Metro Passbook, Inc., and Richard Natow

Page 9

[Docket No. C—25091 PART 13— PROHIBITED TRADE PRACTICES Metro Passbook, Inc., and Richard Natow Subpart—Advertising falsely or mis­ leadingly: § 13.75 Free goods or services; § 13.155 Prices; 13.155-15 Comparative; 13.155-40 Exaggerated as regular and customary;

13.155-70 Percentage sav­ ings; 13.155-100 Usual as reduced, spe­ cial, etc.;. § 13.160 Promotional sales plans; § 13.240 Special or limited offers; § 13.260 Terms and conditions. Subpart— Failing to maintain records; § 13.1051 Failing to maintain records; 13.1051- 20 Adequate; Subpart—Misrepresenting oneself and goods— Goods: § 13.1625 Free goods or services; § 13.1760 Terms and conditions..—Prices : § 13.1785 Com­ parative; § 13.1805 Exaggerated as regu­ lar and customary; §, 13.1823 Terms and conditions; § 13.1825 Usual as reduced or to he increased. —Promotional sales plans: § 13.1830 Promotional sales plans. Subpart—Offering unfair, improper and deceptive inducements to purchase or deal: § 13.1925 Coupon, certificate, check voucher, e tcd e d u c tio n s in price;

§ 13.1955 Free goods; § 13.2000 Limited offers or supply; § 13.2080 Terms and conditions.

(Sec. 6, 38 Stat. 721; (15 UJS.C. 46). Inter­ prets or applies sec. 5, 38 Stat. 719, as amended; (15 U.S.C. 45 [Cease and desist order, Metro Passbook, Inc., et al., Philadel­ phia, Pa., Docket C-2509, Mar. 28, 1974] In the Matter o f Metro Passbook, Inc. a Corporation, and Richard Natow, in­ dividually and as an Officer of Said Corporation Consent order requiring a Philadel­ phia, Pa., seller of promotional coupons, among other things to cease misrepre­ senting the terms and conditions regard­ ing the use of its coupons; misrepresent­ ing the prices of its coupons as sale prices; failing to maintain adequate rec­ ords substantiating its claims; and mis­ representing savings afforded to pur­ chasers or that merchandise or services are “free.”

No. 87—Pt. I----2 FEDERAL REGISTER, V O L 39, NO. 87— FRIDAY, M AY 3, 1974

Page 10

15386 The order to cease and desist, includ­ ing further order requiring report of compliance therewith, is as follows: It is ordered, That respondents Metro Passbook, Inc., a corporation, its succes­ sors and assigns, its officers and Richard Natow, individually and as an officer of said corporation and respondents’ agents, representatives, and employees, directly or through any corporation, sub­ sidiary, division, or other device, in con­ nection with the advertising, offering for sale or sale of promotional coupons, or any other merchandise or service, in “ commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from :

1. Representing, directly or by impli­ cation, that through the use of respond­ ents’ promotional coupons the purchase of any item at participating restaurants entitles the buyer to any second item free of charge.

2. Representing, directly or by implica­ tion, that through the use of respond­ ents’ promotional coupons the purchase of any ticket at participating sport ex­ hibitors entitles the buyer to any second ticket free of charge.

3. Representing, directly or by impli­ cation, that respondents’ promotional coupons are accented bv participating theaters and other places of entertain­ ment for any and all performances. 4. Representing, directly or by impli­ cation, that respondents’ promotional coupons may be used at any and all times. 5. Representing, directly or by implica­ tion, that the number of restaurants or establishments that honor respondents’ promotional coupons is greater than those that do in fact honor respondents’ promotional coupons.

6. Using the word “Sale”, or any other word or words of similar import or mean­ ing not set forth specifically herein unless the price of such merchandise being offered for sale constitutes a reduction, in an amount not so insignificant as to be meaningless, from the actual bona fide price at which such merchandise was sold or offered for sale to the public on a regular basis by respondents for a rea­ sonably substantial period of time in the recent, regular course of their business. 7. (a) Representing, directly or indi­ rectly, orally or in writing, that by pur­ chasing any of said merchandise or serv­ ices, customers are afforded savings amounting to the difference between respondents’ stated price and respond­ ents’ former price unless such merchan­ dise or services have been sold or offered for sale in good faith at the former price by respondents for a reasonably substan­ tial period of time in the recent, regular course of their business. (b) Representing, directly or indirectly, orally or in writing, that by purchasing any of said merchandise or services, cus­ tomers are afforded savings amounting to the difference between respondents’ stated price and a compared price for said merchandise or services in respond­ ents’ trade arça unless a substantial number of the principal retail outlets in the trade area regularly sell said mer- RULES AND REGULATIONS chandise or services at the compared price or some higher price. (c) Representing, directly or indi­ rectly, orally or in writing, that by pur­ chasing any of said merchandise or serv­ ices, customers are afforded savings amounting to the difference between re­ spondents’ stated price and a compared value price for comparable merchan­ dise or services, unless substantial sales of merchandise of like grade and quality are being made in the trade area at the compared price or a higher price and unless respondents have in good faith conducted a market survey or obtained a similar representative sample of prices in their trade area which establishes the Validity of said compared price and it is clearly and conspicuously disclosed that the comparison is with merchandise or services of like grade and quality. 8. Representing, directly or by implica­ tion, orally or in writing, that purchasers of respondents’ merchandise will save any stated dollar or percentage amount without fully and conspicuously dis­ closing in immediate conjunction there­ with, the basis for such savings repre­ sentations.

9. Faffing to maintain and produce for inspection or copying for a period of three (3) years, adequate records (a) which disclose the facts upon which any savings claims, sale claims and other similar representations as se’ forth in Paragraphs Six, Seven, and Eight of this order are based, and (b) from which the validity of any savings claims, sale claims and similar representations can be determined.

10. Representing, directly or indirectly, orally or in writing, that any price amount is respondents’ regular price for any article of merchandise or services unless said amount is the price at which such merchandise or services have been sold or offered for sale by respondents for a reasonably substantial period of time in the recent, regular course of their business and not for the purpose of establishing fictitious higher prices upon which a deceptive comparison or a “free” or similar offer might be based. 11. Representing, directly or indirectly, orally or in writing, that a purchaser of respondents’ merchandise or services will receive “free” bonuses, passes or values of any other “free” merchandise, services, gifts, prizes or awards unless all conditions, obligations, or other pre­ requisites to the receipt and retention of such merchandise, services, gifts, prizes or awards are clearly and conspicuously disclosed at the outset in close conjunc­ tion with the word “free” wherever it first appears in each advertisement or offer. 12. Representing, directly or indirectly, orally or in writing, that any merchan­ dise or services is furnished “free” or at no cost to the purchaser of advertised merchandise or services, when, in fact, the cost of such merchandise or services is regularly included in the selling price of the advertised merchandise or serv­ ices.

13. Representing, directly or indirectly, orally or in writing, that a “free” offer is being made in connection with the introduction of new merchandise or serv­ ices offered for sale at t specified price unless the respondents expect, in good faith, to discontinue the offer after a limited time and commence selling such merchandise or services, separately, at the same price at which it was sold with a “free” offer.

14. Representing, directly or indi­ rectly, orally or in writing, that mer­ chandise or services are being offered “free” with the sale of merchandise or services whichv are usually sold at a price arrived at through bargaining, rather than at a regular price, or where there may be a regular price, but where other material factors such as quantity, qual­ ity, or size are arrived at through bar­ gaining.

15. Representing, directly or .indi­ rectly, orally or in writing, that a “free” offer is available in a trade area for more than six (6) months in any twelve (12) month period. At least thirty (30) days shall elapse before another such “free” offer is made in the same trade área. No more than three such “free” offers shall be made in the same area in any twelve (12) month period. In such period, re­ spondents’ sale in that area of merchan­ dise or services in the amount, size or quality promoted with the “free” offer shall not exceed 50 percent of the total volume of its sales of merchandise or services, in the same amount, size or quality, in the area.

16. Representing, directly or indi­ rectly, orally or in writing, that mer­ chandise or services are being offered as a “gift” , “without charge”, “bonus”, or by other words or terms which tend to convey the impression to the consuming public that merchandise or services are free, when the use of the term “free” in relation thereto is prohibited by the pro­ visions of this order.

