Dispute Resolution

• Pages: 203-223

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CHAPTER XI

DISPUTE RESOLUTION

A. Self-Regulation through the National Advertising Division

For over forty years, the U.S. advertising industry has maintained a

system of self-regulation for ensuring the truth and accuracy of

advertising. 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. Voluntary industry-wide self-regulation provides a mechanism

for competitors to resolve legal disputes related to advertising without

resort to costly litigation.

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)—an

independent self-regulatory body charged with the responsibility of

monitoring and evaluating truth and accuracy in national advertising

directed toward consumers ages twelve and older. NAD, led by a director

and staffed by eight attorneys, examines and evaluates a wide range of

advertising claims, including express claims and implied claims, puffery,

monadic (non-comparative claims) and comparative claims, superiority

claims, establishment (“clinically proven”) claims, product testing,

pricing claims, and disclosures. Published NAD decisions, which include

detailed findings and analysis, have covered a broad range of products

and services in all national media (television, print, radio, and internet

advertising) as well as advertising conducted through new media, such as

Twitter, YouTube, Facebook, and Pinterest.

1. How the NAD Process Works

The majority of the cases reviewed by NAD are initiated by

companies challenging the truth and accuracy of advertising claims made

by competitors in the marketplace. NAD review of advertising may also

be initiated by consumers, advocacy groups, local Better Business

Bureaus, or by NAD itself through its own monitoring program. There

are no issues of “standing” with NAD—anyone may bring a challenge.

NAD’s jurisdiction extends to national advertising in any medium

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Advertising Claim Substantiation Handbook

whether directed to consumers, businesses or other service

professionals.1

The review process, though voluntary and informal, follows a

detailed set of procedures, available on NAD’s website.2 A party may

freely contact the NAD attorney assigned to its case with any procedural

or substantive questions. Under the procedures, there is no formal

discovery. Instead,, the parties to the proceeding develop the record by

each providing two rounds of letter submissions (including any

evidentiary exhibits that the submitting party deems relevant).

A challenge is initiated in the form of a letter enclosing or describing

the advertisement in question and setting forth why the challenger

believes it to be false or misleading.3 Evidentiary submissions are

confidential and not shared with the public.

Once NAD determines that it has jurisdiction, it will forward the

challenge letter to the advertiser and request a response that provides

substantiation for the challenged advertising claims.4 The advertiser’s

response must provide substantiation for the advertising claims at issue.

Any advertiser challenged in a NAD proceeding has the option to submit

data to NAD with a request that the data not be made available to the

challenging party on the ground that such material is confidential and/or

proprietary.5 Should an advertiser refuse to participate in the NAD

process (or refuse to comply with NAD’s recommendations following

1. According to NAD Procedures “national advertising” is: [A]ny paid

commercial message in any medium (including labeling), if it has the

purpose of inducing a sale or other commercial transaction or persuading

the audience of the value or usefulness of a company, product or service;

if it is disseminated nationally or to a substa ntial portion of the United

States, or is test market advertising prepared for national campaigns; and

if the content is controlled by the advertiser. The Adver. Indust. Process

of Voluntary Self-Regulation, ADVER. SELF-REGULATOR COUNCIL, § 1.1

(A) (Jan. 1, 2014), available at http://www.asrcreviews.org/asrc-

procedures/ [hereinafter Advertising Procedures].

2. Advertising Procedures, supra note 1.

3. Id. at § 2.2 (A).

4. Id. at § 2.2 (B).

5. In such a case, the advertiser must identify which materials are

confidential and/or proprietary, affirm that the material is not publicl y

available, and provide a comprehensive summary of the materials (to be

shared with the challe nging party) includi ng as much non-confidential

information as possible about the methodology employed and the results

obtained. Advertising Procedures, supra note 1, at § 2.4(D).