Hearing Aid Dispensing – Part VII

This blog is a continuation of a series describing events that shaped hearing aid dispensing channels in the U.S. The last blog ended by stating that some audiologists decided to become engaged in the sale of hearing aids, with or without ASHA (American Speech and Hearing Association) sanctions.

Unfair Practices Concerns

FTC Logo

Hearing aid dealers had been concerned since the initial draft of the ASHA Position Paper in 1971 (Resolution 13) that the association was undertaking an all-out, concerted, well-planned, nationwide program to disparage dealers in order to support its movement toward hearing aid dispensing by audiologists.  These efforts were equated with unfair practices.  Numerous materials, mostly newspaper articles, disparaging hearing aid dealers appeared from 1971 through 1974. {{1}}[[1]] The elimination of the hearing aid specialist, National Hearing Aid Society, March, 1975. [[1]] Most quoted audiologists (usually University Hearing Experts), were written by audiologists, endorsed audiologists, and carried themes such as:

  • Stricter laws must cover hearing aid dealers (Palm Beach Post Times, Palm Beach FL)
  • The billion dollar swindle, frauds against the elderly (The Plain Truth, March, 1971)
  • One should go through an audiologist and not a hearing aid dealer (Letter to Editor by audiologists quoting Consumer Reports)
  • Alleged abuses by hearing aid dealers (News Day, Inc., Garden City Long Island, NY)
  • Hearing aid salesmen bilk customers (The Miami Herald)
  • Hearing aid deals bilk elderly Americans (Idaho Statesmen)
  • Fast-talking hearing aid pitchmen, doping elderly (Los Angeles Times)
  • Hearing aid fraud, warning sounded (Tulsa Daily World)
  • Hearing aid buyers taken (St. Petersburg Times)
  • House to house hearing aid fraud growing (The Courier-Journal, Louisville KY)
  • Beware of hearing aid gyp (Cocoa Beach Times, Florida)
  • Many hearing aid buyers get taken by home peddlers (Arkansas Democrat)
  • Hearing aid sales pitch hit (The State Journal, Lansing MI)
  • Some hearing aid dealers take rather than aid (The Lakeland Ledger)
  • Elderly victims of hearing aid frauds (The St. Paul Pioneer Press)
  • The hearing aid sales game (The Sunday Star, Washington, D.C.)
  • Cut urged in costs of hearing aids – audiologists proposes selling them on a non-profit basis (NY Times)
  • Muffled pitch-hearing aid sales, talk can be trap (The Courier Journal, Louisville, KY)
  • Salesmen turn deaf ear to complaints (Dayton Daily News, Dayton, OH)
  • ASHA Manual on State Licensure urging audiologists to publicize shortcomings of hearing aid dealers (May 1973, p. 11)
  • Hearing aid abuses (The Sunday Sun, Baltimore, MD)
  • Hearing aids: beware of a phony pitch (Seattle Post Intelligencer, Seattle, WA)
  • Paying through the ear (Nader Report, 1973)
  • Hearing health system criticized by older Nader group (The Congressional Record, Oct, 29, 1973)
  • If you think you might have a hearing problem, I wouldn’t recommend a hearing aid dealer (Walton Reporter, Walton, NY)
  • Hearing aids: who is paying for what and should they?  (The Washington Post)
  • Audiologist not same as hearing aid dealer (Newport News, VA)
  • Hearing aid ‘rip-off’ found (NY Post Times, quoting University clinical audiologist)
  • Diagnosis by a hearing aid dealer can be a gamble for hearing-impaired (Detroit Free Press)
  • Hearing aid salesmen make millions preying on fears of the hard of hearing (National Enquirer)

The most effective campaign of disparagement occurred in the Twin Cities of Minneapolis and St. Paul, MN.  Clinical, VA, and University audiologists combined with the State’s Nader Group, Minnesota Public Interest Research Group (MPIRG), to prepare and publish a scathing 81-page attack on hearing aid specialists.  This was coordinated with an extensive muckraking article in the Minneapolis Star on November 13, 1972.  As a result of these efforts, hearing aid dispensers, including many competent and ethical ones, suffered severely, and some were forced out of business.  Both hearing aid sales and hearing aid evaluations in clinics dropped dramatically – primarily because the consuming public no longer trusted any of the parties involved, including the audiological community that was attempting to position itself as the model of competence.

The irony of all this is that almost all of the audiologists involved in providing information for these articles ended up selling hearing aids themselves or working in facilities that were later to sell hearing aids.

Even though many states already had licensing laws for hearing aid sales, all this publicity led to turf protection activities by all parties involved.  It was during this time that audiologists sought state licensure – often to exclude themselves from having to meet hearing aid license regulations.  Hearing aid dealers sought to ensure that their business and livelihoods were protected.  Physicians, especially ENTs, positioned themselves to be exempt from any hearing aid sales licensure, even if they dispensed hearing aids.  A thesis on this would result in a separate tome in itself and will not be expanded upon in this series.

