As We See It

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.

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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.