It is further ordered, That respondents shall forthwith deliver a copy of this order to cease and desist, and a copy of the Commission’s news release setting forth the terms of the order, to each advertising agency and advertising me­ dium, such as newspaper publishing com­ panies, radio stations or television sta­ tions, presently utilized in the course of their business, and that respondents shall, immediately .upon opening an ac­ count, deliver a copy of such order and news release to any such agency or me­ dium with which they subsequently open an account.

It is further ordered, That respondents shall forthwith deliver a copy of this order to cease and desist to each of their agents, representatives and employees engaged in the offering for sale or sale of respondents’ merchandise or services, or in any aspect of the creation, prepara­ tion or placing of respondents’ advertise­ ments and that respondents shall deliver a copy of such order to each such person whom they subsequently employ, imme­ diately upon employing each such per­ son and that respondents shall secure from each such person a signed state- FEDERAL REGISTER, V O L 39, NO. 87— FRIDAY, M AY 3, 1974

Page 11

RULES AND REGULATIONS 15387 ment acknowledging receipt of said carder.

It is further ordered, That respondent corporation shall forthwith deliver a copy of this order to each of its operat­ ing divisions.

It is further ordered, That respondents shall notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondent, such as dissolution, assignment or sale result­ ing in the emergence of a successor cor­ poration, the creation or dissolution o f subsidiaries or any other change in the corporation which may affect compliance obligations arising out of the order. It is further ordered, That the individ­ ual respondent named herein promptly notify the Commission of the discontin­ uance of his present business or employ­ ment and of his affiliation with any new business or employment. Such notice shall include respondent’s current busi­ ness address and a statement as to the nature of the business or employment in which he is engaged as well as a descrip­ tion of his duties and responsibilitiés. It is further ordered, That the re­ spondents herein shall within sixty (60) days after service upon them o f this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. Issued: March 28, 1974.

By the Commission.

Essàl]:

C harles A . T o b in , Secretary.

[PE Doc.74-10167 Filed 5-2-74; ft: 45 ami Title 16— Commercial Practices CHAPTER I— FEDERAL TRADE COMMISSION SUBCHAPTER D— TRADE REGULATION RULES PART 432— POWER OUTPUT CLAIMS FOR AMPLIFIERS UTILIZED IN HOME EN­ TERTAINMENT PRODUCTS The Federal Trade Commission, pur­ suant to the Federal Trade Commission Act, as amended, 15 UJS.C. 41, et seq., and the provisions of Part 1, Subpart B of the Commission’s procedures and rules of practice, 16 CFR l.ii, et seq., has con­ ducted a proceeding for the promulgat­ ion of a Trade Regulation Rule con­ cerning power output claims for ampMners utilized in - home entertainment Products.

Commission has now considered au matters of fact, law, poliey and dis­ cretion, including the data, views and _ piments presented on the record by “««rested parties in response to the no- ^ Prescribed by law, and has dethat the adoption of the Trade rule anc* statement of its f f l * * Purpose set forth herein is in the public interest, 8ec.

Scope.

Required disclosures.

J » ,, Standard test conditions. 415 k 2ptional disclosures. 435 r ffoJUbited disclosures. Liability for violation. 432.1 432.2 432.3 Au th o r ity: The provisions of this Part 432 Issued under 38 Stat. 717, as amended; (15 U.S.C. 41-58).

§ 432.1 Scope.

(a) Except as provided in paragraph (b) of this section, this part shall apply whenever any power output (in watts or otherwise), power band or power fre­ quency response, or distortion capability or characteristic is represented, either expressly or by implication, in connec­ tion with the advertising, sale, or offer­ ing for sale, in commerce as “commerce” is defined in the Federal Trade Commis­ sion Act, of sound power amplification equipment manufactured or sold for home entertainment purposes, such as for example, radios, record and tape players, radio-phonograph and/or tape combinations, component audio ampli­ fiers and the like.

(b) Representations shall be exempt from this part if all representations of performance characteristics referred to ip paragraph (a) of this section clearly and conspicuously disclose a manufac­ turer’s rated power output and that rated output does not exceed two (2) watts (per channel or total).

(c) It is an unfair method of competi­ tion and an unfair or deceptive act or practice within the meaning of section 5 (a) (I> of the Federal Trade Commis­ sion Act (15 U.S.C. 45(a)(1)) to violate any applicable provision of this part. §■ 432.2 Required disclosures« Whenever any direct or indirect rep­ resentation is made of the power output, power band or power frequency response, or distortion characteristics of sound power amplification equipment, the fol­ lowing disclosures shall be made clearly, conspicuously, and more prominently than any other representations or dis­ closures permitted under this part: (a) The manufacturer’s rated mini­ mum sine wave continuous average power output, in watts, per channel (if the equipment is designed to amplify two or more channels simultaneously)__ (1) For each load impedance required to be disclosed in paragraph (b) of this section* when measured with resistive load or loads equal to such (nominal) load impedance or impedances, and (2) Measured with all associated channels fully driven to rated per chan­ nel power;

(hi The load impedance or imped­ ances, in Ohms, for which the manu­ facturer designs the equipment to be used by the consumer;

(c) 1 The: manufacturer’s rated power band or power frequency response. In. Hertz (H z), for each rated power output required to be disclosed in paragraph (a )(1 )' o f this section; and (d) The manufacturer’s rated per­ centage of maximum total harmonic dis­ tortion at any power level from 250 mW to the rated power output, for each such rated power output and its corresponding rated power band or power frequency response.

§ 432.3 Standard test conditions. For purposes of performing the tests necessary to make the disclosures re­ quired under § 432.2:

(a) The power line voltage shall be 120 volts AC (230 volts when the equip­ ment is. made for foreign sale or use, unless a different nameplate rating is permanently affixed to the product by the manufacturer in which event the latter figure would control), RMS, using a sinusoidal wave containing less than 2 percent total harmonic content. In the case of equipment designed for battery operation only, tests shall be made with the battery power supply for which the particular equipment is designed and such test voltage must be disclosed under the required disclosures of § 432.2. If capable of both AC and DC‘ battery oper­ ation, testing shall be with AC line oper­ ation:

(b) The AC power line frequency for domestic equipment shall be 60 Hz and 50 Hz for equipment made for foreign sale or use;, (cl The amplifier shall be precondi­ tioned by simultaneously operating all channels at one-third of rated power out­ put for one hour using a sinusoidal wave at a frequency of 1,000 Hz; (d) The preconditioning and testing shall be in still air and an ambient tem­ perature of at least 77° F (25° C) ; (e) Rated power shall be obtainable at all frequencies within the rated power band without exceeding the rated maxi­ mum percentage of total harmonic dis­ tortion after input signals at said fre­ quencies have been continuously applied at full rated power for not less than five (5) minutes- at the amplifier’s auxiliary input, or if not provided, at the phono input.

(f) At all times during warm-up and testing, tone loudness-contour and other controls shall be preset for the flattest response.

§ 432.4 Optional disclosures.

Other operating characteristics and technical specifications not required in § 432.2 may be disclosed: Provided: (a) That any other power output Is rated by the manufacturer, is expressed in minimum watts per channel, and such power output representation(s) complies with the provisions of § 432.2 ; except that if a peak or other instantaneous power rating, such as music power or peak power, is represented under this section, the maximum percentage of total har­ monic distortion (see § 432.2(d)) may be disclosed only at such rated output: And provided further, (b) That all disclosures or representa­ tions made under this section are less conspicuously, and prominently made than the disclosures required in § 432.2; and (c) The rating and testing methods or standards used in determining such rep­ resentations are disclosed, and well known and generally recognized by the industry at the time the representations or disclosures are made, are neither in­ tended nor likely to deceive or confuse FEDERAL REGISTER, V O L 39, NO. 87— FRIDAY, M A Y 3, 1974

Page 12

15388 RULES AND REGULATIONS the consumers and are not otherwise likely to frustrate the purpose of this part.

N ote.— For the purpose of paragraph (b ) of this section, optional disclosures will not be considered less prominent if they are either bold faced or are more than twothirds the height of the disclosures required by § 432.2.

N ote 2 : Use of the asterisk in effecting any of the disclosures required by § 432.2 and permitted by § 432.4 shall not be deemed conspicuous disclosure.

§ 432.5 Prohibited disclosures.

No performance characteristics to which this part applies shall be repre­ sented or disclosed if they are not ob­ tainable as represented or disclosed when the equipment is operated by the con­ sumer in the usual and normal manner without the use of extraneous aids. § 432.6 Liability for violation.

