22 J.L. & Econ. 269 (1979)
Payola in Radio and Television Broadcasting

handle is hein.journals/jlecono22 and id is 273 raw text is: PAYOLA IN RADIO AND TELEVISION
BROADCASTING*
R. H. COASE
University of Chicago Law School
I. INTRODUCTION
PAYOLA in radio and television broadcasting may be defined as undis-
closed payments (or other inducements) which are given to bring about the
inclusion of material in broadcast programs. I The making of such payments
has become a crime as a result of amendments to the Communications Act in
1960,2 and is now prohibited by regulations of the Federal Communications
Commission (FCC).3 The aim of this paper is (1) to discover why these
payments came to be made, (2) to consider whether the results of allowing
such payments should be regarded as beneficial or harmful, and, in the light
of this, (3) to evaluate the worth of the 1960 amendments to the Communica-
tions Act and of the FCC's regulations.
To understand why payola became so common in the broadcasting indus-
try it should be realised that payola became a feature of the broadcasting
industry not in the late 1950s, when the practice received considerable pub-
licity in the press and was investigated by a congressional committee, but in
the 1930s and that it entered the broadcasting industry simply as a continua-
* I am greatly indebted to Mrs. Clara Ann Bowler who, as research assistant, showed
considerable enterprise in unearthing information on payola from a wide variety of sources. I
am also grateful for financial assistance to the Law and Economics Program of the University of
Chicago Law School and the Foundation for Research in Economics and Education. I have to
thank officials of both the Federal Communications Commission and the Federal Trade Commis-
sion for theirhelp in providing me with information. They are not, of course, responsible in any way
for the use which I have made of this information. It is pleasant to recall that I started to write this
paper at Stanford University in 1977 while a Senior Research Fellow at the Hoover Institution. In
revising this paper, I have greatly benefited from comments made by participants at seminars at
UCLA and the Hoover Institution and bywritten comments by Professors Edmund W. Kitch, John
H. Langbein, H. Douglas Laycock, Bernard D. Meltzer, and Geoffrey R. Stone of the University of
Chicago Law School and by Professor Earl A. Thompson of UCLA.
I The term payola is generally said to have been introduced by the trade periodical Variety
and its popularity resulted from its use in that periodical. In Webster's Third New International
Dictionary, payola is defined as an undercover or indirect payment for a commercial favor (as
to a disc jockey for plugging a song).
2 See P.L. 86-752, 74 Stat. 895-97.
3 See Applicability of Sponsorship Identification Rules (Public Notice), 40 Fed. Reg. 41936
(1975).

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