As We See It

Two New FTC Rules

Jim Austin  |  Oct 14, 2024

The US Federal Trade Commission (FTC) has issued two new/newly revised rules relevant—or possibly relevant—to the hi-fi industry.

As John Atkinson reported in the October Stereophile (see Industry Update), the FTC recently announced a revision to the "Amplifier Rule," with changes that took effect in August. It's the culmination of a process that lasted several years and a significant modification of a rule that has been in place for half a century. Amplifier manufacturers take note. Then in mid-August, the FTC announced the final version of a new rule aimed at banning fake reviews and fake product testimonials. It also forbids companies from intimidating people engaging in critical speech.

First, though, the amplifier rule: From the start, the purpose of the rule has been—quoting JA—"to impose uniform, conservative standards on how domestic power amplifiers were rated and advertised." Following a revision in 2020, the rule required manufacturers to express the maximum power output of their products as "average continuous power in watts," into a load impedance of 8 ohms, with all associated channels driven—although later the FTC issued a correction, saying that for multichannel amplifiers, only the main (L, R) channels needed to be driven. The rule requires manufacturers to indicate the bandwidth over which the specification applied (ie, 20Hz–20kHz) and the maximum THD+N over the power range from 0.25W to the rated maximum power. The rule indicates how the amplifier must be preconditioned before the measurement is made.

In 2020, the FTC proposed eliminating the rule altogether and sought comment. Among the commenters were Atma-Sphere founder Ralph Karsten and our own John Atkinson, both of whom advocated keeping it. Their opinions (and concurring ones) carried the day. The rule was kept but revised; in fact, it was strengthened. Here's what it now says, in a nutshell.

Manufacturers are not required to specify the maximum output of the amplifiers they make, but if they do, the measurement must be made after preconditioning the amplifier for an hour at 1/8 the maximum rated power into an 8 ohm load. In a stereo amplifier, both channels must be driven. "After the input signal has been continuously applied at full rated power for at least five minutes," the amplifier must be able to operate "at any power level from 250mW to the rated power at all frequencies within the rated power band of 20Hz to 20kHz without exceeding 1.0% of total harmonic distortion plus noise (THD+N) at an impedance of 8 ohms."

This is all familiar except for one key phrase. Previously, manufacturers measured power by driving their amplifiers at 1kHz and raising the power until the THD+N reached 1%. Now they must ensure that that standard is met at all frequencies between 20Hz and 20kHz, with THD+N less than or equal to 1%. For most amplifier circuits, the highest THD+N occurs at 20kHz.

Take a look at fig.7 in JA's measurements of the excellent Parasound JCA100 (footnote 1). At 20V into 8 ohms, the Parasound's THD+N is roughly 10 times higher at 20kHz than at 1kHz, 0.07% compared with 0.007%.

Hence, unless I'm missing something, the new rule will require most amplifier manufacturers to dramatically reduce their maximum power-output claims.

To repeat: The rule applies to any manufacturer that chooses to specify maximum output power. The specification must be labeled "FTC Power Output Rating." Companies are free to publish other, supplementary power specifications, but they must be presented less prominently than the FTC rating and labeled with specific language: "This rating was not tested under the FTC standard." This language must also be prominent and must not appear in "a footnote, asterisk, or similar notation."

What about the other rule, the new one? On August 14, the FTC issued a press release describing the new rule (footnote 2), the culmination of a process that commenced in 2022. It prohibits:

• Product reviews by "people" who don't exist, including reviews written using AI (artificial intelligence);

• Compensation in return for reviews, either positive or negative, whether the offer of compensation is conveyed "expressly or implicitly";

• Reviews written by "company insiders," including relatives, that "fail to clearly and conspicuously disclose" the connection to the business; this is the only explicit disclosure requirement;

• Company-controlled review websites that present themselves as independent;

• The use by companies of "unfounded or groundless legal threats, physical threats, intimidation, or certain false public accusations" to suppress negative reviews;

• "Selling or buying fake indicators of social media influence, such as followers or views generated by a bot or hijacked account."

If I'm reading it right, violations carry a maximum civil penalty of $51,744 each, though the FTC may apply much smaller penalties.

I spent days cogitating on what impact, if any, this new rule might have on Stereophile. I asked myself every hard question I could think of and came to a clear conclusion: Assuming the rule applies at all, Stereophile is in full compliance. To be certain, I sent a note to the FTC: Does this rule apply to us? If so, exactly how?