If the manufacturer or, in the case of foreign made products, the importer or domestic sales representative of a for­ eign manufacturer, of any product cov­ ered by this part furnishes the informa­ tion required or permitted under this part, then any other seller of the product frhft.n not be deemed to be in violation of § 432.5 due to his reliance upon or trans­ mittal of the written representations of the manufacturer or importer if such seller has been furnished by the manu­ facturer, importer, or sales representa­ tive a written certification attesting to the accuracy of the representations to Which this part applies: And provided further, That such seller is without actual knowledge of the violation con­ tained in said written certification. Effective: November 4,1974. Promulgated: May 3,1974, By the Commission.

[ s e a l] C h arles A. T o b in , Secretary.

Statem ent op Basis and P urpose 1 CHAPTER I.---BACKGROUND W ith the advent of stereophonic and/or two-channel sound, manufacturers of sound power equipment began describing the per­ formance capability of their products in terms of power output expressed as “X num­ ber of Watts’*. Watts in this context refers to the output capability of the amplification unit.

The industry, generally speaking, is divided into two parts; the packaged or con­ sole systems manufacturers and the com­ ponent systems manufacturers. Tradition­ ally, manufacturers of packaged systems have rated their products according to the 1 Footnote references to the transcript of the public hearings are preceded by the pre­ fix “Tr." and references to the written com­ ments in the public record are preceded by the prefix “R.”.

EIA Standard Methods of Measurement8 while manufacturers of component systems have rated their equipment according to the IHF Standard.3 Since the mid-50’s the industry has re­ ceived much criticism by the trade press for failing to agree upon a single industry stand­ ard which is meaningful to the consumer. To date no single standard has been agreed upon. It has been asserted that there are no less than seven commonly used methods of determining amplifier wattage ratings,4 all of which will yield substantially different results.

As a result, with the proliferation of output claims for stereophonic equipment, we find mediocre products advertised as, for exam-' pie, “500 watts" with no indication as to what standard or method of rating is being fol­ lowed. Many times, especially in the case of low quality packaged units, output is grossly exaggerated by rating according to the “peak power”, an instantaneous power rating made without regard to the level of distortion. Further, such output figure is usually ex­ pressed in terms of the total power rather than the per channel power thereby permit­ ting a doubling of the output figure. In the absence of any specific disclosure as to whether the so-called “RMS power” 8 or the less regorous “music power” 3 is being represented, under either the EIA or IHF standard, generally music power is followed. To arrive at the RMS power rating, it is necessary to deduct 10 to 25 percent of the music power rating and divide by 2 to arrive at the per channel figure for 2-channel stereo systems. Unless the power of an amp­ lifier is rated at a specific level of distortion and such distortion is disclosed, it cannot realistically be compared to any other amplifier rating.7 Still other manufacturers have shown a tolerance in rating the output of their products by use1 of the symbol “± ld B ” (plus 8 EIA refers to the Consumer Electronics Group, Electronic Industries Association, with a membership composed of approxi­ mately 65 domestic manufacturers and as­ semblers and about 175 manufacturers and importers. Retail sales by American manu­ facturers total some $2.3 billion annually, Tr. 9, 10 and R. 285; See also EIA Standard, RS-234C, R. 286-300.

3 IHF refers to the Institute of High Fidelity, with a membership composed of some 37 domestic and non-domestic member companies, Tr. 53-53B; see also IHF Standard A—201 (1966), R. 331-341.

4 R. 183.

5 RMS, meaning root mean square, is an engineering concept which has been defined as the average continuous power. This des­ ignation was objected to as being inaccurate and the designation “RMS”

has been changed to “average” in the Final Rule. 3 Music power, currently referred to as monetary power in the EIA Standard, is an instantaneous power rating at a given level of distortion. EIA permits a distortion level of 5 percent while IHF recommends a level of distortion not to exceed 1 percent. 7 See article from The Stereo Review en­ titled, "Hi Fi Questions and Answers”, R. 59; see also statement submitted by Walter Goodman, President of IHF, R. 126. or minus 1 decibel). In the case of a rating of this sort, the minimum output may be as much as 20 percent below as the nominal power stated or as much as 25 percent above. Thus, a rating of 100 watts (± ld B ) would indicate a power output range of from 80 to 125 watts.8 It has been asserted that one of the best known and most respected manufacturers of stereo components and consoles produces a stereo component the literature for which states the power output in three rating systems, ± ld B , IHF power and RMS power, all at a total harmonic distortion level of 1 percent. When sold as a console with a different model number and a modified face­ plate, this same amplifier is rated at EIA peak power with 5 percent distortion.» • The trade press has aptly described this situation as the “Wattage W ar”, noting that the consumer, who normally equates watts with quality, is often deceived because he be­ lieves the higher the watts the better the quality.10 A technical advisor for Campbell Music Store, Washington, D.C., has submitted for the record the following statement which best illustrates the extent of the problem: “----------Armed with a moderate engineering background and all published specifications available, I cannot determine, without bench testing, which of a number of amplifiers on the market is more powerful or of better quality. W ith the thought of literature con­ taining meaningless values and technical doubletalk, my sympathy goes out to the average consumer who is poorly equipped to deal with this numbers game.” 11 Mr. Julian Hirsch of Stereo Hi-Fi Review states: “The widespread abuse, or disregard, of current measurement standards has re­ sulted in the present chaotic situation, in which advertised power ratings of high fidelity amplifiers may have little relation­ ship to J;heir actual performance. "As a result, manufacturers who adhere to ethical rating systems are at a competitive disadvantage, and consumers are often mis­ led by exaggerated claims and are unable to make fair comparisons between products.”18 In all fairness to certain members of the industry, however, there are a few manufac­ turers of high quality component systems who follow neither EIA nor IHF standards but conservatively rate their amplifiers ac­ cording to their average continuous power output, per channel. These manufacturers disclose the maximum level of distortion across the entire audio spectrum,13 the fre­ quency bandwidth at which this power is available and thet speaker load or load im­ pedance in ohms at which such power is available.

Under both the EIA and IHF standards, 8 See article from Audio Times Magazine, “What’s a Watt?”, R. 20; also trade press comments, R. 43a.

•R. 609-610.

10 Home Furnishings Daily, R. 25-26. “ R, 609.

Tr. 189-190. See Consumer Reports (June 1969) “What’s What With Watts?”, R- 80; consumer letters R. 553-555; 13 EIA and IHF fate their products only ai a frequency signal of 1000 cycles per second (1000 hertz) which is a center points in th® frequency range or power band. FEDERAL REGISTER, VOL. 39, NO. 87— FRIDAY, M AY 3, 1974

Page 13

RULES AND REGULATIONS 15389 even what they term "continuous power” is measured at a point on the power curve only 30 seconds after the input signal has been applied.“ Under such procedure, the power CHAPTER n .—-THE PROPOSED RULE AND ITS EFFECTS Public Notice of this proceeding was issued by the Commission on January 12, 1971, wherein the following Trade Regulation Rule was proposed:

Section 1. Scope, a. This rule shall apply whenever any power output (in watts or otherwise), power band or power frequency response, or distortion capability or char­ acteristic is represented, either expressly or by implication, in connection with the ad­ vertising, sale, or offering for sale, in com­ merce as “commerce” is defined in the Fed­ eral Trade Commission Act, of sound power amplification equipment manufactured or sold for home entertainment purposes, such as for example, radios, record and tape play­ ers, radio-phonograph and/or tape combina­ tions, component audio amplifiers and the like.

b. It is an unfair method of competition and an unfair or deceptive act or practice within the meaning of section 5 (a )(1 ) of the Federal Trade Commission Act (15 U.S.C. § 46(a)(1)) to violate any applicable pro­ vision of this rule.

Sec. 2.— Required disclosures. Whenever any direct or indirect representation is made of the power output, power band or power frequency response, or distortion character­ istics of sound power amplification equip­ ment, the following disclosures shall be made clearly, conspicuously, and more promi­ nently than any other representations or disclosures permitted under this rule: a. The manufacturer’s rated minimum sine wave continuous RMS power output, in watts, per channel (if the equipment is designed to amplify two or more channels simultaneously) — (i) For each load impedance required to be disclosed in subsection (b) of this section, when measured with resistive load or loads equal to such (nominal) load impedance or impedances, and (fi) Measured with-all associated channels fully driven to rated per channel power; b. The load impedance or impedances, in Ohms, for which the manufacturer intends the equipment to be used by the consumer; c. The manufacturer’s rated power band or power frequency response, in Hertz (H z ), for each rated power output required to be disclosed in subsection (a) (i) of this section; and d. The manufacturer’s rated percentage of maximum total harmonic distortion at any power level from zero (0 ) watts to the rated power output, for each • such rated power output and its corresponding rated power band or power frequency response. Sec. 3.— Optional Disclosures. Other op­ erating characteristics and technical specifi­ cations not required in section 2 of this rule may be disclosed, provided: a.