Attempted Avoidance of FTC Rules and Regulations – Unfair Competition

Conflict Outcomes

Why is any of this disparagement issue important to recall?  It appears that ASHA, and its members, were circumventing FTC Rules and Regulations – most likely unknowingly.  After all, few if any were experienced in the business world.  Still, one would have thought that Executives of ASHA, and their legal counsel, should have been aware of this.  Or, perhaps they were, but believed that they were above the Rules and Regulations.  As one will read later in this series, it took a single ruling from the U.S. Supreme Court to let them know that they were not “special.”

To provide some background related to this issue, the Federal Trade Commission’s (FTC) Regulations of the Hearing Aid Industry {{2}}[[2]] Trade Practice Rules for the Hearing Aid Industry, Federal Trade Commission, Promulgated July 20, 1965 [[2]] specifically provided that it was improper to engage in the disparagement of a competitor and that this type of activity constituted unfair competition.

Page 2 of the “Trade Practice Rules for the Hearing Aid Industry,” included the following statement:

These rules promulgated by the Commission are designed to foster and promote the maintenance of fair competitive conditions in the interest of protecting industry, trade, and the public.  It is to this end and to the exclusion of any act or practice which fixes or controls prices through combination or agreement, or which unreasonably restrains trade or suppresses competition, or otherwise unlawfully injures, destroys, or prevents competition, that the rules are to be applied.

Included within these Rules was Rule 16, which reads:

Rule 16 – Defamation of Competitors or False Disparagement of Their Products.
(a)   It is an unfair trade practice to defame competitors by falsely imputing to them dishonorable conduct, inability to perform contracts, questionable credit standing, or by other false representations, or falsely to disparage the products of competitors in any respects, or their business methods, selling prices, values, credit terms, policies or services.
(b)   To represent falsely that competitors are unreliable but that the disparager is not.

It is doubtful that audiologist at that time were even aware of these early FTC Rules and Regulations, but they should have been.  They should have also been aware of the Sherman Antitrust Act of 1890, but again, most likely were not.  I would suspect that most dispensers today (both audiology and hearing aid) are probably not aware of the latter, even though it can affect their business activities.

Unfortunately, however, even the supposedly impartial FTC (with heavy ASHA influence) became involved by issuing alleged public service announcements extolling the virtues of the clinical audiologists and indirectly suggesting that the hearing aid specialist was not worthy of consideration by the hearing-impaired public.  All of this was in violation of their own Rules affecting the hearing aid industry.  A copy broadcast on KABC Los Angeles, CA, July 1974 follows:

FEDERAL TRADE COMMISSION, Washington, D.C. 20580
PUBLIC SERVICE ANNOUNCEMENT FOR RADIO FROM THE REGIONAL OFFICE OF THE FEDERAL TRADE COMMISSION.
:30 (95 words)

So, the salesman told you his hearing aid can restore perfect hearing to everybody.  Don’t you believe him.  No such hearing aid exists.  If you think you need a hearing aid, see an Audiologist before you buy, says the Federal Trade Commission.

An Audiologist is a hearing specialist who can tell if your hearing can be improved by a hearing aid and, if so, what kind of hearing aid will work best for you.  The Federal Trade Commission says consult an Audiologist before you invest in a hearing aid. He does not sell hearing aids for profit. (Emphasis added).

Potential Modification of the FTC Trade Practice Rules for the Hearing Aid Industry

In part because of the activities related to hearing aids and consumers, the FTC considered modifying the “Trade Practice Rules For The Hearing Aid Industry,” which had been promulgated in July of 1965.  The intent was to protect consumers from defective hearing aids, and was based on the collection of data coinciding with ASHA’s 1971 Resolution 13 Position Paper presentation.  It was primarily these data that led to the FTC’s first publication in the Federal Register of proposed hearing aid industry trade regulation rule (40 Fed. Reg. 26646, June 24, 1975.

Leading to, in anticipation of, and in active encouragement of this Federal Register publication, ASHA had been asking its members to compile a brochure of instances of hearing aid specialist abuses and feeding these to the FDA.  This was over a year prior to the Federal Register publication, suggesting to some that ASHA and the FTC were active cooperatives in this eventual direction.  Obtaining such abuses was cleverly embedded in what would appear to be a rather sincere request for information from ASHA members, including those who had no hearing aid experience.

ASHA letter, April 25, 1974.

Dear:
The Federal Trade Commission (FTC) is seeking information pertaining to hearing aids.  While ASHA is providing the FTC with material, this federal agency is also interested in a broad spectrum of input from individual audiologists.  Consequently, I am writing to you for your assistance in providing information to the FTC on any or all of the following topics.

1. Essential tests necessary to select a hearing aid.
2. Can a hearing aid be selected in a person’s home?
3.Should a hearing aid dealer perform hearing tests, and if so, for what purpose, what tests and under what conditions?
4. Quality control of hearing aids.
5. Competencies of hearing aid dealers.
6. What factors distinguish between an audiologist and a hearing aid dealer?
7. What information should be disclosed to persons seeking a hearing aid prior to their purchasing one – regardless of whether disclosure is made by a hearing dealer, audiologist, or a physician?
8. Trial period.  Your answer might address the following questions:

* Would an FTC rule requiring a 30 day trial period be useful?
* Does your center recommend trial periods, and if so, do you recommend a trial for all persons or for selected individuals?
* What are the typical costs to a person for a trial?
* What percentage of persons do not purchase aids following a trial?