The answer came from Michael Ostheimer, an FTC attorney. "The new rule only applies to commercial speech and not journalism. It does not apply to your publication."

Consider, though, that the rule mentions "influencers" repeatedly. For those unfamiliar with the term, an influencer is a new kind of marketer that promotes products online, usually in videos on YouTube, TikTok, and elsewhere, typically in exchange for cash or free stuff. There may be—I really don't know—people who consider themselves "influencers" who are nonetheless principled, objective judges in full compliance with the new rule. Principled independent reviewers do exist—there's no doubt about that—and they have my full respect. As for the other kind, they probably should consult their attorneys.

Footnote 1: I chose the Parasound amplifier as an example because its measured performance is exemplary.

Footnote 2: See ftc.gov/news-events/news/press-releases/2024/08/federal-trade-commission-announces-final-rule-banning-fake-reviews-testimonials.

COMMENTS
teched58's picture
Submitted by teched58 on October 14, 2024 - 6:46am

EIC JA2 wrote that the new FTC rules prohibit the following: "Compensation in return for reviews, either positive or negative, whether the offer of compensation is conveyed "expressly or implicitly."

By its plain meaning, this rule prohibits giving reviewers industry/accomodation discounts on equipment. It also prohibits "permanent" loans. Both are forms of compensation. (While a publication is journalism, individual freelance writers might be influencers. Unless they are FTEs of the pub.)

So therefore any magazine that has reviewers engaging in the above is non-compliant with the new FTC rules.

All audio mags and sites should ask their reviewers to sign a pledge that they are in compliance.

supamark's picture
Submitted by supamark on October 14, 2024 - 11:37am

Tell me you don't know how accomodation pricing works without actually saying so lol. If you like an item under review, you *may* have the opportunity to purchase it at dealer cost. Sometimes there's a very limited number of review samples so off it goes to the next person whether you want it or not. There is NO discussion about it before the review, unless the mfg needs the item to move along to the next reviewer (as in no, you can't buy it).

You can also get accomodation pricing from mfg's you'll never review (no quid pro quo), but your publisher has to have a good relationship with the mfg. Hi-end audio is very much a people business. There was at least one well known mfg my Canadian publisher didn't get along with, and I have no idea why (and won't name names - though he did excoriate Accuphase in print for their US distributor's price gouging, and was right to do it, after a glowing review).

Now, there are some reviewers that will purchase stuff for the purpose of resale. Keep in mind when you purchase via accomodation you cannot sell it for some period (usually 2-3 years, you sign a contract), so it's not exactly quick money. Many reviewers have other jobs or got their bag (money) before writing, because reviewing generally doesn't pay that well. Stereophile probably pays better than most though, NYC ain't cheap.

Oh, and writing a quality bad review is a real slog and difficult to actually pull off; and nobody pays you enough to spend a month or more of your life listening to that awfulness to do it. Therefore, you don't see many.

F'ing armchair lawyers...

On another note, the dude that runs/owns Tekton is in for a rude and expensive awakening if he doesn't change his tune ASAP (assuming any reviewer will ever touch his stuff again, which I doubt).

Glotz's picture
Submitted by Glotz on October 14, 2024 - 12:16pm

than your facts and experience. Armchair, indeed.

By law, these journalists are NOT required to do as you claim- give a pledge or follow these new influencer laws.

They have already made a pledge to readers that they do not in any way pay for play.

teched58's picture
Submitted by teched58 on October 15, 2024 - 5:45am

I can't help you and Mr. Handle(er), because neither of you seem to understand what I'm talking about.

If you'd worked in publishing, you'd understand.

P.S. If you get value (e.g., discount, permanent loan), irresepective of where it is in the process or whether or not it was explicitly discussed at any prior point, that is pay for play.

Glotz's picture
Submitted by Glotz on October 15, 2024 - 9:15am

No, that does not follow logically. Non-sequitur that you filled shit in between to simplify your argument.

Mark and the rest of these writers have worked in publishing.

supamark's picture
Submitted by supamark on October 15, 2024 - 12:01pm

I wrote for the SoundStage! network of online magazines for about 3 years, I understand this subject far better than you ever will. Maybe you should actually have experience in the subject before opening your pie hole. What audio publication(s) have you written for? Yeah, that's what I thought.