Any other power output is rated by the manufacturer, is expressed in minim um atts per channel, and such- power output presentation(s) comply with the provi­ e n s of subsections 2 ( a ) ( 1) through 2 (d) in f60"1011 2; except that if a peak or other instantaneous power rating, such as music thi«er or P®al£ power, is represented under section, the maximum percentage of ltl, SDee^ ' 294 (section 3.1.1 EIA Standa: nntLfl33,4 <section 3.1.1 IHF Standard). hicr^,vfor sucl1 equipment will regit with L ° ecause the power curve tends to : with thermal (heat) build-up. total harmonic distortion (see subsection 2 (d )) • lay be disclosed only at such rated output; and provided further that b. All disclosures or representations made under this section are less conspicuously and prominently made than the disclosures re­ quired in section 2 of this rule; and c. The rating and testing methods or standards used in determining such repre­ sentations are disclosed, are well known and generally recognized by the industry at the time the representation or disclosure is made, are neither intended nor likely to deceive or confuse the consumer, and are not othèrwise likely to frustrate the purpose of this rule.

N o t e— 1. For the purpose of subsection (b) of this section, optional disclosures will not be considered less prominent if they are either bold faced or are more than two-thirds the height of the disclosures required by Section 2.

N o t e— 2. Use of the asterisk in effecting any of the disclosures required by Section 2 and permitted by Section 3 of this rule shall not be deemed conspicuous disclosure. S e c. 4.— Prohibited Disclosures. No per­ formance characteristics to which this Rule applies shall be represented or disclosed if they are not obtainable as represented or disclosed when the equipment is operated by the consumer in the usual and normal man­ ner without the use of extraneous aids. S e c . 5.— Liability for Violation. If the man­ ufacturer, or in the case of foreign made products, if the importer or domestic sales representative of a foreign manufacturer of any product covered by this rule furnishes the information required or permitted under this rule, then any other seller of the product shall not be deemed to be in violation of § 4 of this rule due to his reliance upon or trans­ mittal of the written representations of the manufacturer or importer if such seller has been furnished by the manufacturer, im­ porter, or sales representative, a written cer­ tification attesting to the accuracy of the representations to which this rule applies, and provided further that such seller is with­ out actual knowledge of the violation con­ tained in said written certification. Upon issuance of the notice of hearing, consumer interest gained momentum and there was a substantial response to the invi­ tation for comments. Views in support of the proposed rule came from organizations such as the Stanford Research Institute of Menlo Park, California;15 Audiomation Laboratories of Upper Darby, Pennsylvania;10 The Com­ monwealth of Massachusetts Consumers’ Council” and KLH Research and Develop­ ment Corp.,18 both of Cambridge, Massachu­ setts.

Public hearings were held on April 13 and 14, 1971, on the proposed rule which, in essence, required affirmative disclosure in all advertising, where power output, power band, frequency response or distortion capability is represented, of the manufacturer’s rated minimum19 continuous power output in watts per channel and, in addition, three parameters:

1. the speaker load for which the manu- “ R. 599.

19 R. 558.

17 R. 556-557.

” R. 551.

18 The proposed rule required the minimum power disclosure since there is a drop in the power level at each end of the power curve. The maximum power permitted by the rule then would reflect the minimum power at­ tainable at any point along the frequency bandwidth.

facturer intends the equipment to be used,20 2. the manufacturer’s rated power band or frequency response,» and 3. the percentage of maximum total har­ monic distortion at any power level from zero watts to rated power output. Since these parameters directly affect the output rating of an amplifier, it was believed that the consumer should have the benefit of such information in order to enable him to make an intelligent comparison among the various competing products.22 Section 3 of the proposed rule provided for optional disclosures provided they were less prominently disclosed and further, pro­ vided the above three parameters were dis­ closed and were determined in accordance with generally recognized testing methods or standards and such standards were like­ wise disclosed.

Although there was general agreement that where power output is represented it should be stated in terms of continuous .power, differences of opinion were expressed .at the hearing as to the following provisions of the proposed rule and as to the methods used to measure the various parameters. CHAPTER H I.--- ARGUMENTS ADVANCED BY INDUSTRY REGARDING PROPOSED RULE A. Section 1 (a )— Scope. The proposed rule embraced sound power amplification equip­ ment manufactured or sold for home enter­ tainment purposes as, for example, radios; record and tape players, radio-phonographs and tape combinations and component audio amplifiers.

The representative of Electronic Industries Association of Japan (EIA -J) urged that the Final Rule exclude all such named sound power amplification equipment having a power level of two watts or less per chan­ nel, suggesting that it is unlikely that any consumer deception might result from any representation on equipment with a power output falling within this range.23 No one * took issue with this point. This exception, which was included in the notice of revision and amendment herein­ after discussed, would cover a large number of low cost items where power is normally of little consequence to the consumer. B. Section 1 (b )— Consequences of Viola­ tion. EIA voiced concern that under section 1(b) a violation of the Rule would be auto­ matically a violation of Section 5 (a )(1 ) of the Federal Trade Commission Act. It con­ tended that this represents a change in the Commission’s present procedure of filing a formal complaint upon violation of section 5 and granting a respondent a hearing on the applicability of the rule to the particular case as provided in § 1.12(d) of the Commis­ sion’s rules of practice.24 Section 1(b) of the rule does not repre­ sent a change in procedure but merely in­ corporates in the rule the Commission’s con- Most speakers on the market are rated at 8 ohms. Some manufacturers have rated their equipment at 4 ohms load which normally results in a slightly higher output figure. »T h e frequency range or response from the lowest to the highest tones is measured in cycles per second or Hertz (H z ). As pointed out, EIA and IHF permit a maximum power rating at a mid-point in the frequency range (1000 H z). The proposed rule, on the other hand, required disclosure of the minimum output obtainable at any point along the audio range, from the lowest to the highest rated frequency, taking into account the outer extremes.

22 See consumer letter, R. 72-73. 28 Tr. 48.

24 R. 282-4; Tr. 26-28.

FEDERAL REGISTER, VOL. 39, NO. 87— FRIDAY, M AY 3, 1974

Page 14

15390 elusion that practices in violation of said rule are violative of Section 5 of the Federal Trade Commission Act; the respondent still would be given the right of a hearing on the appli­ cability of the rule to the particular case as provided in § 1.12(d) of the Commis­ sion’s rules of practice.

C.

Section 2 (a )— Required Disclosures. EIA, while supporting the RMS disclosure provi­ sion of the proposed rule, argues that in re­ quiring disclosure of additional specifications the rule as designed would accommodate a small segment of the industry and their con­ sumers who desire the maximum informa­ tion about their products; that the great majority of purchasers neither need nor de­ sire these specifications and in fact would tend to be confused by such information.® EIA’s argument loses sight o f the fact es­ tablished by the record that the consumer has been conditioned, by the advertising of more and greater power output figures, to equate power output with quality. The Commission believes that, even assum­ ing that the great majority of purchasers nei­ ther need nor desire the information which the proposed rule would require be disclosed, if without disclosure of these additional pa­ rameters the purchaser is led to believe that a low-priced amplifier of inferior quality has the performance capability of a high-priced amplifier of superior quality, the purchaser is being unknowingly deceived and induced to purchase inferior equipment.® This is true even though a represented quality of the su­ perior product may not lie in the range of human audibility.

(1) Output in terms of minimum watts. Both section 2(a) and the optional disclosure section 3 (a ), provided for disclosure of the per channel power output in terms o f "m ini­ mum watts” so as to reflect the maximum capability of the amplifier across the entire frequency range.

