Portem Distributing, Inc.

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

IN THE MATTER OF PORTEM DISTRIBUTING, mc., ET AL.

CO).TSENT ORDER, ETC., IN REGARD TO THl' ALLEGED VIOLATION Q:' THE FEDERAL TRADE C01.DIISSIQN ACT Docket 7877. Complaint, May 19GO-Decision, July 1960 Consent order requiring ?\Tew York City distributors of phonograph records to ('case giving concenlec1 "payola -money or other material consiuerationto disc jockeys of tcJcvision and radio programs or others to induce broadcasting of their records.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in jt by said Act, the Federal Trade Commission, having reason to believe that Portem Distributing, Inc. , a corporation, and Gladys R. Pare, individually, and as an officer of said corporation, hereinafter.r referred to as respond ents, 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 lEslies its complaint, stating its charges in that respect as follows:

PARAGRAPH 1. Portern Distributing, Inc., 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 Jocated at 601 'West 50th Street, City of Kew York, State of Ne,v York.

Respondent Gladys n. Pa.re is the secretary of said corporate respondent and formulates, directs and controls the acts and pract.ices of said corporate respondent, including the acts and practices set forth herein. The address of this inc1iyidua) n spondent is the same as that of the corporate respondent.

PAR. 2. Respondents ate nmy, and for some time last past have been engaged in the offering for sale, sale and distribution of pllOl1ograph records as an independent distributor for several rec- , (( :330 HDERAL TRADE COMMISSION DECISIONS Com1JJaint 57 F.

ord manufacturers to retail outlets and j111\:ebox operators in various States of 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 dist.ribute when sold, to be shipped Irom their place of business in the State of Npw Yark to purchasers tlwreof located in various other States of the l;nitel1 States, and maintain: and at an times mentioned herein have rnaintained, a substantial course of trade in phonograph records in commerce, as "commerce" is defined in the FBderal Trade Commission Act.

-\R. 3. In the course and conduct of their business, at. an times mentioned h01'C111, respondents have been, and are now, in substanti:11 competition in commerce, with corporations, firms and individuals in the sale and distribution of phonogra.ph re(:ords. u:. . After ,Yorlcl ,Var II \vhen television and radio stations shifted from "live" to recorded performanc.es for much of their programmillg, the production, distribution and sale of phonograph records eml'-rged as an important factor -in the musical industry with a sales volume of approximately $-100 000 000 in lU58. Hecord manufacturing companies and distributors ascertained that popular disk jockeys could, by "exposure" or the playing of a re,cord day after day, sometimes as high as six to ten times a day, substantially inc.reasc the sa.1es of those records so "exposed". Some record manufacturers and distributors obtained and insured the exposure" of certain records in which11 they were financia.lly 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 telcyisicJl st:1lions to induc.e, stimulate or motivate the disk joekeys 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 rpcol'ds "cxposed" on their broadcasts have been selected on 01011' pcrsonal evaluation of each record's merits or its gene.ral popularity with the public whereas, in truth and in fact one of thc principal areas(Jns 01' motiYilt.jolls gua.ranteeing t.he record' s "exposure " is t.he "payola " puyofl'. PAH. 5. In the course and conduct of their business in comnw,rcduring the last several years, the respondent.s have enga.ged in unfair a,nd deceptive ads and practices and unfair methods of competition jn the following respects:

, PORTEM DISTRIBUTING , INC. ) ET AL. 331 329 Comp.Iint The respondents alone, or wlth certa.in unnamed record manufacto disk jockeys broad-turers, negot.iated for and disbursed "payola" casting musical programs over radio or television stations broadcasting across state lines, or to other personnel who influenced the selection of the records "exposed" by the disk jockeys on such programs.

Deception is inherent in "payola" inasmuch as it illvolvesthe payment of a consideration on the express or implied underst.andingthat the disk jockey win conceal, withhold or camouflage such fact from the listening public.

The respondents, by participa6ng individually or in a joint effort with certain collaborating record manufacturers, have aided and abetted the deception of the public by various disk jockeys by controning or unduly influencing the "exposure" of records by disk jockeys with the payment of money or other consideration to them or t.o other personnel which select or participate in the selection of the records llsed on such broadcasts.

