Prestige Records, Inc.

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which they have complied with the order to cease and desist. I N THE l\1A TTER OF PRESTIGE R,ECORDS, INC., ET AL.

COXSEXT onnEn, ETC. , IX REG"\IW TO THE "\ALLEGED VlOLNnox OF THE FEDERAL TRADE COl\BIISSION ACT Docket 80S5, Complaint, J7dy )9GO-Decision, Nov. 1960 Consent order requiring mannfflctnrers in Ber.genfield, N. , to cease giving C'ollcPflled pa~'ola to disc jockeys of radio find television musical programs to induce frequent pInyin!! of their phonogrnph records in order to increase sales.

COl\IPLAINT PUl'sml:nt. 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 Prestige Records Inc., a corporation, and Robert ,Veinstoek, Selig ,Veinstock and ,Joan \Veinstoch:, individually and as officers 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: , Complaint 57 F.

PARAGRAPH 1. Respondent Prestige Records, 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 203 South ",Vashington A venue, in the City of Bergenfield, State of New Jersey.

Respondents Robert ",Yeinstoek, Selig "'Vein stock and Joan ",Veinstock are officers of the corporate respondent. They formulate, direet and control the acts and practices of the corporate respondent including the acts and practices hereinafter set forth. Their 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. 3. In the course and conduct of their business, respondents now cause, and for some time last past have caused, their said reeords 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 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.

PAn. 5. After ",Vorld "'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 musieal industry with a sales volume of approximately $400 000 000 in 1958. Hecorcl manufacturing companies and distributors aseertained 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 individmds 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 mllsical programs on radio and TV stations to inclllce, stimulate or motiyate the disk jockey to select, broadcast expose" and promote certain records in which the player has a financial interest.

, PRESTIGE RECORDS , INC. , ET AL. 1149 11-17 Complaint Disk joekeys, in consideration of their receiving the payments heretofore c1eseribed, either directly or by implication, represent to their listening public that the reeords "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' 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 musieal 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 joekeys 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 efl'ort with certain collaborating record distributors have aided and abetted the deception of the public by various disk jockeys by controlling or unduly influeneing the "exposure" of reeorc1s 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 reeords used on such broadeasts.

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 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 might othenvise not have purchased and also to enhanee the popularity of the "exposed" records in various popularity polls, which in turn has the capaeity and tendency to substantially increase the sales of the "exposed" records. PAR. 7. The aforesaid 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 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. , Decision 57 F.

PAR. 8. The aforesaid ads and praet.ices 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 praet.ices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

llfr. A1'thur lVolteT , Jr. for the Commission. J11' . il1oti"is B. RaucheT of New York, N. , for respondents. INITIAL DECISION BY J. EARL Cox, HEARING EX.UIINER The complaint charges respondents, who are 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 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 interested, on the express or implied understanding that the disk jockeys ",iU c.onceal, withhold or camouflage the fact of such payment from the listening public..

After the issuance of the complaint, respondents, their counsel and counsel supporting the complaint entered into an agreement containing consent order to cease and desist, ,which was approved by the Acting 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 Prestige Records, 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 oflice and place of business located at 203 South '\Vnshington Avenue Bergenfield New . ersey, and t11a t respondents Robert '\Veinstock oHicers of the corporateSelig '\17 einstock and tJoan '\Veinstock are respondent and formulate, direct and control the acts and practices of the corporate respondent, their address being the same as that of the corporate respondent.

The agreement provic1es~ among other things, that respondents admit an the :iurisc1idional facts alleged in the complaint, and agree that the record may be taken as ii' findings 01' j llrisdictiona.l facts had been duly made in accordance wjth such allegations; that the record on whjc.h the, initial decision and the decision of the Commission shall be based shall consist solely of the complaint and this PRESTIGE RECORDS, INC. , ET AL. 1151 1147 Order 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 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 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 may have to ehallenge or contest the validity of the order 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 proceeding in the public interest and such agreement is hereby accepted. Therefore 1 t -is ordered That respondents Prestige Records, Inc. , a corporation, and its oflicers, and Hobert ,Yeinstock, Selig ,Vein stock and Joan ,Veinstoek, individually and as otlieers of said corporation and respondents: agents, representation' s 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 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 any of them, have a financial interest of any nature;

2. Giving or ofiering to give, without reqmrmg public disclosure, any smn of money, 01' other material consideration, to any person, directly or indirectly, as an inducement 10 influence any employee of a radio or television broadcasting s1ation, or any other person, in any manner, to select, or' participate in the selection of ~ 01'and the broadcasting of, any such records in ,,'which respondell;~:; any of them, have Do financial interest of any nature. There shan be '; public disc)osure" ,,-within the mef\Iling of this order, by any employee of a radio or television broadcasting station Decision 57 F.

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 eonsideration 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 COl\IPLIANCE Pursuant to Section 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner shall, on the 17th day of November 1960 become the decision of the Commission; and accordingly:

It i.s o1'dered That respondents Prestige Records, Ine., a corporation, and Robert ",Veinstock, Selig ",Veinstock and Joan ",Veinstock individually and as oflicers of said corporation, shall, within sixty (60) days after service upon them of this order, file with the Commission a report in writjng, setting forth in detail the manner and form in which they have complied "ith the order to cease and desist.