Both EIA and IHF, who take the position that all measurements of power output, power band, frequency response and distor­ tion should be measured in accordance with their own standards, state that power out­ put should be rated at a single frequency gignn.1 of 1000 Hz.21 They are supported in this position by H. H. Scott. Inc.,® Sony Corpora­ tion,® J. C. Penney Company® and Julian Hirsch, editor of Stereo Hi-Fi Review Maga­ zine.81 Their argument is that engineers un­ derstand this measurement technique8* and no one would be deceived if all companies were required to measure the power output of their amplifiers at this frequency. It is noteworthy that a representative of EIA conceded at the hearings that under the * Tr. 10 and 52; R. 269.

28 gee admission by Mr. Owen on behalf of EIA, Tr. 47.

» Tr. 25, 55-56; R. 631.

» T r . 91.

» R. 597.

80 Tr. 132.

81 Tr. 192.

“ Simply stated, under this method of measurement, power bandwidth is defined as that point where the frequency response is 3 dB down (or 50 percent) from the middle or center point; the center point being 1000 tt-z For example, if an amplifier’s output is 50 watts at the center point (1000 Hz) the frequency range (from the lowest to the highest frequency) will be established at that point where the power drops 60 percent at either end of the spectrum. At this point, the minimum watts output would be 25. Since the amplifier is capable of maintaining only 25 watts at the extremes, the rule would require that such rating be In terms of the minimum power or 25 watts.

RULES AND REGULATIONS EIA and IHF method of rating at 1000 Hz, two pieces of equipment with the .same rat­ ing may have entirely different performance capabilities. Mr. von Recklinghausen, speak­ ing on behalf of H. H. Scott, Inc., stated in this connection, that an amplifier is capable of providing power outside of that band, but at a reduced capability, and, of course, having its maximum in the center.8? Opposing the EIA and IHF method of de­ termining output was Dr. Amar Bose of The Bose Corporation81 and the representative of Marantz Company. The latter stated that in speaking to dealers and consumers regard­ ing this question, he found that the con­ sumers believe that where equipment is rated at a certain power the product will deliver that rated power through its entire audio range.85 The Commission recognizes that it is standard engineering practice under both EIA and IHF standards to rate an amplifier a t the single frequency signal of 1000 Hz, but believes that such a measurement is inher­ ently deceptive to the consumer who expects that a piece of equipment represented as being capable of a stated power output will deliver that power output across its full audio range. The whole thrust of the rule is to limit the practice of disclosing power out­ put ratings which have no relation to rating across the power bandwidth. To do anything less would be to sanction a standard tending to favor lower quality equipment on a comparative basis, for the Record clearly establishes that higher quality equipment will perform relatively better out­ side the 1000 Hz mid-point. Thus ft is not accurate to conclude that consumer decep­ tion will be eliminated if all sets are meas­ ured at the same point on the frequency range, for this would tend to conceal the fact that the better quality equipment will main­ tain a higher power output as the extremes of the power band are approached. (2) Per channel disclosure. EIA, EIA-J, IH F and Lafayette Radio Electronics Cor­ poration opposed per channel disclosure in favor of total power ratings. Support for per channel disclosure came from The Bose Cor­ poration, Marantz Company and Julian Hirsch. The record also contains views of consumers * and independent experts 87 sup­ porting per channel disclosure, as required by the rule.

This provision is amply supported by the record. The Commission has been advised that, from a technical standpoint, a stereo having, for example, 20-watts ✓per channel, both channels driven, will give less total power output than a single channel 40-watt amplifier. So, to speak of the stereo in terms o f its total power (40 watts) is, the Com­ mission believes, misleading and deceptive. Additionally, audio speakers are rated in terms of number of watts per channel. Further, 4-channel sound systems have been Introduced which, if rated according to their total power output, would, in the Commis­ sion’s view, have an even greater tendency to deceive the average consumer.8* D.

Section 2 (b )— Disclosure of Load or Working Impedance. Some manufacturers have rated their amplifiers at a 4 ohm speaker load impedance but have supplied 8 ohm speakers with their systems. Gen- 88 Tr. 92. Better quality equipment will per­ form better.

» Tr. 115.

« Tr. 119-120.

» R . 43, 190, 211-212, 218, 221, 228, 231, 234,242, 248, 548, 559, 597. wR. 163, 239.

» See R. 715.

erally, the lower the load impedance utilized in testing transistorized equipment, the higher the output of the amplifier. Various views were expressed with respect to this provision.

EIA and IHF urged that ratings should be based on 8 ohms load with disclosure only where a different impedance is used.3» Lafayette Radio Electronics Corporation« and Marantz Company11 favored disclosure of both 4 and 8 ohms pointing out that cer­ tain amplifiers are designed for more than one set of speakers, e.g., main and remote speakers.

Sony Corporation of America, on the other hand, would rate power output at 8 ohms load and permit optional disclosure of power output ratings at other load impedances.42 The Commission believes that it would be to the benefit of the consumer not to re­ quire disclosure of power output at any one or more specific load impedances but rather to require the manufacturer to state the power output in terms of the load impedance or impedances for which he designs« the equipment to be used by the consumer. Of ■course, this would not preclude the manufac­ turer from representing the power output in terms of other load impedances as an op­ tional disclosure under Section 3 of the rule. Thus, this provision would be maintained in a manner consistent with the rest of the rule in that the Commission is not undertak­ ing to require as a matter of law that any one impedance be used* but is instead requiring the manufacturer to disclose that factor along with the other factors which must also be set forth. This then leaves the consumer, armed with the facts, free to judge for himself whether or not he is im­ pressed with the specifications. E.

Section 2 (c )— Rated Power Band or Frequency Response. Power bandwidth has been traditionally defined as the response range between the lowest and the highest frequencies at which the amplifier can de­ liver half its rated power at rated distortion or — 3 dB down from the mid-frequency point (1000H z).“ As aforestated, both EIA and IHF use this method in measuring output. Under such test method, If the amplifier is capable of, for example, 50 watts output at 1000 Hz, It would be rated a “50 watt” amplifier even though the minimum power output across the fre­ quency range or rated power bandwidth would be —3 dB or only 25 watts, i.e., 50 per­ cent down at each extreme from the center point of 1000 Hz.

Neither EIA nor IHF favored disclosure of the power band as provided by Section 2(c) of the proposed rule. EIA contended that such Information Is unnecessary in advertis­ ing and could lead to a meaningless numbers game.15 It further contended that some may promote their products by advertising a very wide bandwidth which may Include sound waves out of the range of human audibility. In support of the IHF method of measure­ ment, Mr. von Recklinghausen of H. H. Scott, Inc., explained that by using 3 points in the power band, a mid-frequency point and two ® See EIA, R. 275 and 635; IHF, Tr. 55. " Tr. 74.- « R . 600.

«9 o 597.

“ This term, for the sake of accuracy, has been inserted in the final rule in P*ace term “intends” as used in seotion 2(b) the proposed rule.

. « “ IHF Standard, R. 334; EIA Standard, 297. See testimony of Mr. von Recklinghause Tr. 83,87.

“ Tr. 18.

« Ibid.

FEDERAL REGISTER, V O L 39, NO. «7— FRIDAY, M A Y 3, 1974

Page 15

at the extremes, “------ you have very closely tied down the capability of that amplifier, meaning that the amplifier is capable of pro­ viding power outside of that band, but at a reduced capability, and, of course, having its maximum in the c e n t e r [emphasis sup­ plied.] 47 Again, although engineers understand this method of measurement, the Commission is of the opinion that the consuming public it­ self is unaware of such method of rating and, even if it were, would not understand it. As noted, the record indicates the consumer believes that a set will perform as repre­ sented across the audio spectrum when, in truth and in fact, the equipment when rated according to the EIA or IHF rating tech­ nique, will perform as represented only at 1000 Hz.48 The Commission is of the opinion that power bandwidth is another of the signifi­ cant parameters which must be disclosed in order to enable the consumer to make a meaningful comparison of quality among competing products. Further, the product must be capable of providing the rated or advertised power output over the represented power band. If this result is achieved the consumer would again have the facts from which he can judge for himself whether or not a particular piece of equipment will sat­ isfy his requirements. Requiring disclosure of the power band should also serve to dis­ courage an artificial narrowing of the band­ width in order to increase the rated power output. The consumer would then be able to see for himself Under what limited circum­ stances the rated power was achieved and it is only by considering all of these parameters that an intelligent choice can be made. P. Section 2 (d )— Harmonic Distortion.