9. Knowledge of hearing aid dealer abuses(Emphasis added)

Any information provided to the FTC concerning the above topics may be extremely helpful to them in proposing a new trade practices rule.  Comments should be forwarded by May 8, 1974 to: Russell Hatchl, Federal Trade Commission, and Washington, D.C. 20580.  If questions arise concerning this request, or if you want to discuss the topic with FTC, feel free to call Mr. Hatchl collect at area code (202) 962-4642.

Thank you in advance for considering this request, and I would appreciate receiving a copy of any information which you send to FTC.
Best regards,
Bob (Robert M. McLauchlin, Ph.D., Associate Secretary for Audiology Affairs)
cc: Russell Hatchl

Next blog:  The FTC new (1975) Proposed Trade Regulation Rule for the Hearing Aid Industry activities.

About Wayne Staab

Dr. Wayne Staab is an internationally recognized authority on hearing aids. As President of Dr. Wayne J. Staab and Associates, he is engaged in consulting, research, development, manufacturing, education, and marketing projects related to hearing. Interests away from business include fishing, hunting, hiking, mountain biking, golf, travel, tennis, softball, lecturing, sporting clays, 4-wheeling, archery, swimming, guitar, computers, and photography. Among other pursuits.

3 Comments

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  2. I’ve been enjoying your blogs. I hope they are eventually collated and printed somewhere, for on-line stuff often disappears into the ether. We’re really lucky that you are a careful historian, and are taking the time to put it all down before it fades from institutional memory.

    I had two thoughts as I’ve been reading. One is the memory, still fresh in my mind, of the reaction by my former classmates and the audiology faculty where I did my undergraduate work when I entered into dispensing in 1967. Both parties made sure that the ENTs in the area knew that I was an unethical audiologist, and were told not to refer to me under any circumstances. Since my business model was to only take referrals from ENT physicians,  this whispering campaign struck directly at the heart of my practice. This was totally unexpected and a shock, for I thought my professional approach to dispensing would be a welcome alternative to that of referring patients to retail dealers.  Sounds crazy in retrospect;  apparently I needed to be punished for my renegade behavior. It was inconceivable to the audiology establishment at the time that an audiologist would actually go over to the dark side and be involved with that sleazy business. They were convinced I would act in a dishonest manner and were ready to sacrifice one of their own for disobeying the rules. I bring this up to re-emphasize again the deep antagonism and hostility that existed between audiology and the industry at the time. It was palpable on both sides. 

    My second comment regards the move from single to multi-line dispensing. I’m thinking the transition started somewhat before audiologists began to refer to dealers. During and soon after WWII, and before the move  to transistor hearing aids, many small companies and ambitious  young entrepreneurs entered the fray. It was easy to get into the business for parts could be bought from suppliers who were all willing to sell to anybody.Your old company, Audiotone, along with Micronic, Aurex, Microtone, Goldentone, Qualitone, etc., all started that way, and having no distribution system of their own, piggy-backed onto the established main-line dealerships, Radioear, Sonotone, Telex, Zenith, Acousticon, Maico, etc. These startups offered inexpensive products, relatively easy credit, and no quotas. They were grateful if a dealer just bought one or two a month. In addition, Oticon, Bosch , Siemens, Widex and the rest began to make forays into the US market. Many of the startups became more successful than others, and grew into large companies, e.g., Beltone, and Dahlberg. Of course, as you say, the competition for referrals from audiology clinics was fierce and further exacerbated the change from single  to multi-line dealerships. But the explosion of small companies right after WWII started the shift, and eventually this fractionization of the marketplace was the the death knell for companies like Western Electric (Audivox), Otarion, Sonotone, Acousticon, Radioear, Zenith, Maico, etc. I was at Maico when that company decided to abandon protected territories and sell to everybody who wanted the product. It was a  disaster, for nearly overnight Maico lost 30-40% of the business of one of the most loyal dealer groups in the industry. On the other hand, those dealers were selling all kinds of hearing aid makes other than Maico anyway, so Maico probably had no alternative. And then Starkey popularized the custom hearing aid, selling to all, and stole more sales away from the remaining large companies.

    Interesting times.

    Jim Curran

  3. Holy Moly, Wayne! You bring up some really wicked memories in this blog. I remember where we were in those days though, and you sort of make it sound like audiology and audiologists were entirely at fault. I worked in two different states during these years, and on 3-4 different licensing groups. I recall most of the situations you are discussing, but some of them in an entirely different shading. ASHA was definitely a problem for audiology—so were the dispensers, as well as the physicians. And, I wish that audiology could take credit for the publicity arising from FTC, FDA, IHS, AAOO, Gray Panthers, CU, and all the others. They were trying times. Everyone crying “fire”. It’s difficult to remember all of it. Can’t wait for you to jog more memory next week.

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