Louis J. Bedell

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IN Tile MATTER OF LOUIS J. BEDELL ET AL. DOI;'G BUSINESS AS Ella ImCORDS COX SENT ORDETI, ETC. , IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COl\DUSSION ACT Docket 8191. Complaint, Nov. 1960-DGuis' ion, A1J'. , 1961 Consent order requiring- Hollywood mamlfar.nrers of phonograph records to cease giving concealed pa:vola to disc jockeys and other personnel of radio and television stations to induce frequent playing of their records ill on1e1' to increase sales.

560 FEDERAL TRADB COMMISSION DECISIONS Complaint u8 F.

COl\fPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in by by said Act, the Federal Trade Commis,sion, having reason to believe that Louis J. Bedell :Max Newman and Herbert Newman, indivic1ually, and formerly operating as copartners, trading and doing business as Era Records here.inafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proeceding by it. in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: Louis T. Bedell, J\Iax PAHAGR.\PII 1. Individual respondents X e\nnan and J-Icl'bert Newman were copartners, trading Rncl doing and Iax Kewman s presentbusiness as Era Records. Louis .J. Be,c1elrs oflee and principal place of busines is located at 1481 North Vine Street, in the City of I-Iolly,yood, Slale of California. Herbert Newman s offce is located at 642:) Hollywood Boulevard, in the City of HollY'yoocl, State of California.

PAR. 2. R.respondents, prior to J\fay 1059, "ere engaged in the mnnnfaetnre and (listribution, offering for sale and sale of phonograph records to dist.ributors and various retail outlets when trading and doing business as Enl Records. Respondent.s are now, and for some Hrne last past h lye been, engaged in t.he manufact.ure and distribution, oiIering for sale and sale of phonograph records to distributors n,ncl various retail outlets, under' separate corporate entities. \R. 3. In the course and conduct of their business, respondents as copart.ners, for some time last past have caused their said records "hen sold, to be shipped from one State of the I:united States to purchasers thereof located in various other States of the United States, and maintain, and at all t.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. PAn. 4. In the course and conduct of their said business, and at a.ll times mentioned herein, respondents have been in competition, in commerce, with corporations, firms and individuals in t.he sale of phonograph records.

PAR. 5. After vVor1d ",Var II when TV and radio stations shifted from "live" to recorded performances for much of their programming, the production, dist.ribution and sale of phonograph records emerged as an important factor in the musicnJ industry, with a sales volume of approximately $400 000 000 in 1958. Record manufacturing companies and distributors nscertained that popubr disc jockeys could, by "exposure': or the playing of a record day after day, sometimes as high as 6 to 10 times a day, , , ERA RECORDS 561 559 Complaint 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 " alTIOng other things, is the payment of money or other valuable consideration to disc jockeys of musical programs on radio stimulate or motivate the disc jockeyand TV stations to induce, to select, broadcast expose" and promote certain records in which the payer has a financial interest.

payments Disc jockeys, in consideration of their receiving the heretofore described, either directly or by implication, represent to their Estcuing public that the records "exposed" on their broadcasts have been selected on their personal evaluation of each record' whereas, in truthmerits or its general popularity with the public, and in fact, one of the principal reasons or motivations guaranteeing payoff.the record's "exposure" is the "payola" PAR. G. In the COlll'SC and conduct of their business, in COlnmerce during the period indicated herein, respondents as copartners have engaged in unfair and dccepti ve acts and practices and unfair methods of competition in the following respects: The respondents alone or with certain unnan1ed record distributors negotiated for and disbursed "payola" to disc 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 disc 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 disc jockey will conceal, withhold or camouflage such fact froln the listening public.

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 disc jockeys by controllng or unduly influencing thc "exposure" of records by disc jockeys with the pa,ymcnt of money or other consideration to thein, or to other personnel which select or participate in the selection of the records used on such broadcasts.

Thus payola" has been used by respondents to mislead the public into believing t1utt the records "exposed" were the independent and unbiased selection of the disc 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 C81-237--G3-- &: , 562 :FEDERAL 'rrade CONIMISSION DECISIONS Decision 58 F. T.

enllance the popularity of the "exposed" records in various popularity polls, which in turn has the capacity and tcndeney to substantially increase the sales of the "exposed" records. PAR. 7. The aforesaid acts, practices and methods have the capacity and tendency to Inisle2"cl and deceive the public and to hinder restrain and suppress competition in the 111manufacture, sale or distribution of phonograph records, and to divert trade unfairly to the respondents from their competitors, and injury has thereby been done al1c1may continue to be clone to competition in commerce. PAn. 8. The aforesa,icl acts and practices of respondents, as alleged herein, were and are all to the prejudice and injury of the public and of respondents' c0Il1petitors and constitute unfair and deceptive acts and practices and unfair methods of cOlnpetition in commerce within the intent and meaning of the Federal Trade Com111ission Act. Mr. A"thur TV olter, Jr. for the Commission. Lesser Graff' by llfr. Irving Graff, of Beverly Hils, Calif., for respondents.