Section 2(d) of the proposed rule would re­ quire disclosure of the rated percentage of maximum total harmonic distortion at any power level across the power band (not Just at rated output) from zero to rated output. At the hearings, EIA urged that distortion be rated according to its standard, which permits a distortion level of 5 percent at rat­ ed output, and that the percentage of total harmonic distortion not be a required disclosure unless it is greater than 5 per­ cent.48 The argument was made that good sound is reproduced if distortion is not great­ er than 5 percent and that many consumers can perceive little, if any, difference in sound quality when the distortion is reduced from ® percent to 1 percent.6* IHF urged that measurement of total har- ■aonic distortion be made in accordance with its standard which recommends a distor­ tion level of no greater than 1 percent at rated power level. Unlike EIA, IHF would, in accordance with the Rule, require disclosure of the level of distortion because, as Mr. Goodman of IHF put it “— the THD (total harmonic distortion) selected for any wat­ tage rating affects the meaningfulness of that power rating— « Mr. Horowitz of IHF added: "I think the response of the human ear to distortion is a controversial subject, and I think it is a eeling of most discriminating persons that there would be a substantial distortion of •Phdity, if you go from one percent to five percent, and we also feel there would be a 47 Tr. 92.

48 See testimony of Mr. Rottner of Marantz Tr- 120> Mr- Levine, a retailer, Tr. u. see also R. 365—546 for consumers’ and aeaiers’ letters furnished by Mr. Levine, all to support of the rule.

Z 19-20 and R. 88,276-277,637. M R. 276.

M Tr- 55; R. 327.

RULES AND REGULATIONS big gradation in tone quality if you go say from a half percent to five percent. “It is our feeling that unless you accompany the power rating with a total amount of dis­ tortion rating, you would be getting mis­ leading information.” ** Mr. Robert Angus of Audio Times noted that a provision requiring distortion to be specified only if it exceeds 5 percent as pro­ posed by EIA would permit a manufacturer almost as much latitude within the frame­ work of an RMS rating as he now enjoys with no FTC rule at all. He emphasized that an amplifier with an output of 20 watts and total harmonic distortion of 0.5 percent, the normal tolerance for, better high fidelity components, might wind up as a 30-watt am­ plifier if the BTC were to permit a tolerance of up to 5 percent total harmonic distor­ tion.“ Dr. Bose of Bose Corporation, who has made several studies in Audio-Accoustics, proposed 2 percent as a standard reference for distortion. He stated that all indications are that a person is not able to detect any form of audible distortion on music or speech signals below the 2 percent level. He would fix distortion at a 2 percent level and have the manufacturer disclose the band­ width over which he can achieve his stated power with that distortion.54 Mr. Ken Rottner of Marantz Company did not favor pegging the distortion but rather he would require disclosure of the highest percentage measurable of harmonic and in­ termodulation distortion with the full range of frequencies at and below the rated RMS power output.“ (The word “pegging” refers to the suggestion that the Commission should fix the percentage of distortion at which all equipment should be evaluated.) Mr. Reff of J. C. Penney Company favored pegging the distortion and thereby eliminat­ ing this variable, at a level of 5 percent which he contended is used by the industry and will permit the consumer to shop more wisely.“ But Kenneth Nelson of Hi-Fi Trade News was of the opinion that the 5 percent dis­ tortion figure is too high; that it represents merchandise which is really sloppily con­ structed.57 Larry Levine, a dealer, argued against the pegging of distortion explaining that it would restrict some manufacturers and would place others at a great advantage. Customers, he stated, realize that a higher rate of distortion means poorer sound. He noted that where a rating is pegged at 5 percent great advantage is given to the manufacturer of packaged systems, while the advantage falls to the component manufacturer under a pegged distortion of 1 percent.“ Ivan Berger of Sat­ urday Review agreed.“ Also agreeing that distortion should not be pegged and that 5 percent is far too high, Julian Hirsch of Stereo Hi-Fi Review ex­ pressed the view that as low as 2 percent dis­ tortion is relatively high «von for m oderately 53 Tr. 59.

63 Tr. 100.

64 Tr. 110-115.

55 Tr. 119. The Commission sees no rea­ son to require disclosure of intermodulation distortion, because it has been advised that with respect to the latest transistorized equipment, the level of Intermodulation distortion runs about the same or some­ times less than the harmonic distortion level.

“ Tr. 137.

67 Tr. 163.

» Tr. 170,173.

“ Tr. 204.

15391 priced amplifiers. Mr. Hirsch favored the manufacturer having the option on the set­ ting of distortion, as provided by the pro­ posed rule.“ Audibility of distortion. In considering the matter of pegging the distortion at a specific level, there is no general agreement as to that point beyond which distortion becomes inaudible. One reason for this is the fact that the ability to detect distortion varies with the individual’s auditory acuity. At the hearings, Mr. Horowitz (IH F ) stated that most discriminating persons would note a substantial distortion of quality if the dis­ tortion were Increased from 1 to 5 percent and an even larger gradation in tone quality when increased from one-half percent to 5 percent.61 H. H. Scott’s representative agreed that there is a noticeable difference in sound between 1 and 5 percent distortion.62 EIA, taking a contrary view, contended that many of their customers can perceive little, if any, difference in sound quality when the distortion Is reduced from 5 to 1 percent.68 J. C. Penney’s representative expressed a similar view asserting that it is the general feeling in the industry that most consumers cannot detect less than 5 percent total har­ monic distortion.64 Dr. Amar Bose, whose primary interest lies in the psycho-accoustic aspects of sound power equipment, took issue with this con­ tention to a degree when he asserted that there are no audible benefits below percent.65 However, Mr. Bose’s view was disputed by Mr. Rottner of Marantz who insisted that there are audible benefits to be derived from distortion of 2 percent or less.66 In Mr. Rottner’s opinion, we have not achieved that point beyond which the human ear can no longer detect an improvement.67 The Commission believes that Julian Hirsch placed the issue in proper perspective when he registered the following comment: “I have known people who would not com­ plain if they heard ten or twenty percent distortion, but I do not think that that is the normal— I would say a reasonably dis­ cerning listener can tell the difference, even if he is not aware of it specifically, he can tell the difference between, an amplifier that averages around one and a half percent dis­ tortion and one down to one-tenth distor­ tion.”68 Mr. Hirsch further observed that the lis­ tener may not be aware he is hearing less distortion at one-tenth percent but he would be aware of a less satisfactory sound.“ In a statement submitted for the record, Mr. Edward Myer of Myer-Emco, Inc., Wash­ ington, D.C., comments upon the importance of harmonic distortion: “At these hearings verbal arguments were advanced purporting to show that harmonic distortion In home entertainment amplifiers is not a good meas­ ure of amplifier quality because moderate differences in harmonic distortion level have been shown to be undetectable when play­ ing ordinary music through loudspeakers into a normal home environment. While may or may not be true, it has been shown that listeners using earphones (thereby avoiding the room effects) are able to detect “ Tr. 194.

« Tr. 59.

62 Tr. 94.

68 Tr. 19.

64 Tr. 143.

66 Tr. 110.

“ Tr. 118.

67 Tr. 122.

“ Tr. 196-197.

“ Ibid.

FEDERAL REGISTER, VOL, 39, NO. 87— FRIDAY, M AY 3, 1974

Page 16

15392 RULES AND REGULATIONS minute amounts of distortion in sinusoidal waveforms such as are present on single mu­ sical instruments and when listening to cer­ tain types of electronic music. Sales of ear­ phones at this time are almost equal to the sales of loudspeakers and who can say that modem composers will not make extensive use of pure sine waves in the immediate future. In my opinion the T.H.D. system is the best simple measure of amplifier per­ formance.” 70 Considering the entire record, the Com­ mission is of the view that harmonic distor­ tion is the other parameter which must be disclosed in order to enable the consumer to make a meaningful choice among competing products.

The Commission rejects the argument that distortion should be pegged at 5 percent and not be a required disclosure unless it exceeds that amount because 5 percent total har­ monic distortion has been shown to be an excessive amount of distortion for good qual­ ity sound. A pegging of distortion at 1 per­ cent, on the other hand, might well work to the disadvantage of manufacturers of less expensive equipment with no corresponding benefit to the consumer.

Therefore, the Commission concludes that requiring the manufacturer to disclose the total harmonic distortion and giving him the option of setting the level of harmonic dis­ tortion as required by Section 2(d) and per­ mitting optional disclosure in accordance with Section 3(a) of the proposed rule will provide the consumer with sufficient infor­ mation with which to make an intelligent choice.

