Hearing Aid Dispensing – VIII

Wayne Staab
April 8, 2013

Hearing Aids and the FTC   Hearing aid

According to Federal Trade Commission archivists, the agency’s Bureau of Consumer Protection first began investigating hearing aids about January 1975.  A draft proposal to regulate the industry was published in the Federal Register on June of that year.

In the spring and summer of 1976, the FTC conducted 58 days of hearings on its proposal, heard 203 witnesses, and compiled more than 60,000 pages of documents.

In the eight years that followed, the FTC staff analyzed and re-analyzed the records, gathered additional post-hearing documents (an estimated 4,000 pages), and sent two proposed rules to the commissioners for consideration.  The entire process consumed more than 50,000 staff hours of time and probably cost about $700,000, according to FTC figures {{1}}[[1]] Inside the Economy.  Hearing Aids and the FTC, The Washington Post, Business and Finance, Thursday, June 7, 1984[[1]].  Yet, according to the FTC staff, they still had not definitely proven that there was a hearing aid problem.  Some observers believed that this confirmed their concerns that the FTC was an agency gone amok – a federal regulatory agency devoting enormous resources and years of analysis to a problem without ever reaching a conclusion.  Hearing aids were not alone in this, because at least 10 other rule-making proposals had been languishing before the agency for years.    Stacks of Reports

Then, after almost 10 years to toiling over whether to protect consumers from defective hearing aids, the FTC decided that further study was necessary.  The reason given by Commissioner George W. Douglas was that the record was so stale that if they promulgated a hearing aid rule based on the evidence on hand, they would be wasting everybody’s time.  The staff was directed to undertake a new $14,000 survey of hearing aid problems faced by the elderly.  New evidence on problems could be obtained easily by piggybacking on top of an ongoing survey of the elderly that the agency had been conducting as part of an investigation into nursing homes.  Besides, the FTC already had an investment into hearing aid abuse findings, and that “it would be a shame to let it die when we had a chance to get some good evidence fairly cheaply” (quoting Douglas in the Washington Post story).

FTC Commissioner Douglas, a conservative economist, was concerned because a study relating to actual hearing aid problems had not been conducted.  As he stated: “The commission took a lot of testimony….What they got was a bunch of anecdotal stories, you know, of people saying, ‘My Aunt Lizzy got screwed.’  We need to know how many Aunt Lizzys there are.”  But, as will be revealed, A number of changes in the hearing aid industry seemingly made much of the question obsolete.

FTC and FDA      FDA

Compounding FTC rule-making on hearing aids were  FDA (Food and Drug Administration) involvement with hearing aid regulations at the same time, and the fact that the hearing aid industry had already taken some steps to address consumer concerns.

For example, the original FTC notice of proposed rulemaking (1975) was based on testimony that many hearing-impaired consumers, particularly the elderly, were being pressured into buying hearing aids that either didn’t work or weren’t needed in the first place.  As a result, the FTC proposed a rule that would require a 30-day trial period for hearing aid purchasers.  However, the industry had already adopted a voluntary code calling on its members to offer such a trial.  Simultaneously, FDA was working on a Regulation draft to protect the health and safety of hearing-impaired Americans.  It eventually was published in the Federal Register as Code of Federal Regulations, Title 21, Volume 8. Part 801 February 15, 1977 {{3}}[[3]] Part 801, 42 FR 9296, Feb. 15, 1977[[3]].  It was divided into two sections and became effective August 25, 1977:

  • Section 801.420 – Hearing aid devices; professional and patient labeling
  • Section 801.421 – Hearing aid devices; conditions of sale

Additionally, the FDA had adopted a result requiring prospective hearing aid buyers either to first obtain a doctor’s examination or to waive their right to one in writing.  Douglas concluded that these changes suggested that many people would no longer be buying hearing aids blind.  He added the caveat that further rule-making might even harm consumers because of the increased price to hearing aids that would result.  Liberal Commissioner, Robert Pitofsky, arrived at this same conclusion in 1979.

