NAD recommendations are just that, non-binding findings and suggestions made to an advertiser. If an advertiser does not agree to participate in the process, or does not agree to compile with a recommendation (and does not appeal), NAD procedures mandate referral to “the appropriate government agency.” Sometimes such a referral results in an investigation and a later FTC Order requiring the change and requiring redress. (The FTC has the power of course to tell not ask.) Sometimes the interplay is more nuanced and we have seen some of the subtleties in recent NAD decisions. In a case brought by the Council for Responsible Nutrition against Green Tea Hawaii, maker of Raspberry Ketone Drink, the advertiser originally refused to participate. Very recently, the NAD reported “upon consultation with the FTC, the advertiser returned to participate in the CRN initiative with NAD.” The advertiser did not put up a fight but instead agreed to discontinue all of the challenged claims at issue. We wish we could have been a fly on the wall during that “consultation” but it does appear that with referrals the FTC is actively encouraging advertisers to return to NAD and participate in the process.
In another recent case, NAD brought a compliance challenge to Allen Harim Foods. The Animal Welfare Institute had filed a challenge to the claim that these chicken products were “humanely raised.” Allen said they had discontinued these claims and NAD closed the case. But NAD found that Allen continued to make the claim. Allen defended again, this time showing this claim had been approved by USDA and that they had met rigorous third-party certification standards. NAD held Allen to its prior promise and said because it had not discontinued these claims as promised that a referral was required. The referral was made to “an appropriate government agency.” Typically this would be the FTC but NAD usually spells this out so the referral is likely to USDA, and it will be interesting to see how a different agency responds to such a referral. This case seems to suggest that an advertiser should use caution when promising permanently to discontinue a claim as NAD seems to view this promise as ongoing notwithstanding what additional substantiation a company develops.