Prevent Deceptive Ads with help from the BBB

As we await the release of the FTC Green Guides, advertisers also should be aware of the BBB’S National Advertising Division (“NAD”) as a potential means for dispute resolution for false advertising claims.

The Better Business Bureau’s NAD offers a self-regulatory mechanism for remedying false advertising claims made in nationally distributed advertisements.  The system is designed to provide a streamlined and cost-effective alternative to false advertising litigation.  Over 4,000 cases have been resolved through this self-regulatory process.  Additionally, the process is relatively confidential, as only the challenger’s and advertiser’s positions, NAD’s decision, and a statement by the advertiser are made public, all other evidence remains confidential.

NAD’s review policies are established & maintained by the National Advertising Review Counsel (“NARC”).  NARC’s Mission is “to foster truth and accuracy in national advertising through voluntary self-regulation.”  NARC focuses on three goals (1) minimize governmental involvement in private advertising; (2) maintain a level playing field for settling disputes between advertisers; and (3) foster brand loyalty by increasing public trust in advertising.

Advertising cases from the past 3 months are available for free on the homepages of the NAD and NARC websites, while a quarterly subscription to the NARC database costs $1,950 and an annual subscription costs $6,900.  THE NARC database contains NAD cases, as well as those from CARU (Children’s Advertising Review Unit) and ERSP (Electronic Retailing Self-Regulation Program).

While a false advertising case in federal court easily can cost hundreds of thousands of dollars, NAD cases tend to cost a several thousand dollars.  Businesses that belong to the Council of Better Business Bureau (“CBBB”) pay a $3,500 filing fee.  For non-CBBB members, the filing fees are as follows:

(a) $6,000, if the challenger’s gross annual revenue is $400 million or less;
(b) $10,000, if the challenger’s gross annual revenue is more than $400 million and less than $1 billion;
(c) $20,000, if the challenger’s gross annual revenue is $1 billion or more.

While NAD cannot award damages, it can order the advertiser to revise or remove any ads in which false claims are made.  For example, on December 8, 2010 NAD issued a ruling that found that Solowave could substantiate its claims that its play sets are made from cedar, while recommending modifications to modify its claims about the nature and type of lumber used in its products.  On December 8, 2010 NAD also ruled that FloraFlora could in fact substantiate its claims of “free delivery,” which were challenged by FTD.  Lastly, on November 8, NAD referred a case to the FTC involving FTD’s claim that Provide Commerce, Inc. (operating as ProFlowers) discontinue or modify a graph showing results of customer s satisfaction between FTD’s offering and that of ProFlowers.  Because Provide Commerce did not comply with NAD’s initial ruling on the issue, NAD referred the case to the FTC for further review.  Thus, although compliance with NAD rulings is voluntary, it can take steps to make sure such compliance is met.

Brand Geek Takeaway:  When your goal is to prevent the continuation of false advertising claims, you should consider NAD for quick and cost-effective resolution of your disputes.