FTC Begins Inquiry Into Marketing of Violence in Entertainment

Two months after President Clinton ordered a federal inquiry into the entertainment industry’s marketing of violent movies, music and video games, the Federal Trade Commission has issued its first requests for documents to the Motion Picture Assn. of America and the Recording Industry Assn. of America, among others, the FTC and industry sources confirmed Thursday.

Within the last week, so-called letters of request for information have been received by the MPAA that seek basic facts about how it is organized, how its rating system works and how filmmakers and movie studios negotiate to obtain certain ratings, according to sources.

The RIAA has received similar requests, a spokeswoman confirmed. The letters seek voluntary compliance, and the MPAA and the RIAA are cooperating.

“We have been meeting with the FTC and we will be responding,� said Susan Lewis, a spokeswoman for the RIAA, a trade organization that represents several hundred U.S. recording companies. At the MPAA, meanwhile, which represents seven of the major movie studios, employees are reportedly doing double duty, assembling reams of documents for the FTC.

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The 18-month, $1-million study, which Clinton called for in June, authorizes the FTC and the Justice Department to examine whether movie studios, record companies and video game manufacturers violate their voluntary rating systems by labeling some products as unsuitable for children and then marketing those products to youngsters.

Particularly in the wake of recent teenage shooting sprees, such as the one at a high school in Littleton, Colo., legislators have sought to examine the link, if there is one, between violent behavior and exposure to violent entertainment. The FTC study, however, specifically avoids analyzing the content of entertainment products, focusing instead on industry self-regulation and marketing practices.

One source familiar with the inquiry said FTC staff attorneys are “casting a big, big, big net� and trying to take “a broad survey of the landscape� to determine where, specifically, they ought to dig deeper. FTC spokeswoman Victoria Streitfeld would confirm only that the FTC has sent requests for information to “a number� of trade associations and individuals in the motion picture, recording and video game industries.

FTC Chairman Robert Pitofsky, who emphasizes that the inquiry is a fact-finding study and not an investigation, has said he hopes to work cooperatively with the entertainment industry. But in a recent speech before the National Assn. of Attorneys General, Pitofsky made it clear that the FTC has the authority--and the willingness--to issue subpoenas if its requests for voluntary access are denied.

“We have a distinct preference for voluntary production,� Pitofsky said. “In the end, however . . . we will use [the] compulsory process if we find it necessary.�

With the mailing of the FTC’s first letters of inquiry, the entertainment industry was formally put on notice that the criticism coming out of Washington is more than heated rhetoric. It is presumed that Hollywood’s major movie studios will soon receive letters, and it is unclear how they plan to respond. According to some estimates, each studio can expect to spend at least $1 million in legal fees. (While all the studios have in-house counsel, many expect to hire outside firms to help handle what some fear could be an enormous volume of documents requested by the federal agencies.)

When those formal requests are received, movie studios and other entertainment companies will begin negotiating not only whether they will hand over the information but how they will do it. Depending on what the FTC wants, its requests will likely pose a logistical challenge, given that memos about a movie’s target audience and marketing strategies--to name a few key topics--are not all kept in one place but are intermingled with other documents.

As one studio executive said Thursday, “It’s not like they’re in a big folder marked ‘Sensitive.’ �

In its investigations of other industries, the FTC has been known to install a staff attorney at the corporate headquarters to sift through documents to determine what is relevant--a maneuver that can save time and photocopying fees. But the prospect of such an arrangement is likely to worry entertainment companies, given the proprietary information that is held within their files and the highly competitive nature of their business.

Another unanswered question is whether the FTC will seek to examine the thousands of internal e-mail messages that are exchanged each day inside such companies. More than one executive in Hollywood has wondered lately what embarrassing--though not necessarily relevant--tidbits such a survey would unearth.

Arthur Amolsch, the editor of FTC Watch, a newsletter that covers antitrust and trade regulation activity, said the letters sent to the entertainment industry over the last several days are the typical first step in an FTC inquiry. And if the industry is cooperative, this may be the only type of request anyone will receive.

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But if the FTC wants to, Amolsch notes, it can not only demand the release of existing documents via subpoena but can also order corporations to compile information that doesn’t yet exist. This latter authority, called an order to file a special report, is designed to respond to corporations who argue that they simply do not have the information the FTC seeks.

“You don’t have any choice,� Amolsch said of this type of request. “The FTC says, ‘We want you to go and compile the following data. We don’t care if it exists. We need it, and we need it by this date.’ �

A recent order issued to the cigar industry, for example, sought data on everything from the number of cigars sold a year to the total dollar amount spent on cigar advertising, merchandising and promotion.

“The FTC has the broadest authority,� Amolsch said. “If the entertainment industry is smart, they’ll just cooperate. If they’re not, they’ll end up in a court fight.