Disallowed Claims Get New Life With NAD Procedural Change

Advertising Law

The National Advertising Division (NAD) announced procedural changes at the self-regulatory body’s annual conference.

Recommended by the American Bar Association Antitrust Section’s working group, the revised procedures feature a major change that permits advertisers to introduce new evidence regarding closed NAD proceedings.

Pursuant to the change, when the NAD has recommended that certain claims be discontinued, an advertiser will now have two choices if it believes it has developed new substantiation. The advertiser could resume use of the disallowed claims and request that the NAD consider the new evidence in any compliance proceeding. Alternatively, the advertiser may seek the NAD’s review of the new evidence prior to resuming use of the claims.

As detailed in sections 3.8 and 3.9 of the NAD Procedures, the NAD director has the sole discretion to permit the reopening. She may take into account “whether there is a satisfactory showing that the new evidence was not reasonably available to the party at the time the NAD record was closed” as well as “whether the new evidence would have likely changed the NAD or [National Advertising Review Board] decision in a material way,” among other considerations.

A petition requesting that a case be reopened may be submitted to the NAD by either party to the underlying proceeding, along with a nonrefundable initial petition-to-reopen fee of $5,000. If the director grants the petition to reopen, the petitioning party must pay an additional nonrefundable fee equal to the applicable NAD challenge fee minus the $5,000.

From there, the reopened case will proceed as though a challenge had been filed on the reopened claims, in accordance with the NAD procedures.

“We believe the change balances allowing advertisers to make truthful, substantiated claims with the need for speed and finality in the self-regulatory process for competitive challenges,” NAD Director Laura Brett said in a statement.

Other procedural tweaks were also made, including adding compliance language and language regarding the content of the Advertisers Statement. Filing fees for challengers that have been national partners of the Council of Better Business Bureaus for less than one year were increased, and a contact for questions about open or closed NAD matters has been added.

To read the announcement, click here.

Why it matters: Prior to the procedural changes, advertisers did not have an avenue to introduce new evidence or substantiation to support a previously discontinued claim, due to the NAD’s desire for finality. While the procedures did permit the reopening of a case based on “extraordinary circumstances,” the revised sections 3.8 and 3.9 provide advertisers with a new opportunity to provide substantiation for a previously discontinued claim.



pursuant to New York DR 2-101(f)

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