Advertising Self-Regulation

• Pages: 1323-1372

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CHAPTER VIII

ADVERTISING SELF-REGULATION

A. Introduction

For over forty years, the United States advertising industry has

maintained a system of self-regulation designed to ensure that

advertisements are truthful and accurate. The main purposes of the

system are to advance consumer confidence and trust in advertising, to

promote fair competition, and to minimize unnecessary government

involvement and law enforcement activity. Over time, self-regulation of

national advertising has played a significant role in the development of

advertising law and consumer protection.

The Advertising Self-Regulatory Council (ASRC) has established

policies and procedures for the advertising industry’s self-regulatory

programs, including the National Advertising Division (NAD) of the

Council of Better Business Bureaus, Inc. (CBBB), the Children’s

Advertising Review Unit (CARU), the National Advertising Review

Board (NARB), and the Electronic Retailing Self-Regulation Program

(ERSP).1 ASRC seeks to sustain the highest standards of truth and

accuracy in advertising through voluntary self-regulation and, in turn,

provide guidance to advertisers and to the public.2

Other self-regulatory measures are provided by other media outlets

such as the clearance and review processes of the major television

networks. Additional self-regulatory measures are provided by other

media outlets, certain trade associations, local Better Business Bureaus

and individual marketers and advertising agencies.3

1. Until 2012, ASRC was known as the National Advertising Review

Council (NARC).

2. See ADVERTISING SELF-REGULATORY COUNCIL, http://www.asrcreviews.org

(last visited Apr. 14, 2015).

3. For example, the alcohol industry’s three trade associations, the Distilled

Spirits Council of the United States (DISCUS), the Beer Institute (BI),

and the Wine Institute (WI), have issued guidelines to address concerns

about underage exposure to alcohol marketing and to limit where alcohol

advertising and marketing may appear. FED.TRADE COMM’N,SELF-

REGULATION IN THE ALCOHOL INDUSTRY i (2014), available at

https://www.ftc.gov/system/files/documents/reports/self-regulation-

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1324 CONSUMER PROTECTION LAW DEVELOPMENTS

Industry stakeholders have recognized that misleading advertising

claims erode public trust in their products, and that ensuring truth and

accuracy in advertising has a salutary impact on competition. Industry-

wide self-regulation provides a mechanism for competitors to resolve

legal disputes related to advertising without resort to costly litigation.

Increasingly, self-regulation has become regarded by regulators as a

useful means not only of providing guidance but of fostering consumer

confidence in advertising and in the commercial marketplace. The

Federal Trade Commission (FTC) and federal courts have commented

favorably on the role of industry self-regulation in the area of advertising

and marketing.4 In one case, a federal court stayed proceedings pending

alcohol-industry-report-federal-trade-

commission/140320alcoholreport.pdf. The FTC has also praised the

electronic game industry for its strong self-regulatory code and

enforcement of restrictions on marketing, advertising and selling mature-

rated games to younger audiences. FED.TRADE COM M’N,MARKETING

VIOLENT ENTERTAINMENT TO CHILDREN:ASIXTH FOLLOW-UPREVIEW

OF INDUSTRY PRACTICES IN THE MOTION PICTURE,MUS IC RECORDING,

AND ELECTRONIC GAME INDUSTRIES (2009), available at

http://www.ftc.gov/sites/ default/files/documents/reports/marketing-

violententertainment-children-sixth-follow-review-industry-practices-

motion-picturemusic/p994511 violententertainment.pdf.

4. See Deborah Platt Majoras, Chairman, FTC, Univ. of North Carolina

School of Journ alism and Mass Communication: The Vital Role of

Truthful Information in the Marketplace (Oct. 11, 2007), available at

http://www.ftc.gov/speeches/majoras/071011UNCSpeech_DK.pdf

(noting that NARC “has earned a reputation as an effective industry

self-regulation program” that “sets FTC-like standards for truth and

accuracy in advertising”); Robert Pitofsky, Chairman, FTC, Prepared

Remarks at the D.C. Bar Association Symposium: Self-Regulation and

Antitrust (Feb. 18, 1998), available at

http://www.ftc.gov/speeches/pitofsky/self4.htm (noting references to

the NAD as an effective model of self-regulation). See also BellSouth

Telecomms. v. Hawk Communs., No. 1:04-CV-280-MHS, 2004

WL 1085324, at *3-*4 (N.D. Ga. 2004); Mead Johnson & Co. v.

Abbott Labs., 41 F. Supp. 2d 879, 890 (S.D. Ind. 1999), rev’d 201 F.3d

883 (7th Cir. 2000); Abbott Labs. v. Gerber Prods. Co., 979 F. Supp.

569, 573 (W.D. Mich. 1997) (citing NAD decisions in support of

requirement that survey subjects be potential users of the product in

question); Coca-Cola Co. v. Procter & Gamble Co., 642 F. Supp. 936,

939 (S.D. Ohio 1986), rev’d on other grounds 822 F.2d 28 (6th Cir.

1987); AMF, Inc. v. Brunswick Corp., 621 F. Supp. 456, 462 (S.D.N.Y.

1985) (court compelled Brunswick to submit the dispute to NAD for

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the outcome of a NAD proceeding, deferring to the self-regulatory

agency’s own process before providing the parties with a legal remedy.5

B. ASRC and Voluntary Self-Regulation of Advertising

1. Origins

In 1971, in response to growing concerns about the erosion of public

trust in advertising, the advertising industry formed a strategic

partnership with CBBB to create an independent self-regulatory body—

now known as ASRC.6 The goal of ASRC is to sustain the highest

standards of truth and accuracy in advertising through voluntary self-

regulation and, in turn, provide guidance and set standards of truth and

accuracy for national advertisers. The self-regulatory system developed

by ASRC encourages advertisers’ cooperation and compliance by

focusing on three goals: (1) increasing public trust in advertising, (2)

maintaining a level playing field for settling disputes among competing

advertisers, and (3) minimizing the need for government involvement in

the advertising business.

Ensuring high standards of truth and accuracy increases public trust

in the credibility of advertising and enables consumers to make better

purchasing decisions. Truthful advertising also promotes fair competition

and spurs product innovation. Moreover, effective self-regulation also

frees government regulators such as the FTC and the state attorneys

general to devote their resources to investigating advertisers that engage

arbitration, lauding NAD’s “particular experience and skill” in

resolving these matters, with note that NAD “coupl[es] relative

informality and confidentiality with safeguards to ensure procedural

fairness”).

5. See Russian Standard Vodka (USA), Inc. v. Allied Domecq Spirits &

Wine USA, Inc., 523 F. Supp. 2d 376 (S.D.N.Y. 2007) (granting a

stay of federal court proceeding and commenting that “[a]llowing the

NAD, a highly reputable institution, to provide its expert view on

Stoli’s authenticity as a Russian vodka would be extremely useful in

resolving remaining claims in the complaint. The decision would

promote judicial economy and be informative to the court in its own

decision regarding the remaining claims. Furthermore, the NAD

decision would promote settlement between the parties.”).

6. The advertising industry was represented by its three major trade

associations, the Association of National Advertisers, the American

Association of Advertising Agencies, and the American Advertising

Federation (AAF).

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