Peacock Record Company, Inc.

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IN THE ~1:ATTER OF PEACOCK RECORD COMPANY, INC.

CONSENT ORDER, ETC.~ IX REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE CO:M:l\HSSION ACT Docket 7901. Compla.int, May 20, 1960-Decision, Sept. 29, 1960 Consent order requiring a manufacturer of phonograph records in Houston, Tex., to cease giving concealed pa~yola to disc jockeys or other personnel 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. Peacock Record Company, Inc., a corporation, hereinafter referred to as respondent has 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:

PARAGRAPH 1. Respondent Peacock l\.ecord Company, Inc. is corporation organized, existing and doing business under and virtue of the laws of the State of Texas, with its principal office and place of business located at 2809 Erastus Street, in the city of I-Iouston, State of Texas.

PAR. 2. Respondent is now, and for some time last past has been engaged in the manufacture and distribution, ofiering for sale ~ and sale, of phonograph records to clistfibutors. PAR. 3. In the course and conduct of its business, respondent now causes, and for some time last past has caused, its said records, "hen sold, to be shipped from one State of the United States to purchasers thereof located in various other States of the United States and in the District of Columbia, and maintains, and at all times mentioned herein has maintained, a snbstnntial course. of trade in said phonograph records in COll11nerce, as ;; C"omml~lce ': is defined jn the I;' e.der~l Trade Commission Act.

PAIL 4. In the course and conduct of its business, and at all times mentioned herein, respondent has been in competition, in eom- , PEACOCK RECORD COMPANY, INC. 813 812 Complaint merce, with corporations, firms and individuals in the sale of phonograph records.

PAR. 5. After 'Vorld vear 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 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 6 to 10 times a day, substantially increase the sales of those reeords 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 payme.nt of money.y 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 rece.iving 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, one of the principal reasons or motivations guaranteeing the record's "exposure" is the "payola" payoff. PAR. 6. In the course and conduct of its 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 distributors negotiated for and disbursed "payola" to disk jockeys broadcasting musical programs over radio or television stations broadcasting influence the selectionacross State lines, or to other personnel who of the records "exposed" by the disk jockeys on such programs. De.ception is inherent in "payola" inasmuch as it involves the payor implied understandingment of a consideration on the express that the disk jockey will conceal, withhold or camouflage such fact from the listening public.

individually or in a joint effort. The respondent by participating with certain collaborating record distributors has aided and abetted the deception of the public by various disk jockeys by controlling or , , Deeision 57 F.

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 respondent. to mislead the public into believing that the records "exposed" were the independent and unbiased selection of the disk jockeys based either on each recorcFs 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 manuf~('ture, sale or distribution of phonograph records, and to divert trade unfairly to the respondent from its competitors and substantia.! injury has thereby been done and may continue to be clone to competition in commerce.

PAR. 8. The aforesaid acts and practices of respondrllt, 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 Trn(le Commission Act.

j11'1' . IJa?' old A. Ifennedy and 31-)'. A1'that 1Fo7teJ': Jr. for the COlllmlgw1O11.

JJf1' . lVilliwn Ii. Scott, Jl' of I-Iouston, Tex., for respondent. INITIAL DECISION BY J. EARL Cox, I-lI':ARING EXAMINER The complaint charges respondent, which is engaged in the manufacture and distribution, offering for sale, and sale of phonograph records to distributors with "violation of the Federal Trade Commission Act, in that respondent, alone or with certain unnamed record distributors, has negotiated for and disbursed "payola", i. , the payment of money or other yaluable 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 re.spondent is fina,ncially interested, on the express or implied understanding that the disk jockeys PEACOCK RECORD COMPANY, INC. 815 812 Order will conceal, withhold or camouflage the fact of such payment from the listening public.

After the issuance of the complaint, respondent, its counsel, and counsel supporting the complaint entered into an agreement containing consent order to cease and desist, which was approved by the Director, Acting Associate Director, and Acting Assistant Director of the COlumission s Bureau of Litigation, and thereafter transmitted to the hearing examiner for consideration. The agreement states that respondent Peacock R.ecord Company, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Texas, with its principal office and place of business located at 2809 Erastus Street, Houston Tex.

The agreement. provides, among other things, that 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; that the record on which the initial decision and the decision of the. Commission shall be based shall consist solely of the complaint and this agreement; that the agreement. shall not become a part of the official record unless and until it becomes a part of the decision of the Comlnission; that the complaint may be used in construing the terms of the order ngreec1 upon, which may be altered, modified or set aside in the manne.!' provided for other orders; that the agreement is for spttlement purposes only and does not constitute an admission by respondent that it has violated the law as alleged in the complaint; and that the order set forth in the agreement and hereinafter included in this decision shall have the same force and effect as if entered after a full hearing.

respondent waives any further procedural steps before the hearing Examiner and the Commission, the making of findings of fact or conclusions of law, and alj of the rights it may have to challenge or contest the validity of the order to cease and desist entered in n,accordance with the agreement.

The hearing examiner has determined that the aforesaid agreement containing the consent order to cease and desist provides for an appropriate disposition of this proceeding in the public interest and such agreement is hereby accepted. Therefore It is o'/'de?'ed That respondent Peacock Beeord Company, Inc. , a corporation, and its officers, and respondent's 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 broac1- , Syllabus 57 F.l'.

casting 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 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 ot and the broadcasting of, any such records in which respondent has 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 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 plflyed that his selection and broadcasting of such record are in consideration of some nature, directly or indirectly received by him or his employer.

DECISION OF THE COMMISSION AND ORDER TO FILE REPORT OF COMPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shall, on the 29th day of September 1960 become the decision of the Commission; and accordingly:

It is ordered That respondent Peacock Record Company, Inc. , a corporation, shall, within sixty (60) days after service upon it of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which it has complied with