Scepter Music, Inc.

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

In Toe Marrer oF SCEPTER MUSIC, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 7896. Complaint, May 20, 1960—Decision, Oct. 15, 1960 Consent order requiring New York City manufacturers of phonograph records to cease paying concealed payola to disk jockeys and other personnel of television and radio stations 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 Scepter Music, Inc., a corporation, and Florence Greenberg, 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:

ParacraPH 1. Respondent Scepter Music, 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 located at 1650 Broadway, in the City of New York, State of New York.

Respondent Florence Greenberg is an officer of the corporate respondent. She formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. Her 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 manufacture and distribution, offering for sale, and sale, of phonograph records to distributors. Par. 8. 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 located in various other States of the United States, and maintain, and at all times mentioned herein have maintained, a substantial course of trade in said phonograph records in commerce, as “commerce” is defined in the Federal Trade Commission Act.

Complaint 57 F.T.C.

Pan. 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 World War 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 1U 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, stimulate or motivate the disk jockey to select, broadcast, “expose” and promote certain records in which the payer has a financial interest.

Dick 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’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 competion 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 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.

SCEPTER MUSIC, INC., ET AL. 889 887 Decision The respondents 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’s 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 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 manufacture, sale or distribution of phondgraph records, and to divert trade unfairly to the respondents from their competitors and _ substantial 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. Harold A. Kennedy and Mr. Arthur Wolter, Jr., for the Commission.

No appearance for respondents.

Inir1au Decision py Earn J. Kota, Heartne Examiner The complaint in this proceeding issued May 20, 1960, charges respondents Scepter Music, Inc., a New York corporation, with its principal office and place of business located at 1650 Broadway, New York, New York; and Florence Greenberg, individually and as an officer of said corporation, located at the same address as the corporate respondent, with violation of the provisions 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. Order 57 F.T.C.

After the issuance of the complaint, respondents entered into an agreement containing consent order to cease and desist with counsel in support of the complaint, disposing of all the issues as to all parties in this proceeding.

It was expressly provided in said agreement that the signing thereof is for settlement purposes only and does not constitute an admission by respondents that they have violated the law as alleged in the complaint.

By the terms cf said agreement, the respondents admitted all the jurisdictional facts alleged in the complaint and agreed that the record herein may be taken as if the Commission had made findings of jurisdictional facts in accordance with the allegations. By said agreement, the parties expressly waived any further procedural steps before the hearing examiner and the Commission; the making of findings of fact or conclusions of law; and all the rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance with the agreement. Respondents further agreed that the order to cease and desist, issued in accordance with said agreement, shall have the same force and effect as if made after a full hearing. It was further provided that said agreement, together with the complaint, shall constitute the entire record herein; that the complaint herein may be used in construing the terms of the order issued pursuant to said agreement; and that said order may be altered, modified or set aside in the manner prescribed by the statute for orders of the Commission.

The hearing examiner has considered such agreement and the order therein contained, and, it appearing that said agreement and order provides for an appropriate disposition of this proceeding, the same is hereby accepted and is ordered filed upon becoming part of the Commission’s decision in accordance with Sections 3.21 and 8.25 of the Rules of Practice, and, in consonance with the terms of said agreement, the hearing examiner finds that the Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents named herein, that this proceeding is in the interest of the public, and issues the following order: ORDER It ts ordered, That respondents Scepter Music, Inc., a corporation, and its officers, and Florence Greenberg, individually and as an officer of said corporation, and respondents’ agents, representa- -SCEPTER MUSIC, INC., ET AL. - 891 887 Decision .

tives 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 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, 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 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 COMMISSION AND ORDER TO FILE REPORT OF COMPLIANCE Pursuant to Section 8.21 of the Commission’s Rules of Practice, the initial decision of the hearing examiner shall, on the 15th day of October, 1960, become the decision of the Commission; and, accordingly: 7 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. Complaint BT FTC.