Follow ACC Docket Online:  

The National Advertising Division: A Fast, Fair, and Expert Adjudication of Competitive Advertising Disputes

This sponsored content is graciously presented by Council of Better Business Bureaus, Inc. and was featured in ACC Docket's January/February 2018 issue.
T he following communication from the chief marketing officer to the corporate counsel is the written record of a primal scream: "Our competitor is making advertising claims that ARE NOT TRUE. Their claims are based on spurious science or no science at all, and this isn't the first time. This hurts the brand. This hurts the bottom line. Please, please, please can't you make them stop?"

When a company is confronted by advertising claims it believes are untrue, falsely disparaging, or misleading, it generally falls to corporate counsel to evaluate the threat of troubling claims, identify the risks of any response, and recommend appropriate steps, which might include filing:
•  An action in federal court for false advertising under §43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a);
•  A complaint with the Federal Trade Commission (FTC); and,
•  A challenge to the advertising before the National Advertising Division (NAD).
Absent issues strong enough to merit entry of a temporary restraining order by a court, or clear evidence of consumer harm that warrants the expenditure of FTC resources, the NAD process might be the best approach.

″Is the company is unfamiliar with the NAD process? ″Is the company geographically distant from NAD's New York offices? ″Is the company concerned about the prospect of extensive discovery and depositions?
The following primer aims to answer those questions, explain how the NAD process works, and encourage corporate counsel from all companies that advertise to consider the value of an expert forum charged with promoting truthfulness and accuracy in advertising.

Background

The advertising self-regulatory system was founded by three major advertising trade associations — the 4A's (American Association of Advertising Agencies), the American Advertising Federation (AAF), and the Association of National Advertisers (ANA). To ensure the integrity of the process, the associations partnered with a third-party administrator, the Council of Better Business Bureaus (CBBB). The NAD process offers a fair, expeditious, expert and cost-effective forum for adjudication of advertising claims.

Policies and procedures

While NAD monitors advertising in all media and opens inquiries based on that monitoring practice, the majority of NAD cases are brought by advertisers who "challenge" a competitor's advertising claims. "The Advertising Industry's Process of Voluntary Self-Regulation, Policies, and Procedures," serve as a step-by-step guide to all actions before the NAD, including advertising challenges. The procedures are available at ASRC's website, www.asrcreviews.org.

What type of claim does NAD review?

NAD is staffed by attorneys who are experts in advertising claims substantiation. The NAD reviews advertising claims that are national or broadly regional in scope and accepts challenges to advertising that is directed to consumers, professionals, and businesses.

NAD examines express and implied claims for goods and services as diverse as telecommunications, infant nutrition, over-the-counter medication, dietary supplements, animal husbandry practices, "green" products, seal and certification programs, building products, food and beverages, and online booking platforms. NAD decisions address claim types that include, but are not limited to, clinically proven claims, superiority claims, pricing claims, and endorsements and testimonials.

[Related: 5 Answers to the Questions Every Advertising Lawyer Gets Asked]

NAD reviews claims that appear in print and broadcast mediums, on packaging, on websites and in social media, within in-store displays, and in press releases or other promotional materials.

If a complaint challenges advertising for more than one product or service, NAD may ask the challenger to submit individual challenges. If a complaint is too broad in scope, NAD might ask the challenger to limit the issues for review.

NAD does not review matters of taste or decency. NAD does not review political advertising.

Filing a challenge

The filing process is straightforward: In a letter to the NAD director, 20 typewritten pages or fewer, the challenger identifies the advertising at issue, where it appeared, the challenged claims, and the basis for the challenge. The challenger is expected to provide copies of the advertising at issue and pay a filing fee.
Upon receipt of a challenger's letter, NAD reviews the materials and decides, usually within one business day, whether to open the case.

NAD will decline to open a case if identical claims are the subject of pending litigation, a court order, or a regulatory consent decree or if the challenged claims were permanently withdrawn from use prior to the date of the complaint and the advertiser provides in writing its representation that the claims will not be used in future advertising.

If NAD declines to open a case, the challenger is notified and the filing fee is returned.

Anatomy of a challenge

If the challenge is accepted, NAD immediately sends the challenger's complaint and an opening letter requesting substantiation for the challenged claims to the advertiser. The clock starts ticking.

