Advertising Law Tool Kit 13th Edition 2025

Venable / 53 52 / Venable National Advertising Division For over 50 years, the U.S. advertising industry has operated a self- regulatory system, the National Advertising Division (NAD) of the Better Business Bureaus National Programs. The NAD offers a voluntary system allowing competitors to resolve advertising disputes governed by NAD- specific procedures without engaging in more costly litigation. Companies can challenge their competitors’ claims before NAD, which will evaluate whether claims are truthful and substantiated. NAD aligns its efforts with frameworks and standards set by agencies like the Federal Trade Commission (FTC), Federal Communications Commission (FCC), and Food and Drug Administration (FDA). NAD cases are typically initiated by companies challenging a competitor’s advertising claims, although consumers, advocacy groups, or NAD itself may also initiate challenges. These challenges begin with a letter to NAD, identifying the challenged advertising claims, which is also sent to the advertiser, outlining challenged advertising claims and reasons why they are alleged to be false or misleading. The advertiser may respond via written submission and evidence substantiating the claims; the challenger has the opportunity to reply in writing with its own evidence; and the advertiser may submit a final response. After written submissions, the parties individually meet with NAD to clarify positions and underlying evidence and answer questions. Witnesses and experts also attend NAD meetings. NAD then determines whether the claims are substantiated, or whether the claims should be modified or discontinued. The final decision is sent to the advertiser, along with a request for a statement on whether they will modify or discontinue the claims, or appeal to the appellate body of NAD, the National Advertising Review Board (NARB). The final decision and advertiser’s statement are published in NAD Case Reports and through press releases. NAD’s online archive, a searchable database, offers insights into its rationale and the expected evidence levels for various claims. Critically, in an NAD challenge, the burden is on the advertiser (the “defendant” in a lawsuit) to prove its claims truthful, not on the challenger (the “plaintiff”) to prove the claims false. Thus, NAD provides a favorable forum for companies seeking to stop their competitors’ false or misleading claims. Although the process is voluntary, companies that do not comply are referred to the FTC or another applicable government agency for enforcement. NAD and competitors also monitor compliance with their decisions, and NAD may request a status report from the advertiser concerning its compliance efforts. If reasonable progress is found but concerns remain, NAD collaborates with the advertiser to resolve these issues. NAD does not pre-approve advertising, and persistent non-compliance may result in a referral to the relevant regulatory agency for investigation. Consider the following when determining whether to pursue an NAD challenge: • The cost, timing, and procedures of traditional litigation • The types of claims to be challenged • The evidence the challenger possesses that calls into question the truthfulness of the advertiser’s claims • Whether the challenger is making similar claims, which could result in a counter-challenge Shahin O. Rothermel sorothermel@Venable.com