Government to Examine Payola, Vows Action

Federal regulators are taking a closer look at the payola scandal that led to a $10 million settlement by Sony BMG Music Entertainment (search) with the state of New York.

Federal Communications Commission (search) Chairman Kevin Martin announced late Monday that his agency will review the settlement for any disclosures of payola (search) rule violations. He promised swift action against anyone violating rules against "pay-for-play" in the music industry.

The FCC "will not tolerate non-compliance," Martin said in a statement. "While payola may not be a widespread practice in the broadcasting industry, to the extent it is going on, it must stop."

The agency, which regulates the public airwaves, could fine violators up to $32,500 per incident.

Last month, Sony BMG agreed to pay $10 million and stop bribing radio stations to feature its artists. The agreement is part of a wider investigation by New York state Attorney General Eliot Spitzer, who has called payola "pervasive" in the industry.

A 1960 federal law and related state laws bar record companies from offering undisclosed financial incentives in exchange for airplay. "Payola" is a contraction of "pay" and "Victrola," the old wind-up record player.

FCC commissioner Jonathan Adelstein, who had called for an agency investigation, applauded the move.

"I believe this payola scandal may represent the most widespread and flagrant violation of any FCC rules in the history of American broadcasting," said Adelstein. "Mr. Spitzer's office has collected a mountain of evidence on the potentially illegal promotion practices of not only Sony BMG, but also other major record companies, independent promoters and several of the largest radio station groups."