Thus payola" is used by the respondents to mislead the public into believing that the records "exposed" were the inc1ependent 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 public to purchase tile "exposed!' records which they otherwise might not have pnrchrtsed and, also, to enhance the popularity of the "exposed" records in various popularity polls, which in turn llRS the capacity and tendency to substantial1 r increase tile sales of the "exposed" rccords. PAR. 6. The aforesaid acts, practices and metho(ls have the capacity and tendency to misle ld and decejve thc public, and to hinder, restrain and suppress competition in Ole offering for sale, sale an(l distribution of phonograph records, and to divert trade unfairly to the respondents from their compehtors, a11l substant.ial injury has therehy been (lone and 111ay continue to be clone to competition in commerce.

PAR. 7. The aforesaid acts and practices of respondents, as al- Jcged lwrein, were and are all to the prejudice and injury of the pl1b1ic anrl of respondents' competit.ors and constitute unfair and deceptive acts and practices and unfair methods 01 competition i.n commerce within the intent and meaning' of the Federal Trade Commission Act.

Kelley for the Commis- 11/T. John T. Walke?' and lift. James H. S1GB.

, for respondents. ilh' /m' ris B. Rauche?' of New York, N. DL'Cision 57 F.

INITIAL DECISION BY WILLlA 'l L. PACK, HEARING EXAMINER The complaint in this matter chaTges the respondents with violation of the Federal Trade Commission Act in the sale and distribution of phonograph records by negotiating for and disbursing payola" (money and other valuable consideration) to disk jockeys broadcasting musical programs, and causing such fact t.o be withheld from the pnblic. An agreement has now been entered into by respondents and counsel supporting the complaint which provides, among other things, that respondents admit a11 of the jurisdictional allegations in the complaint; that the record on which tile initial decision and the decision of the Commission s11all be based shall consist solely of the complaint and agreement; that the inclusion of findings of fact and conclusions of law in the decision disposing of t.his matter is wa.ivec1 , together with any further procedural steps before the hearing examiner and the Commission; that the order hereinafter set forth may be entered in disposition 01 the proceeding, such order to have the same force and effect as if entered aiter a full hearing, respondents specifically waiving any and a1l rights to challenge or contest the validity of such order; that the order may be aJterccl, modified, or set asi(le in the manner providrcl for other orders of the Commission; that the complaint may be Hsed in construing the terms of the order; and 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.

The hearing examiner having considered the agreement and proposed order and being of the opinion that they provide an adequate basis for appropriate disposition of the proceeding, the agreement is hereby accepted, the following jurisdictional findings made, and the following orci?r issued:

1. Hcsponc1ent Portem Distributing, Inc., is a Nc'\Y York corporation with its principal ofrca and place of business located at 601 'Vest 50th Street, New York, K.Y. Individual respondent Gladys R.. Pa.re is the, secretary of sn,id corporate respon(lent and formulates, directs und cont.rolls the acts and practices of said corporate respondent. The a.address of the individual respondent is the same as that of the. corporate respondellt.

2. The Federal Trade Commission has jurisdiction of the subject matter of t.his proceeding and of the respondents: and the proceeding is in the. public interest.

PORTEM DISTRIBUTING , INC.) ET AL. 333 329 Decision ORDER 1 t is Q1'dered That respondents Portcm Distributing, Inc. , a corporation, and its offcers, and Gladys R. Pare, individual11y and as an offcer of said corporation, and respondents' agents, representatives and employee, , 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 sta. tions in broadcasting programs in commerce, as "commerce " is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Giving or otfedng to give, withol1t requiring public disclosure any sum of money, or other material consic1eratjon, to any person directly or indirectly, to induce that person to select, or participate in the selection of, and 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 ill any manner, t.o 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 he " public disclosure" \fithin the lTefming of this order by any clnp10yee of a radio or television broadcasting station or any other person, who selects or participates in the selection a, broadcasting of a record, when he shall disclose, or CD"use 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 hon for compensation of some nature, directly or indirectly, received Gy him or his employer.

DECISION OF THE COI'L\IISSIO), AND ORDER TO FILE HEPORT OF COllIPLIAKCE Pursuant to Section 3.21 of the Commission s Rules of Practice t.he initial decision of the hearing examiner shall, on the 28th day of July 1960, become the decision of the Commission; and, accordingly: It i8 onleted That respondents herein shall wjthin sixty (60) days after service upon them of this order, file 'with the Commission a report in writ.ing sctti.ng forth in detail the manner and form in which they have complied with the oreler to cease and desist. Complaint 57 F.