INITIAL DECISION BY LOREX H. L_\ -CGHLIX, HEARING EXAUIXER The Federal Trade Commission (80mc6n188 also hereinafter referred to as the Commission) on November 28 , 1960, issued its , charging the individual respondents Louiscomplaint herein Bedell fax Xewman and Herbert Kewman, who are now engaged in the manufacture, distribution, offering for sale and sale of phonograph records to distributors and various retail outlets( and were so engaged prior to fay1 195\), when trading and doing business as Era Hecords), with violation of the Federal Trade Commission .r in that respondents, alone or with certain unnamed record distributors, have negotiated for a,nd disbursed "payola, i. , the payment of money or other valuable consideration to disc jockeys of musical programs on ra.cio and television stations, to induce, stimulate or n10tivate the disc jockeys to select, broadcast expose" and promote certain records, in which respondents are financially interested the express or implied understanding that the disc jockeys l,vill conceal, withhold or camouflage the fact of such paTlnent from the listening public. Hespondents were duly served with process. On .January 27, 1961, there was submitted to the undersigned hea.ring examiner of the Commission for his consideration and approval an " Agrcement Containing Consent Order To Cease And De ist" which had been entered into by respondents, their counsel, and counsel supporting the complaint on January 17, 1961, subject to the a.approval of the Bureau of Litigation of the Comnlission, which ha.d subsequently duly approved the same.

ERA RECORDS 563 559 Decision After due consideration, the hearing examiner finds that said agreement, both in fonTl and in content, is in accord with s;J.2G of the Commission s R.nles of Practice for Adjudicative Proceedings and that by said agreement the parties have specifically agreed to the following rmttters:

1. Individual respondents Louis J. Redell 1:ax ewman and I-Ierbert :Newman were copartners, trading and doing business as Era Recon1s. Louis J. Bedell' s and J\Iax K ewman s present oITke and principal place of business is located at 1481 North Vinc Street Hollywooc1 , California. Hcrbert X ewm:11 s offce is located at 6'25 Hollywood Boulevard, I-oJlywood, California. 2. Respondents admit "II the jurisdictional facts alleged in the complaint ttnc1 agree that the record l1tty be taken tts if fulc1ings of jurisdictional facts had been duly made in accordance -with such allegations.

3. This agreement disposes of all of this proceeding as to all pftrties.

H.esponc1ents waive:

(a) Any further procedural steps before the hearing exalnineI" and tile COll,mission;

(b) The lnaking of fuldings of fact or conclusions of law; and (c) All of the rights they may have to challenge or contest the validity of the order to cease and desist entered in accordance with this agreement.

5. The record on which the initial decision and the decision of the Commission shall be based shall consist solely of fne compla.irtt and this agreement.

6. This agreement shall not become a part of the offcial record unless and until it becomes a part of the decision of the Commission. . 7. This agreement is for settlement purposes only and does not constitute an admission by respondents that they h tve violated the law as alleged in t.he complaint.

S. The following order to cease and desist may be entered in thig proceeding by the Commission without further notice to respondents. When so entered it shall have the same force and ciIect as if entered after n full hettring. It may be altered, modified or set aside in the manner provided for other orders. The complaint may be used in construing tile terms of the order.

the upon clue eonsic1eration of said complaint and agreement, hearing examiner approves and accepts the said "Agreement Containing Consent Order To Cease And Desist; finds tlutt the Commission has jurisdiction of the subject matter of this proceeding and of t.he respondents herein; that the complaint states a legal cause Dccisioll 58 F.

for complaint under the Federal Trade Commission Act against the respondents, both generally and in each of the particulars alleged therein; that this proceeding is in the interest of the public; and that the following order, as proposed in said agreement, is appropriate for the just disposition of all of the issues in this proceeding as to all of the parties hereto. The hearing exalniner therefore issues the said order, as follows:

It is ordered Tlmt respondents Louis J. Bedell, Max X ewman and Herbert N CWDlan, individually and formerly operating as copartners trading and doing business as Era Records, or under any other name ,a,nd respondents' agents, representatives 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 defuled in the Federal Trade Commission Act, do fortlnvith 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 pets on to select, or participate in the selection of, and the broadcasting of, any sneh records in which respondents, or any of them, have a linancial interest of any nature;

(2) Giving, or ouering to give, without requiring public diselosnre any sum of money, or other material consich ration, to any person directly 01' 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 tho broadcasting of, any such records in which respondents, or a,ny 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 t.television broadcasting station or any other person who selects or participates in the selection and broadcasting of a record 1\hen he sha,ll disclose or cause to have diseJosed, 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\nnSSION AND ORDER TO FILE REPORT OF C03IPLIANCE Pursuant to Section 3.21 of the Comnllssion s Rules of Practice the initial decision of the hea.ring examiner shall, on the 6th day of Aprij 1961, become the decision of the Commission; and, accordingly:

APEX PRODUCING CORPORATION ET AL. 565 559 Complaint It is onle1'd That the above-named respondents shall, within sixty (60) days after service upon them of this ordcr, Jle 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.