The NAD reviews advertising claims that are national or broadly regional in scope and accepts challenges to advertising that is directed to consumers, professionals, and businesses.
— Linda Bean, Director of Communications, Advertising Self-Regulatory Council

To help ensure that the process moves smoothly, the NAD case manager provides both parties with a schedule of deadlines and meetings.

The advertiser has 15 business days to submit a written response to both NAD and the challenger that provides substantiation for the challenged claims, details any jurisdictional objections it may have, and includes copies of all advertising, in any medium, that is related to the challenged claims.

The advertiser's response may not include a counter challenge, although an advertiser may file a separate challenge. The advertiser may provide certain confidential information to NAD alone, but must provide the challenger with a comprehensive summary of the confidential information and the principal arguments it has submitted in its rebuttal of the challenge.

[Related: Tips & Insights: The Quest for Compliance]

The challenger then has 10 business days to review the advertiser's response and reply to the advertiser and NAD; the advertiser then has 10 days to submit its final response.

NAD may request additional information, to be submitted within six business days, from either the advertiser or challenger. That information will be forwarded to the other party, who will have six business days to submit a response.

The procedures provide for ex parte meetings with NAD. NAD seeks to meet with both parties and will schedule such meetings — either in person or via video- or tele-conference — shortly after NAD's receipt of the advertiser's final response.

The NAD decision

NAD begins drafting the decision after the filing of the last document or last meeting and can be expected to make one of three determinations for every claim at issue:
•  The evidence provided by the advertiser fully supports the claim under review.
•  The evidence isn't sufficient to support the claim and NAD recommends the claim be modified in current and future advertising to better reflect the evidence in the record.
•  The evidence is wholly insufficient to support the claim. NAD recommends the claim be discontinued.
•  NAD's decision sets out the basis of its inquiry, the positions of both parties, its analysis of the claims, and its findings and conclusions.
Upon receipt of the decision, the advertiser has five days to prepare and submit a response, called the "Advertiser's Statement."

The Advertiser's Statement provides the advertiser with an opportunity to state whether it will comply with NAD's recommendations or appeal the decision and explain, briefly, why it may disagree with NAD findings.

The full text of the decision is posted at ASRC Online Archive, a subscription-only database. A press release explaining the decision is distributed to news outlets and parties are provided with a courtesy copy of the release before it is distributed.

Parties are prohibited from using NAD decisions for promotional purposes.

More than 90 percent of the advertisers who come before NAD comply with recommendations to modify or discontinue certain advertising claims
— Linda Bean, Director of Communications, Advertising Self-Regulatory Council

Compliance and referrals

More than 90 percent of the advertisers who come before NAD comply with recommendations to modify or discontinue certain advertising claims. Where advertisers decline to participate or refuse to implement the recommendation, NAD refers the advertising claims at issue to the appropriate federal or state law enforcement agency, most often the Federal Trade Commission. All such referrals are accompanied by a press release announcing the referral.

User-friendly forum

The self-regulatory system works best when parties adhere to both the letter and spirit of self-regulation.

To encourage participation, NAD seeks to provide a user-friendly service. NAD's case manager works closely with parties to facilitate scheduling and the NAD assistant director, communications, provides one-on-one assistance with navigating the NAD process.

NAD's time to decision varies with the complexity of the case and needs of the parties. NAD recognizes that parties may occasionally seek deadline extensions; NAD works to ensure that reasonable extensions are granted after consultation with both parties.

Confidentiality

NAD proceedings are confidential except for the publication of final decisions, press releases, and abstracts. NAD's final decision is the only permanent record kept regarding the basis of an inquiry, the issues, the evidence, and the conclusion reached by NAD.


By participating, parties agree to keep the proceedings confidential throughout the review process. Parties also agree that they will not mischaracterize NAD's decision or use the decision for promotional purposes.

Appeals

The self-regulatory system includes an appeals process. Advertisers have the automatic right to appeal an adverse decision from the NAD. Challengers must seek permission to appeal from the chairman of the National Advertising Review Board, which is the appellate body of the self-regulatory system. Appeals are heard by five-member panels, drawn from a pool of 70 volunteers. Those volunteers include people who work for companies that advertise, representatives from advertising agencies, and educators from college and university marketing and media programs.

About the Authors

For more information about NAD, please visit www.asrcreviews.org, or contact Linda Bean, director of communications and stakeholder engagement, lbean@asrc.bbb.org, or 212.705.0129.


The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.