The National Advertising Division (NAD) has for more than 40 years been the premier avenue for self-regulation in the advertising industry. Born in the ’70s at a time when there was pressure from government and consumer advocates to regulate advertising, the industry stepped up and promised to regulate itself. Under the auspices of the Council of Better Business Bureaus, the industry associations formed the NAD.
At the annual NAD Law Conference held in New York September 28-29, the NAD announced that some procedural changes would be made in response to an ABA assessment of NAD process.
Here are the highlights of the NAD’s proposed new procedures:
- Scheduling – The opening letter will set forth a schedule for each of the responsive filings. The parties can agree to alterations, but once set they will be held firm. If the parties cannot agree to a mutually acceptable set of deadlines, the NAD office administrator will hammer out a compromise with the parties. However, the advertiser’s timeframe for a response does not toll while the scheduling negotiations are taking place.
- Private settlements – The parties may settle their dispute up to the time when the decision is given to the advertiser by NAD. The NAD will determine whether the settlement is in the public interest and, if acceptable, the case will be closed and published under the new heading (“On Consent of Party”). There will be no refund of the filing fee. The NAD retains the ability to pursue claims notwithstanding the settlement. There will not be any press release on these types of closures.
- Press releases – New language will be added about how the decision is not an admission of wrongdoing.
- Challenge limits – NAD won’t add claims to those identified by the challenger. The challenger has to list claims explicitly. If NAD has other concerns, it can bring a monitoring case.
- Page limits – On all responsive briefs, the NAD will impose a 20-page limit, subject to agreement by both parties.
- Appeal process – Challengers will still have to request an appeal. If granted, there will be a filing fee ($5,000). If the NARB Chair ultimately denies the request, the fee is forfeited. The proposed revised procedures clarify that the appeal is de novo review. The NAD will no longer be a party in an appeal (unless it’s an appeal from a case brought by the NAD), except upon request of the panel chair.
- Appellate briefs – Subject to a new 30-page limit. Cross appeals will be filed on same day and given the same time to respond with limit. It is now explicitly permitted to include applicable precedent even if it was not cited in the submissions to the NAD.
- Advertiser’s statement – The first thing the advertiser must state is whether it is going to comply, not comply, or appeal. Then, it is limited to a short, half-page statement.
- Executive summary – The “executive summary” requirement for the reply briefs is abandoned.
- Decision timing – The NAD will have 20 days (rather than 15) to produce a decision.
- Permanent discontinuance during pendency – Where the advertiser chooses to discontinue advertising rather than submit substantiation on the merits, the NAD will use new standard language to reflect that there was no determination on the merits.
Whether the response to the ABA report will make the self-regulatory process more streamlined or rather will add new restrictions that will complicate, elongate, and frustrate the self-regulatory process is unclear. Also unclear is how, if at all, this process helps to promote the consumer protection mission of the self-regulatory system. Additionally, whether the changes have succeeded in making the appeal process fairer for an appealing advertiser is unclear. Finally, it remains to be seen if removing the NAD from the panel as the default will result in an appeal on virtually every case in which the advertiser disagrees with the NAD’s recommendation.