John Holo Ka

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IN THE MATTER OF JOHN HOLO KA ET AL. DOING BUSINESS AS ALPHA DISTIUBUTING CO.

CONSENT ORDER, ETC., TN REGARD TO THE ALLEGED 'VIOLATION OF Tln FEDERAL TRADE COl\DIlSSIO:: ACT Docket 7725. Complaint, Jan. 6, 1960-Decisfon, Mar. 14, 1961 Consent order requiring Kew York City distributors of phonograph records to cease giving concealed payola to disc jockeys and other personnel of television and radio programs as inducement for the frequent playing of their records 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 .John IIo1onka and IIarry Apostolcris, individually, and as copartners, doing business as Alpha Distribu6ng Co., hercina.after referred to as respondents , ALPHA DISTRIBUTING CO. 437 436 Complaint 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:

P ARAGRAPII 1. Respondents John Holonka and Harry Apostoleris are individuals and copartners, doing business as Alpha Distributing Co., with their principal offce and place of business located at 457 West 45th Street, New York, N. Y.

PAR. 2. Respondents atc now, and for some time last past have been, engaged in the offering for sale, sale and distribution of phonograph records as an independent distributor for several record manufacturers to retail outlets and jukebox operators 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 distribute when sold, to be shipped from their place of business in the State of New York to purchasers thereof located in various other states of the lJnited States, and maintain, and at a11 times mentioned herein have maintained, a substantial course of trade in phonograph records in commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 3. In the course and conduct of their business, at a11 times ment.ioned herein, respondents have been, and are now, in substantial competition, in commerce, with corporations, firms and individuals in the sale and distribution of phonograph records. PAR. 4. After W orld ,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 OOO OOO in 1958. Record manufacturing companies and distributors ascertained that popular disc jockeys could, by "exposure" or the playing of a record day after day, sometimes as high as six to ten times a day, substantially inereasc the sales of those records so "exposed." Some record manufacturers and dist.ributors obtained and insured the exposure" of certain records in which they were financially interested by dislmrsing "payola" to individuals authorized to select and exposc" records for both radio and television programs. Payola, among other things, is the payment of money or other valuable consideration to disc jockeys of musical programs on radio and television stations to induce, stimulate or motivate the disc jockey to select, broadcast expose" and promote certain records in which the payer has a direct financial interest. , 438 FEDERAL TRADE CQ1\oMISSIOK DECISIOXS Complaint 58 F!.r.

Disc jockeys, in consideration of their receiving the payment heretofore described, either directly or by implication, represent to their listening public that the reearcls '"exposed' on their broadcasts have been selected on their personal evaluation of each record's merits or its general popularity ".ith the public, whereas, in truth and in fact one of the principal reasons or motivations guaranteeing the record' s " xposure " is the "payola payoff. PAR. 5. In the course and conduct oT their business, in commerce during the last sevcntl ye 1rs, the respondent.s hflYC engaged in unfair and deceptive acts and practices and unflir methods of competition in the following respects:

The respondents alone, or 'with certain nnnamed record manufachIrers, negotintec1 for anti dif:1)llfScc1 ;'p:1yola ' to disc. jockeys broadcasting musical programs over radio or television sta60ns broadcasting across st.ate lines, or to other personnel who influence t.he sele,ction of t,he records exposed by the disc jockeys on such programs. Deception is inherent in "payola" inasmuch as it involves the payment of a consideration on the express or implhd understanding that the disc jockey ,,-ill conceal, withhold or cnmonfiage such fact from the listening public.

The respondents, by participating in(lividual1y or in a joint, effort wit.h certain collaborating record manufacturers. hayc aided nnd abetted the deception of the public by various disc jockeys by controlling or unduly influencing the '; exposure ' by records by disc jockeys with the payment of money or othet considerat.ion 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 rs based either on each record'unbiased selection of the disc jocke merit or public popularity. This deception of the public has the capaeit.y and tendency to cause the public to purchase the "exposed" records which they otherwise might not have purchased and also to ' records in V3,1;1011S popularityenhance the populruity of the "exposed polls, which in turn has the capacity and tendency to substantially increase the sales of the "exposed" records. PAR. 6. The aforesaid acts, practices, and methods have the deceive the public and tocapacity and tendency to mislead and hinder, restrain and suppress competition in the offering for sale and to divert trade sale and distribution of phonograph records, unfairly to t.he respondents from their competitors, and substantial injury has thereby been done and may continue to be done to competi tion in commerce.

