Hull Records, Inc.

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in which they have complied with the order to cease and desist. l' HE l\fA TTR OF HULL RECORDS, INC., ET AL.

CONSENT ORDER , ETC. , IN REGARD TO Tile ALLEGED VIOLATION OF THE FEDERAL TI\DE co nrrssIO!- ACT Docket 7829. Complaint, Mar. 1960-Decision, July 1960 Consent order requiring New York City manufacturers of phonograph records to cease giving concealed "payola -money or other material consideration to disc jockeys of television and radio programs or others to induce broadcasting of their records.

HULL RECORDS , INC. ) ET AL. 249 248 Complaint COMPLAINT 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 lIull Records, Inc. a corporation, and Wiliam Kaslin, and Blanche KasJin, individuany and as offcers of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission 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:

P ARAGRAIJH 1. Hull R.ecords, Inc., is a corporation organized existing and doing business under and by virtue of the laws of the State of N cw York, with its principal offce and place of business located at 1595 Broadway, New York, N.

Respondents Wiliam Kaslin and BJaTlche KasJin are respectively President and Secretary of the respondent corporation and formulate, direct and control the acts and practices of said respondent corporation, including the acts and practices herein set out. The address of the individual respondents is the same as that of said corporate respondent.

PAR. 2. Respondents are now, and for some time last past have been, engaged in the manufacture, distribution and sale of phonograph records to independent distributors for resale to retail outlets and jukebox operators in various States oT the United States. In the course and conduct of their business, respondents now cause, and for some time last past have caused, the records they manu1acture, sell and distribute, when sold, to be shipped from their place of business in the State of New York, to purchasers thereof located in various other States of the United States and maintain and at all times mentioned herein have maintained a substantial course of trade in phonograph records in commerce, as "commerce is defined in the Federal Trade Commission Act. PAll. 3. In the course and conduct of their business, at a1l times mentioned herein, respondents have been, and are now, in substantial competition in commerce, with corporations, firms and individuals in the mufacture sale and distribution of phonograph records.

PAll. 4. After World ,'Tar II when television and radio stations shifted from "live" to recorded performances for much of their programming, the production, distribution and sale of phonograph records emerged as an important facior in the musical industry with a sales volume of approximately $400 000 000 in 1958. , , Complaint 57 F.'l.

H,ecotd 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 six to ten 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 fuml1cially interested by disbursing "payola" to individuals authorized to select and "expose records for both radio and television programs. Payola, among other things is 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 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 and in fact, OTIe of the principal reasons or motivations guaranteeing the record's "exposure" is the "payola'\ payoff. PAn. 5. 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 broadbroad-casting musical programs over rfldio or television stations, casting across state lines.

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

The respondents by participating individually or in a joint effort witll 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 said disk jockeys with the payment of money or other consideration to them. Thus payola" is used by the respondents to mislead the public into believing that the records "exposed" were the independent and unbiased selections 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 pubhc to purchase the "exposed" , also records which t.hey otherwise might not have purchased and to enhance the popularity of tlle "exposecl'\ re, cords in various popu- HULL RECORDS , IKC., ET AL. 251 248 Dccision Jarity polls, which in turn has the capaeity and tendency to substantially increase the sales of the "exposed" records. PAIL 6. The aforesaid acts and practices and methods have the. capacity and tendency to mislead and deceive the public and to hinder, restrain and suppress competition in the manufacture, distribution and sale of phonograph reeords, and to divert trade unfairly to the respondents from their competitors and substantial injury has thereby been done and may continue to be done to eompetition in corrercc.

PAR. 7. The aforesaid acts and practices of respondents, as alleged herein, were and are a11 to the prejudice and injury of the public and of respondents' competitors and constitute unfair and deceptive act.s and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

Mr. John T. Walker and Mr. James II. Kelley for the Commis- SlOIl.

Hespondents, for themselves.

INITIAL DECISION BY .J. EARI, Cox, IIEARING EXAlfIXEH The complaint charges respondents, who are engaged in the manufacture, distribution and sale 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 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 fmancially interested, on the express or implied understanding that the disk jockeys will conceal, withhold or eamouflage the fact of such payment from the listening public.

After the issuance of the complaint, respondents and counsel supporting the complaint. entered into an agreement containing consent order to cease and desist, which was approved by the Director, Associate Director and Assistant Director of the Commission s Bureau of I..tigation, and thereafter transmitted t.o the hearing examiner for consideration.

The agreement states that respondent Hull Records, Inc., is a corporation organized, existing a,nd doing business under and by virtue of the laws of the State of New York, with its principal offce and place of business located at 1595 Broadway, New Yark 252 FEDERAL 1'TRADE COMMISSION DECISIO:\S Or' del' 57 F.

, and that respondents Wmiam Koslin and Blanche KasEn are, respectively, President and Secretary of the respondent eorpomtion and formulate, direct and control the acts and practices of said respondent corporation, their address being thc same as that of said corporate respondent.

The agreement provides, among other things, that respondents admit all the jurisdictional facts aneged 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 anegations; that the record on which the initial decision and the decision of the Commission shan be based shall consist solely of the complaint and this agreement; that the agreement shall not become a part of the oflicial 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 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 aneged in the complaint; and that the order set forth in the agreement and hereinafter included in this decision shall have the same force and effed as if entered after a full hearing. Respondents waive any further procedural steps before the Hearing Examiner and the Commission, t.he making of findings of fact or conclusions of Jaw, and all of t.he rights illCY 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 a1l 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 FIearing Examiner finds this proceeding to be in the public interef=t, and accepts the agreement conta.ining conSfmt order to ee.asc and desist as part of the record upon which this decision is based. Therefore It i8 ordered That respondent Hun Records, Inc., a corporation and its offcers, and respondents \Villiam Kaslin and Blanche ICasljn individually and as offcers of said corponltion, and respondents agents, representatives and emp1oyces, directly or through any corporatc 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 prognnns in commerce, as "commcree" is defined in the Federal Trade Commission Act, do forth- \\'ith ce,false and desist from:

COKTIKENTAL SCHOOLS ) INC") ET AL. 253 Syllabus (1) Giving or offering to give, without requiring puhlic 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 broadcasbng of, any such records in which respondents, or any of them, have a financial interest of any nature;

(2) Giving or offering to give, without requiring public disclosure, any sum af money, ar 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 broadcasbng of, any such records in which respondents or any of them, have a financial interest of any nature. There shah 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 considera- Uon for compensation of some nature, directly or indirectly received by him or his employer.

DECISION OF Tile co nIISSION AND ORDER TO FILE REPORT or.' COMPUANCE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shah, on the 19th day of July 1960, become the decision of the Commission; and, accordingly:

It is ordered That respondents Hull Records, Inc., a corporation and Wiliam KasJin and Blanche KasJin, individuaHy and as offcers 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 fonn in which they have