G. Section 3— Optional Ditdlosures. This section of the proposed rule provided that other power output or operating specifica­ tions may be disclosed provided such power output representations are in terms of mini­ mum watts per channel and comply with the requirements of subsections 2(a) (i) through 2 (d ), the representations are less conspicu­ ously and prominently made than Section 2 disclosures and the rating and testing meth­ ods or standards are disclosed. However, if an instantaneous power rating is repre­ sented, such as “peak power”, the maximum total harmonic distortion may be disclosed only at such rated output where distortion will register the greatest. EIA urged that this section be restricted to momentary or music power and measured in accordance with EIA Standard No. 234—C <1971) which provides a standard of meas­ urement only for continuous and momentary power output. 71 Lafayette Radio Electronics Corporation emphatically opposed optional disclosures on the ground that they will tend to confuse the consumer.7* H. H. Scott would restrict optional disclo­ sures to types of power for which standard methods of measurement exist, citing IHF Standard, Section 3.1.2 as the solution.7* The Record reveals that some persons feel the Commission should prohibit disclosure of all short-term power, such as music power. to R. 565.

71R. 279: Tr. 21-22.

73 Tr. 75.

73 Testimony of Mr. von Recklinghausen, Tr. 84.

peak power, etc.,7* while others feel that only peak power representations should be pro­ hibited.7* The Commission believes that the Rule, which requires disclosure of three parame­ ters whenever a power output claim is made, will tend to discourage short-term power representations, especially those in terms of “peak power.” Once consumers have been educated to look for the three parameters which this rule requires to be disclosed and to make their purchase decision on that basis alone, they should not be so impressed with subordinated disclosures of other less signifi­ cant factors and hence there should be less temptation to employ these essentially unmeaningful characteristics in advertising. At the same time, the seller’s freedom to make these representations in a nondeceptive manner if he so chooses is preserved, for the intent of this rule is to require adequate product information disclosure and not to establish rigid standards from which no seller may depart.

H. Asterisk Disclosure. Note 2 to Section 3 of the proposed rule prohibited asterisk dis­ closure of information provided by Sections 2 and 3.

The only person to comment on this provision was Mr. Ivan Berger who would permit use of the asterisk for disclosing all parameters except the distortion.76 In similar oases in the past, the Commission has found that the asterisk is often used to bury the disclosure.

The Commission has been confronted with this kind of problem especially in adminis­ tering the Trade Regulation Rule relating to TV Picture Sizes (16 CFR 410,). The TV Rule was amended to include specifically a provi­ sion prohibiting use of the asterisk in effect­ ing disclosure (36 FR 21518, Nov. 10, 1971). The Commission believes it would be remiss, especially in a case involving disclosure of product specifications as here, not to have a specific provision prohibiting the much abused asterisk form of disclosure. I. Section 4— Prohibited Disclosures. This section, as to which no direct issue was taken, was intended to assure that all performance characteristics are based upon conditions of normal use by the consumer, i.e., conditions which are encountered in the home. CHAPTER XV.---PROCEEDING TO AMEND AND REVISE THE PROPOSED RULE A. Section 1(a) and (b ). At the hearing, objection was taken to section 1 as being 74 Accoustic Research, R. 109, New York Audio Society, R 227 and Audio Magazine, R. 594. Morley Kahn, Director of Marketing, Dynaco, Inc.,'in announcing support for the rule stated, “There is a problem of measur­ ing short-term power on a meaningful and reproducible basis. The use of a momentary signal makes it extremely difficult to meas­ ure distortion; and, in fact, there is no stand­ ard way to do so— We feel that a rating sys­ tem which can exaggerate the performance of an amplifier is a dis-service to the con­ sumer and serves no beneficial purpose.” Tr. 64-66; R. 348. See also consumers’ views, R. 188, 222, 228, 229, 232, 233, 242, 246, 249, 263, 553, 596, 618.

to EIA at Tr. 22 and IHF at R. 136; Also Ivan Berger, Tr. .207 and R. 304. tor. 302.

too broad in scope. It was contended that this Section should exempt equipment hav­ ing a power output capability of two watts or less on the theory that consumer decep­ tion is unlikely to result from representations on such equipment.77 B. Section 2 (d ). Also questioned was the accuracy of this section which would have required disclosure of the manufacturer’s rated percentage of total harmonic distortion at any power level from zero watts to rated power output. One person pointed out that from a purely technical standpoint, In meas­ uring from “zero power” in this context a meter would read 100 percent distortion.7» Others expressed a similar view .to Accordingly, on February 1, 1972, a notice to amend and revise issued for comment pro­ posing (1) an amendment to Section 1, para­ graphs (a) and (b) exempting representa­ tions with respect to equipment not having a rated output in excess of 2 watts per chan­ nel or total and (2) a revision of Section 2, paragraph (d ), requiring that the maxi­ mum total harmonic distortion be measured from a minimum power of 250 milliwatts. CHAPTER V.--- RESPONSE TO NOTICE TO AMEND AND REVISE PROPOSED RULE AND FINDINGS Unanimous support for the Amendment and Revision came from industry and con­ sumers.80 The Commission is of the opinion that lit­ tle consumer deception will result from claims made for equipment having a power output of 2 watts or less. Further, the section 1 exemption will greatly facilitate enforce­ ment of the rule.

CHAPTER VI.--- PROCEEDING TO REVISE TO INCLUDE STANDARD TEST CONDITIONS The argument was made at the hearings and raised again in response to the notice to amend and revise that the rule should con­ tain specific test conditions. EIA urged the Commission to make the measurements re­ quired by the rule in accordance with the EIA Standard stating that variations in test conditions under section 2 could result in different output ratings.81 EIA-J,82 Somerset Associates83 and Audio Showcase, Inc.,*1 agreed.

77 Electronic Industries Association of Japan, Tr. 48.

78 h . H. Sçott, Inc., Tr. 83. 70 Klipsch and Associates, Inc., R. 2; EIA, R. 103- 80 Consumers’ letters, R. 648-656, 679, 78B, 716-719; EIA, R. 662-663 and IHF, R. 714; German Hi-Fi Center, R. 687; Som erset As­ sociates, R. 689; Texas Consumer Associa­ tion, R. 715 and Marantz, R. 721. «T r. 664.

87 Tr. 677.

*> In speaking of his disappointment in tae Commission’s failure to include such conai' tions, Mr. Greenberg stated : “As far as our comment on the omissions in the proposed regulation we consider them obvious. We refer the Commission to any audio engineer for verification and submit that without their Inclusion, we will again have another meaningless regulation filled with genuine loopholes for clever manufacturers to ex­ ploit.” Tr. 689, 690.

84 Tr. 691.

FEDERAL REGISTER, VOL. 39, NO. ,87— FRIDAY, M A Y 3, 1974

Page 17

RULES AND REGULATIONS 15393 Accordingly, on October 11, 1073, a notice to revise to include minimum test conditions was issued for comment.“ CHAPTER VH.— RESPONSE TO NOTICE TO REVISE AND FINDINGS A. Section 3 “ —Standard Teat Conditions. (1) Power line voltage. Section 3(a) of the revised proposed rule states: “the power line voltage shall be 117 volts AC (230 volts when the equipment is made for foreign sale or use), RMS, using a sinusoidal wave contain­ ing less than 2 percent total harmonic content”.

EIA contends that a more reasonable power line voltage would be 120 volts because 117 volts is exceeded in approximately 96 per­ cent of customers’ homes; 87 that 120 volts Is the voltage usually specified for measuring under standard test conditions.88 As to for­ eign equipment, EIA would have the Rule provide that the test voltage be within ± 1 percent of the amplifier rating because such equipment may not be rated at 230 volts.“ EIA also suggests that the Commission in­ clude a testing specification of the power line voltage for AC/DC or DC operated products and that such specification be the manufac­ turer’s rated DC power supply for the par­ ticular product.®0 Pacific Electronics would have the Com­ mission establish line voltage as 120 volts ± 1 percent as provided in the IHF standard.®1 With respect to the harmonic content of the sinusoidal wave, National Electronics Service Dealers Assocation, Inc., contends the , rule requirement that such wave be of less than 2 percent total harmonic content is far too high to protect the consumer and should be changed to “no more than 1 percent and/or less*’.*® Klipsch and Associates, Inc., an electronic research and development firm, states that since few power lines have as little as 2 per­ cent total harmonic content, the rule is un­ necessarily stringent. A 10 percent figure, it is stressed, would provide for an essentially sinusoidal wave form without materially af­ fecting the power supply voltage or current levels of equipment under test.®“ The power line voltage specification has been changed to 120 volts in the Pinal Rule since there appears to be general agreement on this figure. Moreover 120 volts corresponds with the average voltage in homes across the U.S.A.

