Roulette Records, Inc.

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

In THe MatTrer oF ROULETTE RECORDS, INC., ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 7710. Complaint, Dec. 30, 1959—Decision, Aug. 8, 1961 Order—following enactment of specific statutes which afford adequate protection to the public against the challenged practices—dismissing complaint charging New York City manufacturers of phonograph records with giving illegal “payola” to radio and television disc jockeys. 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 Roulette Records, Inc., a corporation, and Morris Levy, Morris Gurlek, Philip Kohl and Joseph L. Kolsky, 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:

Paracrapy 1. Respondent Roulette 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 office and principal place of business located at 659 10th Avenue, New York, New York. 693-490-6415 Complaint 59 F.T.C.

Respondents Morris Levy, Morris Gurlek, Philip Kohl and Joseph L. Kolsky are president, treasurer, vice president, and executive vice president and secretary, respectively, of the corporate respondent. The individual respondents formulate, direct and control the acts and practices of said corporate respondent, including the acts and practices herein set out. The address of the individual respondents is the same as that of said corporate respondent. Par. 2. Respondents are now, and for some time last past have been, engaged in the manufacture, distribution and sale of phonograph records to independent distributors for resale 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 manufacture, sell and distribute to be shipped from their place of business in the State of New York 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 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 all times mentioned herein, respondents have been, and are now, in substantial competition, in commerce, with corporations, firms and individuals in the manufacture, sale and distribution of phonograph records. Par. 4. After World War IJ, 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 1938. 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 six to ten 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 television programs. “Payola”, among other things, is 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 jockey to select, broadcast, “expose” and promote certain records in which the payer has a direct financial interest. Disk jockeys, in consideration of their receiving the payments heretofore described, either directly or by implication, represent to ROULETTE RECORDS., INC., ET AL. 211 209 Complaint 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. 5. 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 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 Jistening 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 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 will 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 selections 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 otherwise might not have purchased and, also, to enhance the popularity of the “exposed” records in various popularity 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 capacity and tendency to mislead and deceive the public, and to hinder, restrain and suppress competition in the manufacture, sale and distribution of phonograph 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.

Syllabus 59 F.T.C.

Par. 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.

Mr. Arthur Wolter, Jr., for the Commission. Brower Brill & Gangel, New York, N.Y., for the respondents. Iniriat Decision sy Wintiam L. Pack, Hearrng EXAMINER Commission counsel has filed a motion asking that the complaint be dismissed without prejudice. In substance, the ground assigned for the motion is that since the issuance of the complaint specific statutes have been enacted by Congress which afford adequate protection to the public against the practices challenged by the complaint, and that therefore the expenditure of further time, effort and public funds in the present proceeding would be unwarranted. The motion is not opposed by respondents. In the circumstances, it is concluded that the motion is well taken and should be granted.

ORDER It is ordered, That the complaint be and it hereby is dismissed, without prejudice to the right of the Commission to take any further action in the matter in the future which may be warranted by the then existing circumstances.