Monday, 23 October 2017
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HearingAidThe hearing aid cartel is one of the most powerful and well-organised in world, third only to crude oil and arms. Only six companies, using many different brands and models with different codes, make us think that there is healthy competition in a free-market. The owners became billionaires in a few decades. Some have been prosecuted in their countries for various crimes, writes Jack Soifer.

William Demant Holding A/S & GN Store Nord A/S are two Danish companies whose voting share majority is in the hands of the American corporation T. Rowe Price Group Inc. with 5% in the hands of Dutch, Danish and Norwegian investment funds.

GN Store is an old enterprise dealing with headsets and digital sound. In 1990 it purchased Madsen, today Otometrics, selling audiological measurement equipment.
In this way it got detailed knowledge and contacts with shops and professionals who sell hearing-aids. The next step was logical, to purchase hearing-aid makers, to deliver what the shops needed.

In 1996 it made an alliance with American Resound, to sell their products in Europe. In 2000 it bought Beltone. It has plants in Praestoe in Denmark, Xiamen in China and Johor in Malaysia.

William Demant was started long ago by a professional who sold the company in 1998, supposedly disillusioned by the financial world. He then continued to work on devices for smaller firms. William Demant’s brands of hearing-aids are Opticon, Sonic and Bernafon.

As GN, it sells diagnostic instruments to for shops to help them sell hearing aids. Brands are Maico, Amplivox, Grason, Micro-medical, and Interacoustics.  

Although Europe is still in crisis, William Demant raised sales by 11% and EBITA by 28% reaching a net return of 17.5% in 2017. As GN, it has a Foundation which interacts with researchers and is marketing innovations which, according to Swedish researchers, ‘raise prices with almost no benefits.’ (See later)

T. Rowe Price is an American pension & investment fund. It had problems during the 2nd WW, but grew with the Marshall plan, later with unusual operations in Luxemburg and Hong Kong.

Its CEO is Bill Stromberg, a famous football player who also ran Phil Eagles and knew many players who had money to invest.

APG Management, Netherlands, is one of shareholders, a pension fund which made a huge profit in 2016, while the European economy was still poor.

GN has today 5,400 employees and sells the brands Resound, Beltone, Jabra and Intertone. Its CEOs are Anders Hedegaard, with a long background in marketing and René Svendsen, with experience at Nokia Global.

The CFO is Marcus Desimoni, with a PhD from the Bundeswehr University Munich, practiced in investor relations at Siemens and at Sivantos in Singapore.

The board chairman is Per-Wold Olsen with long experience in emerging markets at Merk. Also on the board is Wolfgang Reim who studied in Zurich and is consultant to an association of makers of advanced medical equipment which gives access to research at many universities. Also Carsten Krogsgaard, earlier at the Ministry of Finances of Denmark; also CFO at the state-owned railway. Helene Barnekow is CEO of Telia, an ex-governmental telecom operator in Sweden, with access to incredible amount of information on customers with poor hearing.

Erik Westermann was a poor child born in the early 1930s. After commercial college, he worked for a supermarket and, after seven years at hearing-aid leader Opticon, started Widex in 1956 with colleague Christian Topholm. His friend dies in a traffic accident and both families today own Widex. Their sons later studied engineering and neuro-science in order to develop better devices. Since 2001 the company has belonged to the family-owned fund W&T, which presently has one of the highest liquidity rates in the market, 336%, and a very high solidity, 71%. The board decided to cut dividends in order to be able to fight off corporate raids from their powerful competitors.

Jan Topholm is on the board of 16 enterprises, Anders Westermann on 22, Soren Westermann on 12, all with small profits, but Widex showed a return of 17% in 2016.

As the other companies, Widex has many different models, some very small, others allowing a more natural sound, thus, more expensive. Unlike others, Widex has only one brand and does not pressure potential clients who can take an online hearing test and look around at competitors’ devices if they wish.  

The Widez global market share is around 10%. Widex is among the six largest hearing aid manufacturers, with 4,000 employees worldwide in 100 countries. The plants are in Lynge, a small village in Denmark, and Tallinn, Estonia, both in the European Union.

