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"How's It Going for You?": NAD's Revised Rules Two Years Later

Changes to the NAD’s procedures have been generally positive and have improved the efficiency of the self-regulatory process

The American Bar Association Sections of Antitrust Law, Advertising Disputes & Litigation and Consumer Protection recently held a panel discussion entitled “National Advertising Division: A Look at Procedure and Process.” The purpose of the program was to discuss the implementation and impact of significant changes to NAD’s rules or procedure.

By way of background, in 2015 a working group (of which this firm was an active participant) of the ABA Antitrust Section and its Consumer Protection and Alternative Disputes and Litigation Committees prepared a report entitled “Self-Regulation of Advertising in the United States: An Assessment of the National Advertising Division.” That report concluded that the then extant NAD procedures worked well but also recommended that certain changes be implemented. In response, NAD announced in late 2015 that it would implemented a number of changes to its rules of procedure. Some of the significant changes implemented by NAD included:

  • NAD issues a scheduling order at the beginning of each challenge case.
  • Private settlements of pending challenges are permitted.
  • NAD is not a party participant on appeals to the NARB unless requested by the Chair of the Panel hearing the appeal.
  • On appeal to the NARB, a party may raise new arguments based on NAD decision’s or other authority, whether or not previously in the record.
  • NARB panels review cases on a de novo
  • The Advertiser’s Statement must clearly state whether the advertiser intends to comply with NAD’s recommendations.

The consensus of the panel was that the changes to NAD’s procedures have been generally positive and have improved the efficiency of the self-regulatory process. For example, the panelists agreed that the requirement that the advertiser state clearly in its statement whether it intends to comply with NAD’s recommendations provides much needed clarity to the challenger as to the advertiser’s intentions going forward. The panelists also agreed that the change to allow the parties to settle a challenge encourages efficient resolution of disputes and allows NAD to conserve its resources and attorneys’ time for challenges where there is an active dispute between the parties. NAD’s Martin Zwerling indicated that NAD has generally been very satisfied with how the changes to NAD’s process have been implemented.

One area of discussion for possible further improvement of NAD’s procedures concerned use by an advertiser of substantiation in connection with a compliance proceeding. Under its current procedures, NAD will not consider new substantiation for a claim during a compliance proceeding that was obtained after NAD’s initial decision. Panelists as well as audience participants argued that if NAD finds that an advertiser did not have proper substantiation for its claim but the advertiser then goes out and obtains evidence substantiating its claim, fairness dictates that such evidence should be considered in connection with any later compliance proceedings.

TAKE AWAY: NAD continues to serve an important role in adjudicating advertising disputes. The self-regulatory body has been willing to incorporate recommendations of its participants to increase its effectiveness and efficiency.