Starday Recording & Publishing Co., Inc.

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

IN THE ~1A TTER OF ST AR.DA Y RECORDING & PUBLISI-IING CO., INC., ET AL. CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE CO2\DIISSION ACT Docket 7886. Complaint, May 1960-Decision, Sept. 29, 1960 Consent order requiring manufacturers of phonograph records in Madison, Tenn., to cease giving concealed payola to disc jockeys or other personnel of radio and television programs to induce frequent playing of their records in order to increase 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 Starday Recording &; Publishing Co. , Inc. , a corporation, Starday International Sales Company, Inc. , a corporation, and Donald F. Pierce, individually and as an officer of said corporations, 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 compla.int stating its charges in that. respect as follows: PARAGK-\PI-I 1. Respondents Starday Recording Publishing Co. Inc., and Starday International Sales Company, Inc., are both corporations organized, existing and doing business under and by virtue of the laws of the State of Tennessee. The address of their principal office and place of business is P.O. Box 115, :Madison, Tenn. respondent Donald F. Pierce is president of both of the corporate respondents and formulates, directs and controls the policies acts and practices of both of said corporations, including the acts 640968-63- , , ,, 802 FEDERAL TRADE COMl\lission DECISIONS Complaint 57 F.

and practices set out herein. The address of the individual respondent is the same as that of the corporate respondents. P.-\R. 2. Respondents are now, and for some time last past have been, engaged in the manufacture, distribution and sale of phonograph records to inde,penclent distributors for resale to retail outlets and jukebox 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 manufacture~ sell and distribute, when sold, to be shipped from their place of business in the State of Tennessee, to purchasers thereof located in various other States of the United States~ and maintain and at all times mentioned herein have maintained, a subst,antial 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 their business, at. all times mentioned herein, the respondents have been, and are now, in substantial competition, in commerce, with corporations, firms and individuals in the manufacture, sale and distribution of phonograph records.

PAn. 4. After"'\V ordel "'\Var IL when telm-ision and radio stations shifted from "live." to recorded performances for much of their programming, the production, distribution an(l sale of phonograph records emerged as an important. factor in the musical industry, with a sales volume of approximately $400 000 000 in 1D58. 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 1.0 ten times a day, substa, tially increase the sales of those records so "exposed." Some record manufacturers and distributors obtained and insured the "exposure of Gertain records in ",which they "were financially interested,d by disbursing "pnyola." to individuals authorized to select and "expose records for both radio and television )l'O.!Trams. Payola \ among other things, is the payment. of money or other valuable consideration to elisk jockeys of musical programs on radio and television stations to induce, stimulate or motinlfe the. disk jockey to select, broadcast expose" and promote certain records in which the payer has a, financial interest. Disk jockeys, in consideration for their receiving the payments heretofore described, either directly or by implication: represent to t their listening public. that the records "expo5P(r~ on their broadcasts han' been selected on t,lwi1' personal ('valnn bon of each record' merits or its general popuhrity with the public d1Creas: in truth , STARDAY RECORDING & PUBLISHING CO. , INC. , ET AL. 803 801 Complaint and in fact, one of the principal reasons or motivations guaranteeing the record's "exposure" is the "payola" payoff. PAR. 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 or competition in the following respects:

The respondents alone, or with certain unnamed record manufacturers and/or 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 manufacturers and/or distributors have aide,d 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. 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 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 n.foresaid acts, i)ractices and methods have the capacity and tendency to mislead and deceive the public, and to hinder, restrain and suppress competition in the manufacture, sale ::md distribution :l11cl/or the. offering for sale, sale ancl distribution of phonograph reeorcls, nnd to divt'Tt trade unfairly to respondents from their competitors, and substantial injury has thereby been clone and may continue to be done to competition in commerce. PAR. 7. 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 Dedsion 57 F.T:C.

deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

1111' . John T. lValker and lil'/'. James H. Kelley for the Commission. Mr. Harlan Dodson, Jr. of Nashville, Tenn., for respondents. INITIAL DECISION BY 'VILLI.AM L. PACK , HEARING EXAMINER The complaint in this matter charges 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 to be withheld from the public. An agreement has now been entered into by respondents and counsel supporting the complaint. which provides, among other things, that respondents admit all of the jurisdictional allegations in the complaint; that the record on which the initial decision and the decision of the Commission shall be based shall consist solely the complaint and agreement; that the inclusion of findings of fact and conclusions of law in the decision disposing of this matter waived, together with any further procedural steps before the hearing examiner and the Commission; that the order hereinafter set forth may be entered in disposition of the proceeding, such order to have the same force and effect as if entered after a full hearing, respondents specifically waiving any and all rights to challenge or contest the validity of such order; that the order may be altered modified, or set aside in the manner provided for other orders of the Commission; that the complaint may be used 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 order issued:

1. R.respondents Starday Recording &; Publishing Co. , Inc. , and Starchy International Sales Company, Inc., are both Tennessee corporations with their office and place of business located at :Madison Tenn. Respondent Donald F. Pierce is president of both corpontte respondents and formulates~ directs and controls the policies, acts STARDAY RECORDING & PUBLISHING CO. , INC. , ET AL. 805 801 Decision and practices of both of said corporations. The address of the individual respondent is the same as that of the corporate respondents. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER 1 t is ordered That respondents Starday Recording & Publishing Co., Inc., a corporation, Starchy International Sales Company, Inc., a corporation, and their officers, and Donald F. Pierce, individually and as an officer of said corporations, 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 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 respondents, or any 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 any of them, have a financial interest of any nature. There shan be "public disclosure" within the meaning of this order, by any employee of a radio or television broadcasting station or any other person, who sele,cts 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 re,cord 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 COl\UnSSION AND ORDER TO FILE REPORT OF COMPLL\NCE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner sha1J , on the 29th day of COll11)laint 57 F.rI'. September 1960 become the decision of the Commission; and, accordingly :

It is ordered That respondents herein 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.