Prevent Deceptive Ads with help from the BBB

Posted by | December 13, 2010 | General | No Comments

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.

About Lara

Lara Pearson is a trademark attorney with Exemplar, where she also serves as the firm's Sustainability Steward. Lara's legal practice focuses on trademark and copyright law, including: intellectual property audits; trademark search & clearance; trademark and copyright registration & maintenance; intellectual property transfers; transactional work; and dispute resolution, including litigation when necessary. Lara primarily represents other social enterprises -- those leveraging their businesses and brands as catalysts for positive social and environmental change. Such businesses engage in CSR (Corporate Social Responsibility) to have a positive "triple bottom line" of people, planet and profit. As Exemplar's Sustainability Steward, Lara works with others in her law firm to measure and reduce the firm's carbon emissions and encourage engagement in social responsibility initiatives, including pro bono legal work and volunteering. Lara is a proud member of the Social Venture Network. Brand Geek is a member of 1% for the Planet and a Certified B Corporation, whose Incline Village office is certified under the regional Keep the Sierra Green program. Exemplar Companies is the most innovative professional services firm in the New Economy. Our unique, diversified expertise spans the disciplines of corporate law, business advisory, and capital/investment banking to better meet the needs of our high-potential customers. We have assembled a comprehensive suite of service to meet the complex issues facing companies in today’s challenging business environment. Our unique, holistic approach ensures the growth and success – and greatly increases the competitive advantage - of our customers. The Exemplar team is comprised of knowledgeable, highly skilled experts in a wide range of industries and disciplines. They work closely with our customers to provide trusted advice, incomparable support, expert guidance and the ultimate competitive advantage as they accelerate their businesses and position themselves to transform industries.

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