ALPHA DISTRIBCTING CO. 439 436 Decision PAR. 7. The aforesaid acts and practices of respondents, as alleged herein, were ,md 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. 311. John T. TV alker for the Commission. JfT. Samuel Kaufman of ::ew York ::. Y., for respondents. IXITI.\L DECISIO:' BY EDGAR A. BGTTLE, I-IEARING EX.-\MIXER On January 6 , 1960, the Federal Trade Commission issued its complaint against the above-named respondents charging them with violating the provisions of the Federal Trade Commission Act in COllnection with the offering for sale, sale and distribution of phonograph reeords as an independent distributor for several record manufacturers to retail outlets and jukebox operators in various states of the the Dnited States.

On .January 12, 1961, the respondents and counsel supporting the the complaint. entered into an agreement containing a consent order to cease and d sist in accordance with section 3.25(a) of the Rules of Practice and Procedure of the Commission. finder the foregoing agreement, the respondents admit the jurisdictional facts alleged in the complaint and agree, among other things, t.hat the cease and desist order there set forth may be entered without further notice and shall have the same force and effect as if entered after a full hea.ring. The agreement includes a waiver by the respondents of all rights to challenge or contest t.he validity of the order issuing in accordance therewith; and recites that the said agreement shall not become a part of the offcial record unless and until it becomes a. part of the decision of the Commission, and that it is for settlement purposes only and does not constitute an admission by the respondents that they have violated the law as alleged in the complaint. The hearing examiner finds t.hat the content of the said agreement meets a11 the requirements of section 3.25 (b) of the Rules of Practice.

This proceeding ha ving now come all for fimll consideration by the hearing examiner on the complaint and the aforesaid agreement for consent order, and it appearing that said agreement provides for an appropriate disposition of this proceeding, the aforesaid agreement is hereby accepted and is ordered filed upon becoming part of the Commission s decision in accordance with section 3. of the R.nles of Practice; and in consonance with the terms of said 440 FEDERAL TRADE COMMISSION DECI8IQ):S Order 58 F.

agreement, the hearing examiner makes the rollowing jurisc1ictional findings and order:

1. Respondents John Holonka and Harry Apostoleris are individuals and copartners, doing business as Alpha Distributing Co. with their principal offce and place of business located at 457 ,Vest 45th Street, New York, New York.

2. The Federal Trade Commission has jurisdiction or the subject matter or this proceeding and or the respondents hereinabove named. The. compla.int states a cause of action against said respondents under the Federal Tracle Commission Act, and this proceeding is in the interest of the public.

ORDER It i8 ordPled That respondents .John HoJonka and Harry Apostoleris, individually, and as copartners doing business as Alpha Distributing Co., or under any other name and respondents' agents representatives and employees, directly or through any corporate or other devic.e, in c.connection 'with phonograph records which ha.ve he,en distributed, in commerce, or which are used by radio or television stoat-ions in broadcasting proznuns in commerce, as "commerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

(1) Giving or offering to give, Will10Ut requiring public disclosure, any sum or money or other materia.l consider.ration, to any person, directly or indirectly, to induce that person to select, or participate in the selection or, and the broadcasting or, any sllch records in which respondents, or either or them, have a financial inte.rest. or any nature.

(2) Giving or offe,ring t.o give, without requiring public disclosure, any sum or money, or other material consideration, to any person, directly or indirectly, as an inducement to influence any emploYBB or a radio or television broadcasting st.ation, or any other pe.rson, in any ma.nner, t.o select, or participate in the selection of and the broadcasting of, any such records in which respondents, or either or them, have a financial interest or any nature. There shan be "public disclosure" within the meaning of this order, by any employee or a radio or television broadcasting station or any other person, who selects or participates in the selection and broadcasting or 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.

, ) THOMASVILLE CHAIR COMPANY 441 436 Findings DECISION OF THE COl\DnSSIOX AXD ORDER TO FILE REPORT OF COMPLIANCE Pursuant to seetion 3.21 of the Commission s Rules of Practice the initial decision of the hearing examiner did, on the 14th day of :March, IDG1, become the decision of the Commission; and accordingly:

It is ordered That respondents herein shall, within sixty (60) days after service upon them of this order, me with the Commission a report in writing sett.ing forth in detail the manner and form in which they have complied with the order to cease and desist.