The Lynge building has a geothermal system that uses groundwater as a heat reservoir to store an entire year’s worth of heating and cooling, the first of its kind in Denmark. It uses solar cells, recycled rainwater and a windmill which delivers more power annually than Widex uses.

Widex and its owners do not have foundations or funds in tax heavens.

Starkey Hearing Technologies, one of the six started by William F. Austin who, according to Bloomberg is good for US$ 2.7 billion and remains sole shareholder. Starkey is partially owned by the tax-free Starkey Foundation.

Starkey’s HQ is in Eden Prairie, Minnesota. According to Forbes, Austin is the only owner of the holding. Austin’s company has long been the largest American hearing aid manufacturer. There may be some question about the accuracy of Bloomberg’s calculations of Starkey’s value and of Austin’s $2.7 billion net worth, since they are not based on first-hand information.

As a privately held company, Starkey is not required to make its revenues and profits public. And, since it has chosen to keep its finances private, the Bloomberg Billionaires Index had to derive its figures indirectly, by taking averages for sales, cost  and profits from three competitors: Sonova, owner of Phonak, and two Danish companies, William Demant, which owns Oticon, and GN Store Nord, parent company of ReSound.

Starkey sells also under brands Audibel, All American Hearing, NuEar and Microtech. As other hearing-aid corporations, it has unusual relations with shop owners.

Starkey Laboratories and its ousted president traded accusations of serious improprieties, escalating a conflict that first came into public view when the hearing-aid maker abruptly fired eight top directors.

Former corporate President Jerry Ruzicka alleged in a lawsuit that Starkey’s owner, Bill Austin, or his family members, diverted millions in company funds for personal use, violated U.S. tax & customs laws, falsified company records and sold hearing aids labelled new that were made from old components, according to a report in the Star Tribune.

"Austin routinely pressured manufacturing personnel to use defective microphones and speakers, and other used or defective parts for hearing aids sold to the company's foundation,” the lawsuit read.

Ruzicka stated: “Austin and his family failed to reimburse Starkey for personal use of the company plane. Austin’s stepson Sawalich used $300,000 in company funds to remodel and maintain his home. The general contractor performing the work was told to falsely indicate that the house was Starkey property. Sawalich kept money that was set aside for customer rebates on hearing aid orders for his personal use and his mother, Tani Austin, diverted $200,000 a month of Starkey money to another company they owned.”

Bill Austin was not licensed in the state of Minnesota to make ear impressions and fit hearing aids, but did so anyway, prompting patient claims for damages for $4.5 million. As a result, Starkey is unable to get professional liability malpractice, according to

A whistleblower report then confirmed, through law enforcement sources, that the FBI and the IRS are conducting criminal investigations for money laundering at both Starkey and the Starkey Foundation.

The RSM US financial auditing report has some unusual notes on the report for 2015. It states that 91% of the Foundation’s assets are devices donated by the corporation. Defective?

The Attorney General of Minnesota, since Sept/2016, “is investigating the Foundation to determine if it violated any of the charitable laws of the State of Minnesota.”

See 'Starkey, fired president trade sharp accusations of wrongdoing'

and 'Fired Starkey Hearing Foundation worker files whistleblower suit alleging wrongdoing'


Andreas and Thomas Strüngmann are twins, born in 1950. From 1986 they have built Hexal, now the second largest manufacturer of generics in Germany. In February 20005, the brothers sold the company, along with its 68% share of Eon Labs, for US$7.5 billion to Novartis.

In 2006, Forbes listed the brothers at number 185 equal, each with US$3.75 billion US assets, of the richest people in the world. In 2015 each had US$3.1 billion, at rank 534.

Through its subsidiaries, Santo Holding and Athos Service GmbH, the Strüngmann brothers hold larger shares in biotechnology and healthcare companies.

In 2004 Santo Holding purchased part of Südwestbank to guarantee inexpensive financing for the Merger & Acquisitions of hearing-aid shops. In 2014, the brothers invested more than €350 million in the bank.

In  Febraury 2008 they purchased 25% of Conergy AG when the Green Party formed a government with SPD. That business did not develop as expected when the government changed.

But this solar power company recovered fully after the nuclear disaster in Fukushima in March 2011, when orders flooded in.

