The National Advertising Division (NAD) is revising its rules of procedure to permit parties to an NAD proceeding that has concluded to request that NAD revisit its decision in the case in order to consider new evidence. The revised rule marks a significant change to NAD’s long-standing rules of procedure that could impact the strategy of parties that participate in the self-regulatory process.
Administered by the Council of Better Business Bureaus, NAD monitors national advertising in all media for truth and accuracy; investigates complaints from consumers, competing advertisers, local Better Business Bureaus and its own review, and provides a forum for the resolution of competitors’ disputes over advertising claims. It handles approximately 150 cases each year and publicly reports its formal decisions, which represents the single-largest body of advertising decisions in the U.S.
Under NAD’s long-standing rules of procedure, once a decision has been made in a case, the NAD case is closed and “no further materially similar complaints on the claim(s) in question shall be accepted by NAD” in the absence of “extraordinary circumstances.” Because “extraordinary circumstances” did not include the existence of new evidence, in cases where NAD determined an advertiser’s evidence was flawed or insufficient to support an express or implied claim, the advertiser lacked the ability to acquire new evidence or to conduct new testing to address NAD’s critiques. Likewise, in situations where NAD determined an advertiser’s evidence was sufficient to support its claims, the challenger lacked the ability to submit later-acquired evidence that calls NAD’s decision into question.
The new procedures expand the definition of “extraordinary circumstances” to include the submission of new evidence. As a result, advertisers and challengers will, for the first time, be able to request that NAD reopen decisions by NAD or the National Advertising Review Board (the “appellate” arm of the NAD) based on the existence of new evidence.
Request to consider new evidence. Either party to the original case may submit a petition to the NAD Director requesting that NAD consider new evidence that may impact its previous recommendation. The petitioner pays an initial $5,000 fee to offset the cost of the new review. Requests to consider new evidence can be made either proactively by either party to a case, or reactively by an advertiser in response to a compliance inquiry.
Review of request. The NAD director reviews the request to determine 1) whether the evidence offered was not reasonably available to the requesting party during the original NAD proceeding and 2) whether the new evidence “would have likely changed the NAD or NARB decision in a material way.” In deciding whether to reopen the case, the NAD director will also consider the advertiser’s compliance to date with the recommendations in the decision and whether the request has sufficient merit to warrant the expenditure of NAD resources.
Reopening a case. If NAD decides to reopen a case, the petitioning party must then pay a filing fee equal to the applicable NAD Challenge Fee for a new proceeding (the fee that challengers pay to initiate an NAD matter) minus the $5,000 filing fee it has already paid to request that the case be reopened.
Previous challengers notified. NAD then informs the challenger or advertiser in the prior proceeding of the decision to reopen the case and sends supporting evidence, if any. In circumstances where an advertiser successfully petitions for a case to be reopened, the challenger can choose whether to participate in the reopened case. If the challenger declines to participate in the reopened case, it will be handled as if NAD opened the matter on its own initiative.
Reconsideration process commences. The reopened matter proceeds in the same way as a typical challenge would as to those claims that the NAD Director determines should be reopened. As with any NAD matter, either party — the advertiser or the challenger — can appeal the NAD’s decision on the reopened case to the NARB.
Effect on compliance inquiries. An advertiser may respond to a compliance inquiry with a petition to reopen the matter. The compliance inquiry will be suspended pending review of the petition. If the petition is granted, the compliance inquiry is terminated. If the petition is denied, the advertiser has 10 days to submit its report to the compliance inquiry.