FTC Terminates Hearing Aid Trade Regulation Rule

After over 10 years of proceedings, the Federal Trade Commission decided to terminate the Hearing Aid Trade Rule with a 4 to 1 vote on September 16th, 1985 {{2}}[[2]] Opening statement of Commissioner George W. Douglas concerning the hearing aid trade regulation rule, September 16, 1985[[2]].

The Commission also voted 4 to 1 to deny a petition filed by AARP and ASHA requesting a 90-day extension of the comment period that recently ended to allow completion of their organizations’ surveys and submission of the results in the rule-making record.  The Commissioners recognized that the AARP/ASHA information might be relevant, but considered the existing record evidence to be substantial and reliable support to take action rather than extending the process to consider additional data.

In support of its actions, the FTC reviewed all documents, including the results of the survey they requested by Market Facts, Inc. (the same group that had conducted another survey of the hearing aid industry in 1971 for the FTC).  This surveyed hearing aid consumer experiences with sales claims, guarantees, trial periods, prices, refund policies, sources of information, and referrals.  Results were placed in the public record and comments were solicited.  After reviewing comments, the Commissioners concluded that the data provided strong evidence that alleged abuses in the industry were not sufficiently prevalent to warrant promulgating a rule.

In making its decision, the Commission had already determined that an act or practice should be prohibited by means of an industry-wide trade regulation rule, rather than by bringing individual cases only if (a) there is substantial evidence that the act or practice is either deceptive or unfair, on the basis of the Commission policy statements on deception and unfairness; and (b) the following questions could be answered affirmatively:

  1. Is the act or practice prevalent?
  2. Does a significant harm exist?
  3. Will the proposed rule reduce that harm?, and
  4. Will the benefits of the rule exceed its costs?

FTC Reinforces its Involvement

Although the Commission terminated the rule-making process, the FTC reinforced its commitment to proceeding with law enforcement and educational efforts to assure consumers of hearing aids, and those in the industry, that unfair or deceptive practices would not be tolerated.  The Commissioners’ consensus was that the role of the FTC would be case-by-case enforcement, combined with educational programs.  They indicated also that FTC would welcome the opportunity to work with industry groups (all hearing-health related) to develop joint projects that would inform the hearing impaired of the different types and capabilities of hearing aids, the advantages and benefits of trial periods, the importance of comparison shopping, and to alert hearing aid consumers to deceptive practices.

Historical FTC Regulation Rule for the Hearing Aid Industry Time Line

June 24, 1975 – First publication in Federal Register of proposed hearing aid industry trade regulation rule (40 Fed.  Reg. 26646)

April 12 to August 17, 1976 – Hearings held

August 1977 – Presiding Officer’s Report released

September 1978 – Rulemaking Staff Recommendations released

March 29, 1979 – Conclusion of 120-day post-record comment period

October 24, 1979 – Commission met to consider staff recommendations

August 8, 1985 – Placement of the following documents on the rulemaking record:                                                    Memorandums to Commission:

  • Undated: Hearing aid industry: re-analysis of record and revised recommendations
  • Oct. 29, 1982: Richard F. Kelly
  • Nov. 1, 1982:  Christopher R. Brewster
  • April 14, 1983:  Amanda B. Pedersen
  • April 14, 1983:  Timothy J. Muris
  • April 14, 1983:  James Lacko
  • July 12, 1985:  Carol T. Crawford
  • July 12, 1985:  Amanda B. Pedersen
  • August 2, 1985:  Nathaniel Greenspun
  • 1985: A description of the experiences of recent hearing aid purchasers, Prepared by Market Facts, Inc.
  • Sept. 9, 1985:  Conclusion of 30-day comment period

September 16, 1985 – Termination of Federal Trade Practice Rule for the hearing aid industry.

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