In May 2003, the Strüngmann family had more than 10% of IVG Immobilien.

In July 2008, the brothers signed an agreement with the Max Planck Society to establish a private research institute, for medical projects - mainly in cognitive neuroscience.

The Ernst Strüngmann Institute (ESI gGmbH) in Frankfurt was equipped by the brothers with €200 million. The Institute is an associated research institute of the Max Planck Society. Since 2009, the neurophysiologist Pascal Fries is the institute's scientific director. One of his reports is on “structuring functional networks in humans.” Another on, “how visibility arises from the communication of neurons in different brain areas, how processes that occur during attention might support.”

This is the basics for neuro-marketing and influencing votes on elections.

Owned by a Foundation, the profits from Sonova et al. go to this tax-free ESI which will benefit Sonova. The Max Plank agreement gives the public an image of research and development.

The brothers are under investigation for tax-evasion and undue real estate businesses by IVG.

From its Annual Report 2017: “The AudioNova Group, purchased in late 2016, operates under several market-specific, well-established local brands, which besides AudioNova include Audium, AuditionSanté, Boots Hearingcare, Connect Hearing, Geers, Hansaton, Lapperre, Schoonenberg, and Triton.”

Sonova uses FIVE brands, as Unitron, and TEN sales brands in 1300 stores all over Europe. It had a 25% market share in 2016.

Although the European crisis affected all branches, Sonova shows an astonishing EBTIA: 2008:33%, 2009: 42% in 2010: 32%, in 2011: 31%, in 2012: 38% and in 2016: 21%, since some governments, such the Swedish government, buy hearing-aids from best/cheapest supplier and resell directly to their citizens.

Except Chase-nominees, the bigger share-holders are Hans-Ueli Rihs, Andy Rihs and Beda Diethelm.

For decades, Germany’s Siemens sold hearing-aids but when the government started investigating this cartel, it partly sold this division to Sivantos Holding, Singapore. This enterprise is mainly owned by Auris Luxembourg II, which has a majority of shares owned by the Swedish fund EQT, whose majority is hold by INVESTOR AB, whose voting majority belongs to a traditional banking family, Wallenberg.

Other major owners of Sivantos are Santo Holding, whose majority belongs to the brothers Andreas and Thomas Strüngmann of Sonova. It is difficult to find out how much Siemens owns of Sivantos.

SIVANTOS major brands are:
- HearUSA which owns 220 centres all over the rich states of the US and Canada and sells to 4,000 providers.
- Audibene is a German dealer selling 800,000 devices in ten rich countries, mainly in Northern Europe, by 4,000 independent sellers.
- A&M selling mainly in Asia, Arab countries and former communist countries. There is no detailed info about this enterprise. It sells four different brands.
- Rexton was founded in 1955 and sells five different brands, mainly in the US.
- AudioService is a German company founded in 1977, selling in 45 countries. It sells twelve brands.
- Siemens/Signia is a German manufacturer and dealer. In 1951 it developed the first pocket-size hearing-aid. It sells ten brands, mainly in Europe.

Sivantos’ CEO is Ignacio Martinez, who has sales experience at Widex and Sonova. CFO is Wolfgang Ollig, experienced in Mergers & Acquisitions, with a PhD from Regensburg and contacts with the Sonova chiefs.

Ignacio is hearty recommended by Jared Schnackenberg, boss of Catalyst Acquisition Group, which gives “alternative to outsourcing or off-shoring units that have become burdensome cost centres within larger organisations. By structuring outsourcing as an acquisition, we can often provide firms with a cash payment for the unit as well as save firms substantial unit closing costs.” Jared is the President of Oticon US and knows Ignacio from Spain.

Ignacio also is praised by Sharad Govil, an ex-audiologist based in Singapore since 2006, who has been a sales director for Sonova, Phonak, Resound and GN Store, all in only nine years. Competitors? Also Jason Mayer, who climbed from local sales to leading positions in Phonak and Unitron in only seven years. Competitors?

Also by Alex Delannoy, who worked for Russel Reynolds during 13 years prior moving to Sivantos.  RR is a head-hunter with offices in almost 50 cities in rich countries and where you cannot find the names of their owners, nor their real bosses, nor any corporate information. Two key offices are in Brussels and Washington, where most lobbyists are based.

