" inasmuch as it involves the payment of a consideration on the express or implied understanding that the disk jockey will conceal, withhold or camouflage such fact from the listening public.

The respondents by participating individually or in a joint effort with certain collaborating record distributors have aided and abetted the deception of the public by various disk jockeys by controlling or unduly influencing the "exposure" of records by disk jockeys with the payment of money or other consideration to them, or to other pe,rsonnel which select or participate in the selection of the records used on such broadcasts.

Thus payola~' is used by the respondents to mislead the public into believing that the records "exposed" ,,"ere the independent and unbiased selection of the disk jockeys based either on each record' merit or public popularity. This deception of the public has the capacity and tendency to cause the public to purchase the "exposed" records which they might otherwise not have purchased and also to enhance the popularity of the "exposed" records in various popularity polls, which in turn has the capacity and tendency to substantially increase the sales of the "exposed" records. PAR. 7. The aforesaid acts, practices and methods have the capacity and tendency to mislead and deceive the public and to hinder~ restrain and suppress competition in the manufacture, sale or distribution of phonograph records, and to divert trade unfairly to the respondents from their competitors and injury has thereby been done and may continue to be done to competition in commerce. PAR. 8. The aforesaid acts and practices of respondents, as alleged herein, were and are all to the prejudice and injury of the public and of respondents' competitors and constitute unfair and deceptive acts and practices and unfair methods of competition in , APOLLO RECORDS N. Y. CORP., ET AL. 607 GO4 Dedsion commerce \within the intent and meaning of the Federal Trade Commission Act.

Harold A. Kennedy, Esq. , and Arthur Wolter, Jr. Esq., for the Commission;

Johnson Zimbalist by 8a1nu.el A. Zi1nbalist Esq., of New York, N. , for respondents.

INITIAL DECISION BY ROBERT L. PIPER, HEARING EXA1\HNER The Federal Trade. Commission on June 3 , 1960, issued its complaint against the above-named 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, charging them with violation of the Federal Trade Commission Act, in that respondents alone or with certain unnamed record distributors, have negotiated for and disbursed "payola " i. , 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 respondents are financially interested, on the express implied understanding that the disk jockeys will conceal, withhold or camouflage the fact of such payment from the listening public. Respondents appeared and entered into an agree.ment dated July , 1960, containing a consent order to cease and desist, disposing of all the issues in this proceeding without further hearings, which agreement has been duly approved by the Director, Associate Director, and Assistant Director of the Bureau of Litigation. Said agreement has been submitted to the undersigned, heretofore duly designated to act as hearing examiner herein, for his consideration in accordance. with ~ 3.25 of the R.ules of Practice of the CommlSSlOn.

Respondents, pursuant to the aforesaid agreement, have admitted all of the jurisdictional allegations of the complaint and agreed t hat the rec.ord may be taken as if findings of jurisdictional facts had been made duly in accordance with such allegations. Said agreement further provides that respondents waive all further procedural steps before the hearing examiner or the Commission, including the making of fu1dings of fact or conclusions of law and the right to challenge or contest the validity of the order to cease and desist entered in accordance with such agreement. It has also been ao-reec1 that the record herein shall consist solely of the com- Ordrl" 57 P.

plaint and said agreement, that the agreement shall not become a part of the official record unless and until it becomes a part or the. decision or the Commission, that said 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, that. said order to cease and desist shall have the same force and effect as if entered after a full hearing and may be altered, modified, or set aside in the manner provided for other orders, and that the complaint may be used in construing the terms of the order. This proceeding having now come on for final consideration on the complaint and the aforesaid agreement containing the consent order~ and it appearing that the order and agreement cover all of the allegations of the complaint and provide for appropriate disposition of this proceeding, the agreement is he.reby accepted and ordered filed upon this decision and said agreement becoming part or the Commission s decision pursuant to 99 3.21 and 3.25 of the Rules or Practice, and the hearing examiner accordingly makes the following findings, for jurisdictional purposes, and order: 1. R,respondent Apollo Records N.Y. Corp., is a corporation existing and doing business under and by virtue of the laws of the State of New York, with its office and principal place of business located at 1780 Broadwa,y, in the city of New York, State of Ne-w York.

Respondent J\'Ielv-in Albert is an officer of the corporate respondent. He formulates, directs, and controls the acts and practices of the corporate respondent. His address is the same as that of the corporate respondent.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents hereinabove named. The complaint states a cause of action against said respondents under the Federal Trade Commission Act, and this proceeding is in the interest of the public. Therefore It is o-rdered That respondents Apollo Records Y. Corp. , a corporation, and its officers, and :Melvin Albert, individually and as an officer of said corporation, and respondents' agents ~ representatiyes and employees, directly 01' through any corporate 01' 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 defined in the Federal Trade Commission Act, do forthwith cease and desist from:

(1) Giving or offering to give, without requiring public dise1osure, any sum of money or other materia.1 consideration, to any UNIVERSAL CARPET DISTRIBUTING CO. INC. , ET AL. 609 604 Syllabus to select, orperson, directly or indirectly, to induce that person suchparticipate in the selection of, and the broadcasting of, any records in \which respondents, or .either of them, have a financial interest of any nature;

without requiring public dis- (2) Giving or offering to give, closure, 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 stain the selectiontion, or any other person, who selects or participates or cause toand broadcasting of a record when he shall disclose, 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 CO~DIISSION AND ORDER TO FILE REPORT OF COl\IPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shall, on the 13th day of September 1960 become the decision of the Commission; and accordingly:

I t is 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.