Payola was a surreptitious practice from the 1950s through to the 1980s where record companies made secret payments to radio disk jockeys to repeatedly play on the air records and artists they were trying to promote. In 1959 the scandal became public and the United States Congress responded in 1960 by passing legislation requiring disclosure by radio stations if any payment had been received to broadcast any matter. Notwithstanding this law, there were further payola scandals through to the 1980s.
More recently, the US Federal Trade Commission has taken the view that:
- When companies launder advertising by paying an influencer to pretend that their endorsement or review is untainted by a financial relationship, this is illegal payola.
- Misinformation is plaguing the digital economy, and recent no-money, no-fault FTC settlements with well-known retailers and brands to address fake reviews and undisclosed influencer endorsements may be doing little to deter deception.
- The FTC will need to determine whether to create new requirements for social media platforms and advertisers and whether to activate civil penalty liability.
The FTC has also issued endorsement guidance setting forth where an when statements made in places such as internet blogs should disclose that a payment or other remuneration has been received in a clear and conspicuous notice and manner.