Triumph Records, Inc.

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IN THE MATTER OF TRIUl\1PI-I RECORDS, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COl\fl\IISSION ACT Doclcet 7964. CO1nplaint, Jmte 1960-Decision, Nov. 1960 Consent order requiring New York City manufacturers of phonograph records to cease giving concealed "payola " to disc jockeys and 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 Triumph Records, Inc. , a corporation, and Herbert C. Abramson, 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. R.respondent Triumph R.ecords, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of New Yor1\:, with its principal office and place of business located at 54 ,Vest 74th Street, New York, New York.

Respondent I-Ierbert C. Abramson is president of the corporate respondent, and formulates, directs and controls the acts and practices of said corporate respondent. The address of the individual respondent is the same as that of said corporate respondent. PAR. 2. R.respondents are now, and for some time last past have been, engaged in the manufacture, distribution and sale of phonograph reeorc1s to independent distributors for resale to retail outlets 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 to be shipped from their place of business in the State of New Yor1\:, to purchasers thereof located in various other states of the United States, and maintain, and at a1l times mentioned herein have maintained, a substantial course of trade. in phonograph records in commerce, as "commerce defined in the Federal Trade Commission Act. , Complaint 57 F.

PAR. 3. In t11e course and conduct of their business, at all times mentioned herein, respondents have been, and are nO\\, in substantial competition, in commerce, with corporations, firms and individua.1s in the manufacture, sale and distribution of phonograph records.

PAR. 4. After 'Vorld 'Var 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. Reeorc1 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 sale 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 alld expose" records for both radio and television programs. Pa~701a, among other things, is the payment of money or other vahutble 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 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. 5. In the course and eon duct of tl1Pir business, in commerce the respondents have engaged in unfair and deceptive acts and practices and unfair methods of competition in the following respects. to disk The respondents negotiated j:o1' and disbursed "payola" jockeys broadcasting musical programs over radio or television stations broadcasting across state lines.

Deception is inherent in "payola" innsmuch as it involves the payment of a consideration on the express or implied understanding that the disk jockey ",ill conceal, withhold or camouflage such fact jrom the listening public.

The respondents have aided and abetted the deception of the public by various disk jockeys by controlling or unduly influencing the , TRIUMPH RECORDS INC. , ET AL. 1067 1065 Decision exposure" of rec.orc1s by said disk jockeys with the payment of money or other consideration to them.

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 joekeys 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 pure-based and, also to enhance the popularity of the "exposed" records in various popularity polls, which in turn has the capacity and tendeney to substantially increase the sales of the "exposed" records. PAR. 6. The n,foresaid acts, practices and methods have ' the eapacity and tendency to mislead and deceive the public, and to hinder, restrain and suppress competition in the manufacture, sale and distribution of phonograph reeords, 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.

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

Jl r. John T. lV.aZlce?' for the Commission. I~respondents, for themselves.

INITIAL DECISION BY J. EARL Cox, I-lea RING EXA1\II~ER The complaint charges respondents, who are engaged in the manufacture, distribution and sale of phonograph records to independent clistribl1tors for resale to retail outlets in various states of the United States, with violation of the Federal Trade Commission Aet in that respondents have negotiated for and disbursed "payola , the payment. of money or other valuable consideration to eJjsk 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 hJlflncinlly interested on the express or implied understanding that the disk jockeys \rill conceal: \rithhold 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 eon sent order to cease and desist, \rhich \ras approved by the Director Order 57 F.

Associa.te Direetor and Assistant Direct of the Commission s Bureau of Litigation, and thereafter transmitted to the Hearing Examiner for consideration.

, is The agreement states that respondent Triumph Records, Inc. a corporation organized, existing and doing business under and b~y virtue of the laws of the State of New York, with its principal office and place of business formerly located at. 54 "\Vest 74th Street New York, N. , and presently located at 300 Central Park 'divest New York, N.Y.; and that respondent Herbert C. Abramson is president of the corporate responclent~ and formulates, directs and eontrols the acts and practices of said corporate respondent, his address being the same as the present address of said corporate respondent. The agreement provides, among other things, that respondents admit all the jurisdictional facts alleged in the complaint, and agree 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 thi~ agreement; that the agreement shall not become a pa:rt of the official record unless and until it becomes a part of the decision of the Commission; that the complaint may be used in eonstruing 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 have the same force and effect as if entered after a full hearing. respondents 'waive any further procedural steps before the Hearing Examiner and the Commission, the making of findings of fact or conclusions of law, and all of the rights they ma.y have to challenge or eonte,st the validity of the orc1eT to cease and desist entered in accordance with the agreement.

The I-Iearing Examiner has determined that the aforesaid agreement containing the consent order to cease and desist provides for an appropriate disposition of this proc.eeding in the public. interest nd such agreement is hereby aeeepted. Therefore , a. COl.PO- 1 t is o1'dered That respondents Triumph Reeords. Inc. ration, and its officers, and I-Ierbert C. Abramson, individually, and as an officer of said corporation, and respondents~ agents, representatives and employees, directly or through any corporate or other device, in connection with phonograph records which have been distributed in eommeree, or which are used by radio or television TRIUMPH RE'CORDS INC. , ET AL. 1069 1065 Decision stations in broadcasting programs in eommeree, as "commerce defined in the Federal Trade Commission Act, do forthwith cease and desist from:

(1) Giving or oflering 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 shan disclose, or cause to have disclosed, to the listening public at the time the record played, that his selection and broadcasting ' of such record are in consideration for compensation of some nature, directly or indi~ rectly received by him or his employer.

DECISION OF THE COl\Il\fISSION 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 3rd day of November, 1960, become the decision of the Commission; and accordingly:

It is oni,ered That respondents Triumph Records, Inc. , a corporation, and Herbert C. Abramson, individually and as an officer of said corporation, 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. , Complail1 t 57 F.