Review samples, are by their nature, used. Can't be sold as new to a dealer but the mfg can still recoup costs via accomodation or tax write-off. An accomodation sale is better for the company's cash flow. Non-review accomodations are still a full price sale for the company, just cutting out the middlemen who ~double the consumer price.

Here's the review for the one item I purchased after review:
https://www.soundstagesolo.com/index.php/equipment/amplifiers/281-kinki-studio-vision-thr-1-headphone-amplifier

It's not even my most glowing review, I bought it as much for its' unique sound as I did for work purposes since I was reviewing a lot of headphone amps at the time and needed more variety. So two birds. Not HR level variety, but still. Herb's speaker/amp collection actually makes his reviews translate better because different combo's give different results. No more accomodation = far less useful reviews. If a reviewer buys something they reviewed, that is more an endorsement of how much they like the product than anything else. I also purchased a Bryston 4B^3, here's my one (possibly run-on) sentence review: A very good amp that should be able to drive any speaker but it uses too much loop negative feedback which blunts transients; and doesn't image quite as well as my Pass Labs XA-30.8.

Topping or Pro-Ject could have offered me a free system and I would have told them to shove that crap back where it came from. Because it's crap, and I don't want it. MBL? Not crap, but still wouldn't want it because it isn't my taste. Pass Labs? Already have a full Pass system, it's awesome... but sure I'll take an upgrade to XS.

Are you trying to claim you can't get work tools at a discount in other professions? Musician sponserships work the same way (dealer pricing for instruments) unless you're like Taylor Swift or something. Hell, PMC literally *gives* away their crappy studio monitors to mix engineers and studios (nobody really wants them), then uses them in advertorials like an endorsement if the entity accepts the gift. That is actually concerning. An Atmos mix setup is expensive, and the studio business isn't exactly profitable though it is a good way to launder money (a restaurant is even better).

I'm kinda surprised that KR's recent speaker shopping wasn't made into a feature series - "Kal goes speaker shopping." It's like regular speaker shopping, but with extended home demos and a book report due at the end of each one.

Long story short (too late, I know), accomodation sales are a win for the company, a win for the reviewer, and a win for the consumer since reviewers have better systems with components you'll recognize and/or have been reviewed to work with. It also gives you a very clear window into the reviewer's taste in gear. I don't do reviews any more because listening to gear instead of music took the joy out of listening to music. A review for a THX AAA based headphone amp that wasn't published was the final straw - that thing sucked because of the THX AAA circuit being fatally flawed and I hated having to listen to it; trying to write a professional review of something awful was a bridge too far. Now, I enjoy music again.

teched58's picture
Submitted by teched58 on October 16, 2024 - 4:53am

That's a new one on me, three-year freelancer. Publicly admitting that you took discounts.

The New York Times prohibits reporters from accepting "discounts, gifts or other inducements."

If an accomodation discount has absolutely nothing to do with any reviews you wrote, nor anything to do with the relationship between the manufacturer and the review, but instead is just a big win-win-win-win-win for equipment which would otherwise be unsellable, what you should do is NOT take the discount with the review, but instead call a manufacturer (any manufacturer) separately from your reviewing and say you'd like their accomodation discount. See what they say.

Glotz's picture
Submitted by Glotz on October 16, 2024 - 12:28pm

Teched tries to impugn people, but using bad logic is really just suspect.

Supamark is vastly more transparent as a writer and person than Teched has ever shown.

Failing to miss the most important point-

The manufacturer is providing a single demo sample for consumption to multiple reviewers- AT A LOSS to themselves outright.

The accommodation is to sell to a reviewer at half price (their cost) so that they don't LOSE MONEY helping reviewers REVIEW their gear.

Otherwise they DON'T get reviewed.

The demo unit is NOT going to be resold. Not to a dealer or anywhere else. Again, it would be a pure loss to the mfg. Not a winning proposition for any small manufacturer, right?

Buying every component as a magazine for a review is also cost-prohibitive.

Hoping that the unit would be thrown out would be even more illogical.

Once again, Teched, your logic sucks.

supamark's picture
Submitted by supamark on October 17, 2024 - 10:45pm

Nor would I, their unethical behavior was quite helpful in W's quest to start a war in Iraq. That ain't their only sin. You should probably look elsewhere for actual ethics. Not politics. Or business. Or religion. Well crap, it's a downright unethical world we live in.

