Mayfair Distributors, Inc.

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IN THE MATTER OF MA YF AIR DISTRIBUTORS, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COl\BnSSION ACT Docket 8021. Complaint, June 1960-Decision, Sept. 1960 Consent order requiring distributors of phonograph records in New York City 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 ~1ayfair Distributors, Inc., a corporation, and Jerry \Vinston, individually and as an officer 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:

PARAGRAPH 1. Respondent ~1ayfair Distributors, Inc., is a corporation organized, e.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 located at 640 Tenth Avenue, in the city of New York, State of New York.

Respondent Jerry Winston is an officer of the corporate responddent. He formulates, directs and controls the acts and practices of the corporate respondent., including the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent.

PAR. 2. Respondents are now, and for some time last past have been, engaged in the distribution, offering for sale, and sale, of phonograph records to various retail outlets. PAR. 3. In the course and conduct of their business, respondents now cause, and for some time last past have caused, their said records, when sold, to be. shipped from one state of the. United States to purchasers thereof loc.atecl in various other States of the United , Complaint 57 F.

States, and maintain, and at all times mentioned herein have maintained, a course of trade in said phonograph records in commerce as "commerce" is defined in the Federal Trade Commission Act. PAR. 4. In the course and conduct of their business, and at all times mentioned herein, respondents have been in competition, in commerce, with corporations, firms and individuals in the sale of phonograph records.

PAR. 5. After vVorld ""Val' 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 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 TV programs. Payola " among other things, is the payment of money or other valuable consideration to disk jockeys of musical programs on radio and TV stations to induce, stim~late 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, one of the principal reasons or motivations guaranteeing the record's "exposure" is the "payola" payoff' PAR. 6. 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 broadcasting musical programs over radio or television statiOJ1s broadcasting across State lines, or to other personnel who influence the selection of the records "exposed" by the disk joekeys on such programs.

Deception is inherent in "payola" inasmuch as it involves the payment of a consideration on the express or implied understanding , , MAYFAIR DISTRIBUTORS, INC., ET AL. 829 827 Decision that the disk jockey will conceal, withhold or camouflage such fact from the listening public.

The respopdents by participating individually or in a joint effort with 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 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 selection 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 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 sub~ stantially 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 manufacture, sale or distribution of phonograph records, and to divert trade unfairly to the respondents from their competitors and injury has thereby been done and may continue to be done to competition in commerce. PAR. 8. 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 deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

Mr. Arthur Wolter, Jr. for the Commission. Hespondents, for themselves.

INITIAL DECISION BY J. EARL Cox, HEARING EXAMINER The complaint charges respondents, who are engaged in the distribution, offering for sale, and sale, of phonograph records to various retail outlets, 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 financially 830 FEDERAL TRADE CO:M:M:ISSION DECISIONS Decision 57 F'.

interested, on the express or implied understanding that the disk jockeys will conceal, withhold or camouflage 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 Litigation, and thereafter transmitted to the hearing examiner for consideration. The agreement states that respondent ~\'fayfair Distributors, 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 plac.e of business located at 640 Tenth A venue, New York , and that respondent Jerry ",Vinston is an officer of the corporate respondent and formulates, directs and controls the acts and practices of the corporate respondent, his address being the same as that of the corporate respondent.

The agreement provides among other things, that respondents admit all the jurisdictional facts alleged in the complaint, and agree treat 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 agre.ement; that the agreement shall not become a part of the official 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 alleged in the complaint; and that the order set forth in the agreement and hereinafter included in this decision shall ha ye the same foree and efl' ect as if entered after a full hearing. Respondents waive any further procedural steps before the. hearing examiner a.nd the Commission, the making of findings of fact or conclusions of law, and all of the rights they may have to challenge or contest the validity of the order to cease and desist ent ered in 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 pnblic interest and such agreement is hereby accepted, T1H' l'l'fol'e :MAYFAIR DISTRIBUTORS , INC. , ET AL. 831 827 Decision It is o1'dered That respondents :Mayfair Distributors, Inc., a cor- , potation, and its officers, and' tJerry 'Vinston, individually and an officer of said corporation, and respondents' agents, representatives and employees, directly or through any corporate or other device, in connection with phoriograph records which have been distributed in commerce, or which are used by radio or television stations in broadcasting programs in commerce, as "commerce 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 either of them, have a financial interest of any nature;

(2) Giving or oflering to give, without requiring public diselosure, 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 either of them, have 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 broadc.asting of a record when he shall disclose, or cause to have disc.closed, 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 COl\OnSSION AND ORDER TO FILE REPORT OF CO)IPLL-\XC1~ Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner sha, ~ on the 29th day of September 1960 become the decision of the Commission ~ and accordingly:

1 t is ordered That respondents ~IilTfair Distributors, Inc. , a corporation, and tTerry 'Vinston, individually and as an officer of said corporation, shall, within sixty (60) days after service upon tJ!P1l! of this order, file with the Commission a report in writing, sett iug forth in detail the manner and form in which they have complied ,,'ith the order to cease and desist.

ComiPlaint 57 F.