Two of its key-statements: "Sales and marketing today are extremely inefficient processes, and with the pressure on reimbursement, the industry needs to find new models of selling and distributing products."

“Boards have an increasing requirement to recruit members with successful consumer goods and services leadership experience.”

Common to all enterprises under Sivantos is the lack of details on their plants and on corporate information. Common to them and to all hearing-aid makers is calling the staff experts, but what they are expected to do is sales, this also goes for the audiologists. Also, there is a lack of details on the different aids, plenty of pictures of older people laughing, with their supposed grandchildren, and aggressive pop-ups to call or email for a hearing-test. It seems they accepted their head-hunter success rates for consumer goods such as coke and ice-creams - which are quite different to hearing-aids.

In order to give an impression of independent enterprises, they all have HQs in different locations, but often sell in the same countries. Also the same chiefs move effortlessly from one company to another within the same cartel.

Feie is a Chinese hearing-aid maker, competing with the most advanced of the cartel: .
Opposed to the cartel, it gives details of each product, as:

MY-16S: ● Intelligent Spectrum Detection Processing System;
 ● Wide Dynamic Range Compression (WDRC);   ● 4 Channels
 ● Adaptive Feedback Cancellation; ● FRONTWAVE  Directional phone
 ● Super Quiet; ● 2 Memories; ● Adjustment for High & Low Frequency
 ● Memory Switch Indicator; ● Low Battery Indicator; ● Adjustable Indicator
 ● Maximum Power Output (MPO) Control;  ● Telecoil Input (optional)
Technical Specifications         BTE
MAX-SSPL90:                        131dBSPL
HFA-SSPL90:                         125dBSPL
MAX GAIN:                               67dB
HFA Full-on Gain:                   59dB
Frequency Range:                200Hz~5969Hz
THD at:                                  500Hz:1.9%; 800Hz:1.1%; 1600Hz:0.3%
Eq.Input Noise Level:             22.1dB
Battery Current Drain:            0.8mA
Attack Time:                              4ms
Release Time:                          39ms
 HFA-SPLITS:                           105dBSPL

Opposed to the cartel, “each indicator meets the GB/T 6657-86 Chinese national standards, the U.S. ANSI92 standard, and IEC-118-7/94 standards.” Feie makes a.o, audiometers and USB programming devices; all products are under one brand.

Feie sells through website Alibaba if a client emails his or her audiogram. Equivalent products, which Feie sells in India for €290, are sold in Portugal for €2,600, in the UK for the equivalent of €3,000, in US for €1,950, in Brazil for €1,100, in Sweden for €185 if in a Western Region Public Health Unit, or up to €2,800 if trough the cartels’ shops  (see table).

The reason for this huge price range is that competition does not exist in most countries, due to the lobby.

Production costs for a digital hearing-aid are between €50 and €80! This Includes a 40 to 50 minute hearing test – the product reaches the consumer at a x30 mark-up!

SWEDEN: Regional Public Health
In Sweden, the Federation for those with damaged hearing, Hörselskadades Riksförbund  commissioned a survey to discover the situation in the regional health units in order to suggest a better public programme.

It shows in 2014 that if a client can wait a few weeks to get an audiogram from the regional health, he or she can buy the hearing aid for €180 in the Western Region, up to €1,400 in Stockholm and €2,800 if directly purchased in a shop (pages 39-40).

“For a Siemens PM 5 the Stockholm Region pays 50% more than the Southern Region and 150% more than the Northern Region” (p.41). “Disinformation is standard in shops, part of the sales technique, to push the product range held by the shop chain.” (p.46). “There have been comments on various occasions indicating that the private shops do not comply with their duty of information. The choices the user has access to are limited and thus shops are suspected of benefiting from the sale of their own product range.” (press release May26th, 2014).

“William Dermant Holding, which owns the hearing aid brands Oticon and Bernafon, had influence by receiving 76% of hearing aid tests in Stockholm County in 2013 and 21% of tests in Skåne(So.). The Swiss company, Sonova Holding AG, which owns the brands Phonak and Unitron, influenced enquiries in 2013 so it carried out half of the hearing aid tests in Skåne and 6% in Stockholm County.”