This is more about social media influencer types and outright free gifts, which ain't the established hi-fi press. In the established press, if someone buys the review sample they really liked it, the mfg got their full profit margin, and it can't be flipped for years. If you have people skills you're better off just working directly for a dealer, ~same discount but no book report.

It is sadly happening in the pro audio press though - even Howie Weinberg is selling out (for KRK of all brands) in a couple advertorials in MixOnline currently. I guess the mastering biz is less profitable than it used to be. PMC and SSL are the kings of gift related advertorials/"news" items right now. Oh look who they gave free stuff to this week, yawn.

I'm no longer a "freelancer" as you so disdainfully put it, I'm an early retiree from like 5 different careers who has to settle for going to the dealer to listen to his brand new (full list price!) Dynaudio Confidence 60 speakers until my whole house remodel is finished (this year, fingers crossed). They're freakin' great (the speakers, and the dealer Origin Hi-Fi), they literally sound twice as good as the Confidence 30's for a little more than twice the price. The amount of information coming through is almost overwhelming. Now that's value! I think they're also twice as big lol. Oh, and neener neener :P

Considering that manufacturer discounts and relationships happen in every industry, I guess we'll have to shut down the free market and go full Socialism. I should probably call my broker... lol.

On actual topic, I would have liked to see rules about publishing specs at 4 Ohms since that's where speakers are going. Also, I really hope this doesn't lead to more loop negative feedback... eww.

mauidj's picture
Submitted by mauidj on October 15, 2024 - 7:17am

Armchair or other but it seems pretty straightforward to me.

"Compensation in return for reviews, either positive or negative, whether the offer of compensation is conveyed "expressly or implicitly."

So are you saying offering a discount on a reviewed product is not compensation?

From your comment it sounds like you are a lawyer….and a bit of a rude one at that.

supamark's picture
Submitted by supamark on October 15, 2024 - 9:15am

You have to buy the item, at the same price a dealer would. It's not a gift, it's a sale on the company's ledger. Since it is a used item, it won't be sold at full price regardless. You can usually get the item at the same price on the used market (or cheaper!) if you're patient. They can sell it to you, write it off as a promotional expense on their taxes, or consign it for sale with someone like The Music Room. It's all the same to the company's balance sheet. From your comment it sounds like you don't have a clue what you're talking about and should stay out of a conversation you were not invited to. Talk about rude.

Also, you don't even know if you can (or want to) buy the product until the review is written and turned in. A lot of the time the answer is no, because it needs to be sent to the next reviewer and they don't have spares.

JohnnyThunder2.0's picture
Submitted by JohnnyThunder2.0 on October 15, 2024 - 3:05pm

A component being offered to a reviewer at a discount in EXCHANGE for a good review is unethical and there may be bloggers etc. that do that. But how many times have we read something like this in a magazine - "I liked this component so much that I bought the review sample..." That is NOT compensation and is not unethical. That's just getting a professional discount and there is nothing unethical about that action. That's just a good relationship with a manufacturer or a marketing person. Should the manufacturer insist on good follow up reviews after that? Well they can reasonably expect that based on the reviewer's prior purchase but that's about it. It cannot be guaranteed and to expect or insist on a good review would be crossing the line. There is a big difference to me in those two actions. And do we know if the hyper ethical audio Taliban types at ASR ever got a nice little "gift" from Topping in exchange for all the glowing reviews Amir and co. have bestowed on them? I love how some commenters think this is some WIN against subjective reviewing methodologies. It's simply the same as the EPA making car manufacturers report their carbon emissions accurately and consistently across the automotive industry.

cognoscente's picture
Submitted by cognoscente on October 14, 2024 - 7:27am

All that fuss about watts, distortion percentage and all other types of measurements are just an attempt to objectify something that is subjectivity (music reproduction and experience). I never look at measurements, after all it says nothing about how it sounds. So in this respect, whatever (those new rules).

Then: is Stereophile an influencer? I say yes and a very big and important one, like What Hi-Fi? in the UK (although they serve another target group / price level, read: down to earth prices) and the German Stereoo for example. These new rules are not intended for them but all those vague types around SM with "advice" about investments/bitcoins, fashion, cosmetics, travel, food/losing weight etc etc like also hifi. That they tackle those types is good. Finally I would say! Fortunately I read more and more often about really high fines being imposed on these types for misleading. That is why I welcome these new rules.

