Numbers Don’t Lie: NAD Referrals Result in Action

Advertising Law

The statistics demonstrate that an advertiser’s refusal to participate in the self-regulatory process is a losing proposition, according to an article authored by a National Advertising Division staff attorney.

Developed by the Council of Better Business Bureaus, the programs administered by the Advertising Self-Regulatory Council (ASRC)—made up of the NAD, the Children’s Advertising Review Unit (CARU), the National Advertising Review Board (NARB), the Electronic Retailing Self-Regulation Program (ERSP) and the Online Interest-Based Advertising Accountability Program (Accountability Program)—are intended to increase consumer trust in advertising, Alexander Goldman wrote.

While a large percentage of advertisers voluntarily participate in the process, some elect not to do so. Pursuant to the procedures of the ASRC, those cases are referred to the appropriate government agency, most often the Federal Trade Commission, or depending on the claims at issue, the Food and Drug Administration or the Federal Communications Commission.

According to Goldman’s Law360 article, of the 19 referrals made by the NAD to the FTC in 2017 and 2018, the agency took no action in only four of the cases. Of the remaining 15, the FTC investigated two matters and took no further action, it returned the cases to the NAD in four instances, and the advertisers modified or discontinued the challenged advertising in the remaining nine.

The data for the two-year period of 2016–2017 revealed similar statistics, with the FTC taking action in 15 out of 19 referrals.

Goldman also noted that the bulk of the referrals involved an advertiser new to the self-regulatory process.

Why it matters: The statistics make clear that when advertisers avoid working with the NAD, the ERSP, CARU or the Accountability Program, they are not avoiding liability; in most cases, they are just prolonging it and perhaps even increasing the cost. One recent example: the FTC’s largest civil penalty obtained in a Children’s Online Privacy Protection Act case, the $5.7 million settlement with video social networking app TikTok, formerly known as Musical.ly, was initiated by a referral from CARU.

manatt-black

ATTORNEY ADVERTISING

pursuant to New York DR 2-101(f)

© 2020 Manatt, Phelps & Phillips, LLP.

All rights reserved