In this way, perfect cartels operate, dividing among the companies the districts which they call “territories.”

According to governmental statistics in 2008 almost 14% of Swedes in all age groups had hearing problems. In 1985 this was only 11%, showing a rapid rise. In the 65-74-yerar-old age range, this figure is 28%, in the 75-84-year-old age range, this is 39%. Astonishing, at 35-44-years-of-age, 10% of Swedes have hearing problems.

In most regions, a patient pays €33-66 per ear for the audio-test and €11-22 for each adjustment needed, (page 81.) On top of the €50-€80 production cost, and around €20-28 for the dealers, for most people the final price should be around €180-€220, which is the price in markets that are free of the cartel, such as in India.

UK: Which & Consumers’ Association
“You can pay anything from £500 to more than £3,500 for a single hearing aid. And with the average cost of a pair of hearing aids bought privately in the UK costing £3,000, you'd be wise to do your homework before parting with any cash.”

Read more: Which: Hearing aid prices

“How much do hearing aids cost? Although it's possible to buy hearing aids for as little as £100, most people who buy privately pay significantly more. The average amount spent on a pair of hearing aids, according to our survey, was £2,501.55. Most people buy two hearing aids rather than one.”

Again, the public health system in the UK, although you must wait a few weeks, can provide what the client needs for some €120. In the shops you pay 20 times more!

“Average prices paid at other chains for a pair of hearing aids were £3,016.55 at Amplifon, £2,885.05 at Hidden Hearing, £2,650.96 at Boots, and £1,618.86 at Specsavers.”

“A third of Amplifon customers told us that they felt under at least some pressure to select a more expensive option out of a range of suggested solutions”.

“A third (35%) of Hidden Hearing's customers reported that they felt either under some pressure or a great deal of pressure, compared with 20% on average across all providers.”

“…some Which? members still commented on the expense of Boots hearing aids”.

Specsavers, with 586 shops, had an average lower price and did not press clients for more expensive aids. It sells Widex, Sivantos, Phonak and Advance. It started with optometrists and sells €2.5 billion worldwide, mainly in the UK, Australia and Netherlands. It sold 338,000 hearing-aids in 2016. Its CEO is John Perkins.

“The billionaire couple behind the Specsavers optical chain had their payout cut in half last year, despite the company recording a lift in profits. Dame Mary Perkins and her husband Doug’s dividend was slashed to £17.4m last year compared to a £36.8m windfall in 2015, according to recently filed accounts. Dame Mary, who started the world’s largest optical chain from a table-tennis table in a spare room over three decades ago …has an estimated fortune of over £1bn.”

See 'Specsavers billionaire founders take a pay cut'

To make a profit of some €1.2 billion in 30 years means a huge net profit margin. Tax havens?

Amplifon has 200 stores and sells GN, ReSound, Phonak and Widex.

Hidden Hearing has 85 branches in rich areas in the UK and sells Oticon, Bernafon and Starkey.

Boots merged with American Walgreen in December 2018, and has 13,200 stores in 11 countries, selling all kind of drugs and beauty creams. The Chairman is James Skinner, a former Executive Vice-Chair of McDonalds. He did not complete a college degree, has sold hamburgers at the lowest cost with plenty of neuromarketing advertising and some very tough franchisee agreements, which led to many prosecutions.

“In November 202016, Ethical Consumer viewed Walgreens Boots Alliance (WBA) SEC filing form 10-K which lists the company's subsidiaries. According to this list, WBA had multiple subsidiaries in jurisdictions considered by Ethical Consumer to be tax havens at the time of writing (Cayman Islands, Bermuda, British Virgin Islands, Delaware, Hong Kong, Jersey, Luxembourg, Singapore, Switzerland, US Virgin Islands).

Many of these were holding companies or insurance companies, which are high risk types of company for tax avoidance. Walgreens Boots Alliance therefore received Ethical Consumer's worst rating for likely use of tax avoidance strategies”.

Common to both the manufacturing cartel and the large chain-stores, is that they have foundations and collect both used devices and money for NGOs in Africa and Asia, mainly to use defective hearing aids or reuse old hearing aids, accounting for these transfers as if the products were new.