Glotz's picture
Submitted by Glotz on October 14, 2024 - 12:10pm

For journalist-based magazines. The definition as influencer does not apply here as they are not social media influencers.

cognoscente's picture
Submitted by cognoscente on October 15, 2024 - 3:56am

everyone influences everyone, so seen that way and in a philosophical way everyone is an influencer. The power / influence that Stereophile has in the audio world is hugh (and Stereophile knows that all to well) that is why Stereophile is certainly an influencer. Influenced is not limited to SM, although thanks to Mark and his (other criminal, or at least morally questionable) buddies vague unreliable types get the chance to make a revenue model of deception (or undermine democracy, but that discussion does not belong here). Let Stereophile be careful not to slide too much in that direction, often it creeps me out that a review is actually a (paid?) advitorial. But maybe that's just my (healthy) suspicion.

Glotz's picture
Submitted by Glotz on October 15, 2024 - 9:09am

They are not social influencers, but journalists. Audio journalists.

I get where you are coming from on this, but healthy suspicions are unfounded here and therefore unhealthy to claim.

A revenue model of deception means that you have some kind of evidence to back it up.

I don't see you or anyone ever complaining about Headphones.com and they actually use their own reviews with an actual retail website connected on to it.

That is far more sus than anything Stereophile does or writes about.

Mark is a criminal? Right. Stop.

I think you assume you understand the industry more than you do, and like Teched, you get most of it wrong.

You worry about OPTICS, versus the ACTUAL truth.

It's what's unseen and unseemly- to even answer you from Stereophile's perspective. It's an old and never-ending trope with zero proof of collusion.

None of these reviews are paid in any way. Not even with long-term loans.

What's funny is none want to see the validity in what a reference product is for the reviewer.

If you don't 'get' that or refuse to see the need and value in a series of references, please put your keyboard away. You do not understand audiophile scientific process, then.

georgehifi's picture
Submitted by georgehifi on October 14, 2024 - 12:17pm

Things like Synergistic Research $300 ac mains fuses that are claimed to be directional, idiotic!!

Proper measurements will mean more than ever, is a good thing.
Like those done here Miller Audio Research and at ASR

Cheers George

ChrisS's picture
Submitted by ChrisS on October 14, 2024 - 1:35pm

"Things... that are claimed to be directional, idiotic!! "

Like Ford vehicles!

georgehifi's picture
Submitted by georgehifi on October 15, 2024 - 12:08am

??

ChrisS's picture
Submitted by ChrisS on October 15, 2024 - 8:56am

Yes...

Downhill!

georgehifi's picture
Submitted by georgehifi on October 15, 2024 - 12:03pm

Downhill!?? (Still don't get it)

Let's make it simple simple are you pro voodoo in audio or against it?
(BTW I don't mind Fords, in Australia it's Jeeps that are a reliability joke) The classic saying here is "Really! you bought a Jeep!"

mauidj's picture
Submitted by mauidj on October 15, 2024 - 7:21am

….it was directed at dCS and their recent legal threats aimed at that guy who gave a slightly negative review to one of their overpriced boxes.

Glotz's picture
Submitted by Glotz on October 15, 2024 - 9:11am

Totally misleading.

They sued Headphones.com, simply that.

They did NOT publish some form of harassment.

Mis-or Dis-information is worse than that. Get it right.

mauidj's picture
Submitted by mauidj on October 15, 2024 - 10:34am

I did not say they actually sued anyone
I do not believe they sued headphones.com
They sent a letter to @goldensounds supposedly threatening legal action.
I NEVER said they published anything.
Even so my comment was not Totally misleading....no more than yours anyway.
Get it right.

Glotz's picture
Submitted by Glotz on October 15, 2024 - 11:21am

You stated or implied the FTC law was written due to dCS' actions.

You're backtracking on your statement.

If dCS threatened to sue or sued Headphones.com that is their right and they wouldn't be prevented in doing so due to this law.

The FTC doesn't state anywhere that they can't sue for damages, but rather not harass a reviewer.

I can assume you haven't heard dCS' expensive 'boxes' either.

David Harper's picture
Submitted by David Harper on October 15, 2024 - 10:03am

Hard to believe the FTC is spending time and resources on an issue as unimportant as home stereo amplifiers. I would have thought there were more serious concerns.

supamark's picture
Submitted by supamark on October 17, 2024 - 10:50pm

Depending on who wins next month, they might be sitting around twiddling their thumbs for the next 4 years so might as well get some work done now.

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