Robert Field doing business as Pacific Record Distributors

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IN THE :MATTER OF ROBERT FIELD DOING BUSINESS AS PACIFIC R.ECOR,D DISTRIBUTORS CONSENT ORDER~ ETC.~ IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 7876. Complaint, May 1960-Decision, Sept. 1960 Consent order requiring a Los Angeles distributor of phonograph records to cease giving concealed payola to disc jockeys or other personnel of radio and television programs to induce frequent playing of its records to increase its sales.

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 Robert Field, an individual doing business as Pacific Record Distributors, here.inafter referred to as respondent, has violated the provisions of said Act, and in respectit appearing to the Commission that a proceeding by it thereof would be. in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. Respondent Robert Field is an individual doing business as Pacific Record Distributors with his principal office. and place of business located at 2663 vV. Pico Boulevard, Los Angeles Calif.

PAR. 2. Respondent is now, and for some time last past has been engaged in the offering for sale, sale and distribution of phonograph records as an independent distributor for se.veral record manufacturers to retail outlets and jukebox operators in various States of the United States.

, Complaint 57 F.

In the course and c.conduct of his business, respondent now causes and for some time last past has caused, the records he distributes when sold, to be shipped from his place of business in the State of California, to purchasers thereof located in various other States of the United States, and maintains, and at all times mentioned herein has maintained, a substantial course of trade in phonograph records in commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 3. In the course and conduct of his business, at all times mentioned herein, respondent has been, and is now, in substantial competition, in commerce, with corporations, firms and individuals in the sale and distribution of phonograph records. PAR. 4. After ",V orld 1Var 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 factor in the musical industry with a sales 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 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 financially 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 jockeys to select, broadcast expose" and promote certain records in which the payer has a direct 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's merits or its general popularity with the public, whereas, in truth and in fact one of the principal reasons or motivations guaranteeing the record' exposure" is the "payola" payoff.

PAR. 5. In the course and conduct of his business in commerce during the last several years, the respondent has engaged in unfair and deceptive acts and practices and unfair methods of competition in the following respects:

The respondent alone, or with certain unnamed record manufacturers, negotiated for and disbursed "payola" to disk jockeys broadcasting musical programs over radio or television stations broad- , PACIFIC RECORD DISTRIBUTORS 573 571 Det: i:-::ion casting across State lines, or to other personnel who influence the selection of the records "exposed" by the disk jockeys on such programs, or to radio stations.

Deception is inherent in "payola" inasmuch as it in volves the payment of a consideration on the express or implied understanding that the disk jockey will conceal, withhold or camouflage SU'c11 fact from the listening public.

The respondent, by participating individually or in a joint effort with certain collaborating record manufacturers, has 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 personnel which select or participate in the selection of the records used on such broadcasts, or to radio stations. Thus payola" is used by the respondent 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 public to purchase the "exposed" records which they otherwise might 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. 6. 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 offering for sale, sale and distribution of phonograph records, and to divert trade unfairly to the respondent from his competitors, and substantial injury has thereby been done and may continue to be done to competition in commerce.

PAR. 7. The aforesa.id acts and practices of respondent, as alleged herein: were and are all to the prejudice and injury of the public and of respondent's competitors and constitute unfair and deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act. Mr. John T. Walke1? and Mr. James H. lielley for the Commission. Respondent pro Be.

INITIAL DECISION BY LOREN H. LAUGHLIN , I-IEARING EXAMINER The Federal Trade Commission (sometimes also hereinafter referred to as the Commission) on ~fay 3, 1960, issued its complaint herein, charging the above-named respondent, who is engaged in the offering for sale, sale and distribution of phonograph records as an , 574 FEDERAL TRADE CO:MMISSION DECISIONS Decision 57 F.

independent distributor for several record manufacturers to retail outlets and jukebox operators in various states or the United States with violation of the Federal Trade Commission Act, in that respondent, alone or with certain unnamed record manufacturers, has negotiated ror 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 respondent is financially interested, on the express or implied understanding that the disk jockeys will conceal, withhold or camouflage the fact or such payment from the listening public. Respondent was duly served with process.

On August 1, 1960, there was submitted to the undersigned hearing examiner of the Commission for his consideration and approval an Agreement Containing Consent Order To Cease And Desist " which had been entered into by respondent and counsel supporting the complaint, under date of July 26 , 1960, subject to the approval or the Bureau of Litigation or the Commission, which had subsequently duly approved the same.

On due consideration or such agreement, the hearing examiner finds that said agreement, both in form and in content, is in accord with S 3.25 of the Commission s Rules of Practice for Adjudicative Proceedings, and that by said agreement the partices have specifically agreed to the following matters:

1. Respondent Robert Field is an individual doing business as Pacific Record Distributors, with his principal office and place or business located at 2663 'V. Pico Boulevard, Los Angeles, Calif. 2. Respondent admits all the jurisdictional facts alleged in the complaint and agrees that the record may be taken as if findings of jurisdictional facts had been duly made in accordance with such allegations.

3. This agreement disposes of all of this proceeding as to all parties. 4. Respondent waives:

(a) Any further procedural steps before the hearing examiner and the Commission;

(b) The making or findings or fact or conclusions of law; and (c) All of the rights he may have to challenge or contest the validity of the order to cease and desist entered in accordance with this agreement.

5. The record on which the initial decision and the decision or the Commission shan be based shall consist solely of the complaint and this agreement.

6. This agreement shall not become a part of the official record unless and until it becomes a part or the decision of the Commission. PACIFIC RECORD DISTRIBUTORS 575 5i1 Order 7. This agreement is for settlement purposes only and does not constitute an admission by respondent that he has violated the law as alleged in the complaint.

8. The following order to cease and desist may be entered in this procee.ding by the Commission without further notice to respondent. when so entered it shall have the same force and effect as if entered after a full hearing. It may be altered, modified or set aside in the manner provided for other orders. The complaint may be used in construing the terms of the order.

Upon due consideration of the complaint filed herein and the said " the Agreement Containing Consent Order To Cease And Desist latter is hereby approved, accepted and ordered filed. The hearing examiner finds from the complaint and the said "Agreement Containing Consent Order To Cease And Desist" that the Commission has jurisdiction of the subject matter of this proceeding and of the responde,nt herein; that the complaint states a legal cause for complaint under the Federal Trade Commission Act against the respondent, both generally and in each of the particulars alleged therein; that this proceeding is in the interest of the public; that the following order as proposed in said agreement is appropriate for the just disposition of all of the issues in this proceeding as to an of the parties hereto; and that said order therefor should be, and hereby is entered as follows:

It is ordered That respondent Robert Field, an individual doing business as Pacific Record Distributors, or under any other name or names, and respondent's agents, representatives and employees, directly or through any corporate or other.r device, in connection with orphonograph records which have been distributed, in commerce, ,,~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 respondent has a financial interest of any nature; (2) Giving or offering to give, without requiring pub~ic 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 flny manner, to select, or participate in the selection of, and the broadcasting of, any such records in which respondent has a financial interest of any nature.

576 FEDERAL TRADE CO:Ml\HSSION DECISIONS Complaint 57 F.

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 Co~Bnssrox .AND ORDER TO FILE REPORT OF CO1\IPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice, the initial decision of the hearing examiner did, on the 7th days of September 1960, become the decision of the Commission; and, accordingly :

It is orde7' That respondent Robert Field, an individual doing business as Pa,cific Record Distributors, shall, within sixty (60) days after service upon him of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which he has complied with the order to c.ease, and desist.