With respect to equipment manufactured for foreign sale or use, as noted earlier, the Commission considers it unwise to permit tolerances such as ± 1 percent, etc., since this would not permit duplication of the tests. However, this aspect of the Rule has “ EIA also contended that to be technically correct the term “RMS” Bhould be changed to “average”. This change was incorporated in the revised rule.

Section 3 of the proposed rule, designated Optional Disclosures,” was changed to Sec­ tion 4, et. seq.

WA survey, “65,000 Service Voltage Tests Across the USA” (1966), reported by J.W. Anderson, R. 802.

88 R. 797.

* ^ectronic Industries of Japan (SIA -J) £ « i i tlaUy agrees with this view, R. 793. R. 797.

Shack 8180 argues that the powei Rinfnl«^ge Should be 120 volts, R. 762. Foi ^ Herman Snibiger, Bell Tele- R 768 759* «t*1 Superscope, 88 R. '778.

83 R. 757.

been changed to require testing at 230 volts unless a different voltage is Indicated and is permanently affixed to the equipment by the manufacturer.

Only one industry member would make the total harmonic content of the signal stricter. The Commission is of the view that this is Insufficient to change what is essentially accepted by most authorities and testing facilities as the standard test for this par­ ticular parameter.

The Commission understands that in the case of AC/DC operated products, the AC converts down to 9 volts or whatever battery voltage is recommended and that testing with the battery in such case will yield a very low distortion because the hum and npise factor from the power line has been eliminated. Therefore, a provision has been inserted in the Final Rule requiring testing at AC on such combination power source equipment. The Rule also provides for equipment oper­ ating solely on battery power. (2) Power line frequency. Section 3, para­ graph (b ), of the revised proposed rule reads, “ the power line frequency shall be 60 Hz". Importer Triad-Ultrad, contends that 230 volts for foreign power line voltages is most generally accompanied by a frequency of 50 Hz, and proposes an amendment to this Section to read: “The power line frequency shall be a minimum of 48 Hz thru a max­ imum of 61 Hz for domestic appplication and/or favored foreign sale or use.” ®4 As noted earlier, we have not permitted the use of tolerances because this would not allow for duplication of the tests. Accord­ ingly, section 3 (b ) has been amended to in­ clude a power line frequency of 50 Hz in the case of equipment intended for foreign sale or use.

(3) Pre-conditioning. Section 3, paragraph (c) of the revised proposed rule states: “the amplifier shall be pre-conditioned by simul­ taneously operating all channels at one-third of rated power output for one hour using a sinusoidal wave at a frequency of 1000 Hz”. Only two industry members take issue with this provision. Both EIA 85 and E IA -J 86 con­ tend that since average power is 1/10 of peak power normally, 1/10 is more representative of the condition under which the amplifier will be operated than is y3. The Commission rejects this argument. Experts in the field have advised that pre­ conditioning at 1/10 of rated power is totally insufficient to reveal any reduction in per­ formance due to thermal build-up. (4) Temperature for testing. Section 3, paragraph (d) of the revised proposed rule states: “the pre-conditioning and testing shall be in still air and an ambient tem­ perature of 77 °F.”

There is general agreement that the tem­ perature specification should be shown in equivalent degrees centigrade. EIA, noting that ambient temperatures in a testing lab­ oratory are often difficult to control, believes that the temperature specification should be stated as “at least 77 “F.”, since the perform­ ance of amplifiers is not improved by higher temperatures.87 One person would change the temperature specification to 100.5“ F„88 a temperature not normally found in the aver- 84 R. 752; in agreement is Professor Ashley, R. 775-776. EIA would include a tolerance of ± 2 ' percent for tests made at other fre­ quencies, R. 798.

86 R. 798-799.

88 R. 793.

87 R. 799. See also Ivan Berger, R. "783; Triad-Ultrad, R. 752. EIA would also include a tolerance, R. 799.

88 Prof. Ashley, R. 776.

age home.

The above suggestions that the tempera­ ture be stated as a minimum specification and the equivalent in degrees centigrade be shown are reasonable and have been incor­ porated in Section 3(d) of the Final Rule. (5) Power rating measurement. Paragraph (e) of Section 2 of the revised proposed rule states: “rated power shall be obtainable at all frequencies within the rated power band without exceeding the rated maximum per­ centage of total harmonic distortion after input signals at said frequencies have been continuously applied for not less than five (5) minutes at the amplifier’s auxiliary in­ put, or if not provided, at the phono input.” Bruce Harvey, a consumer professing to have extensive experience with audio equip­ ment, takes issue with the requirement that the signal be applied through the auxiliary input because, he maintains, auxiliary inputs are loaded with more impedance to protect the initial high amplification gain stages of the amplifier. The most common mode of op­ eration input, he notes, is the phono input through which the tests should be made.88 He states further that the test signal should be furnished by a standard FM/MPX test signal generator.100 Alan Lefkow, Engineer, Consumers Union, states, “ * * * it is not clear whether the level ot the input signals to be continuously applied for 5 minutes are supposed to drive the amplifier to its rated power output for that same length of time.” mi As to the propriety of the amplifier input for application of the signal, the Commission understands that the phono input i^ a very low level type of input, the signal as to which only the MqAdam tester is capable of dupli­ cating; that there is no change in power out­ put regardless of which input is used, the auxiliary or the phono. If the phono input is used, a higher distortion will be gener­ ated. Also built in equalization curves tend to foul up the input signal for most signal generators.

The Commission Is of the opinion, there­ fore, that the auxiliary input will give an accurate picture of performance when in tape or tuner mode because they both by-pass the preamplifier. This aspect of paragraph (e) is therefore left unchanged.

However, the Commission is persuaded by Mr. Lefkow that paragraph (e) should be clarified by providing that the input gjgnaj shall be applied for 5 minutes at full rated power.“ * Finally, paragraph (f) has been added which provides for the placement of controls during the period of testing.“ * Other criticisms, addressed to the basic provisions of the rule as initially proposed, have already been considered and rejected.“ * 88 R. 743.

m o ibid.

R. 786.

“ * Julian Hirsch was the only person to ob­ ject to the 5 minute requirement, R. 766. 103 See comment of Bruce Harvey, R. 742. *** Zenith Radio Corporation maintains that the proposed rule will generate con­ sumer confusion because it permits dis­ closure of three variables at the option and whim of the manufacturer. The Commission wishes to stress its belief, to the contrary, that permitting the manufacturer the option of disclosing frequency response, distortion and impedance will provide the consumer with the information needed to choose the product which is most suitable to his or her particular needs. Pegging these variables, on the other hand would result in favoring manufacturers at a particular point in the market spectrum.

No. 87—Pt. I--- s FEDERAL REGISTER, V O L 39, NO. 87— FRIDAY, M A Y 3, 1974

Page 18

15394 RULES AND REGULATIONS CHAPTER VIH.--- SUMMARY AND CONCLUSION On the basis of the foregoing considera­ tions and the entire Record of the Trade Regulation Proceeding, including the pro­ ceedings to Amend and Revise, the Commis­ sion has concluded that the issuance of a Trade Regulation Rule relating to the Adver­ tising of power output of sound power ampli­ fication equipment for home entertainment products is required by that Record and is in the public interest and has, therefore, promulgated the Final Rule, herein. CHAPTER IX.—-EFFECTIVE DATE OP PIN AL RULE EIA has noted that advertisements, speci­ fication sheets, line folders, catalogs and other promotional materials have different lead times and must be planned and pre­ pared months before they are actually printed and distributed. New product lines are shown between April and June of each year and new models are displayed in late June at the Consumer Electronics Show. Pro­ motional materials for this annual show must be finalized weeks before the products are shown.

At the hearing, E IA -J 106 and IH F 108 urged that the effective date be set at least one year after promulgation of the Rule. Speaking for a major portion of the Industry, EIA now urges that if the Rule is not issued until after January 1, 1974, the effective date should be established as six months from the date of its promulgation.107 The Commission accepts this suggestion as a reasonable solution and, ac­ cordingly, directs that the effective date of this Rule shall be six months after the date of promulgation.

[FR Doc.74-10118 Filed 5-2-74;8:45 am]