National Advertising Division Refers Supplement Advertising to FTC

A recent action by the National Advertising Division (NAD), a self-regulatory arm of the Better Business Bureau, illustrates that advertisers who participate but decline to be bound by an NAD Decision can expect to be referred to the Federal Trade Commission (FTC). The NAD recently announced that it referred advertising claims made by dietary supplement company Creekside Natural Therapeutics (Creekside) to the FTC for further review, following a challenge by the Council for Responsible Nutrition (CRN).

Voluntary Process Backed by Prospect of FTC Referral

The NAD is a voluntary industry dispute resolution body and a division of the Better Business Bureau. NAD provides a forum by which competitors or others can challenge advertising largely on the question of what claims are conveyed and if the advertiser has appropriate substantiation.

Once a dispute is initiated at NAD, should the challenged advertiser choose to participate, both parties submit briefs in writing and meet with the NAD before it issues a formal written decision. If recommendations for changes to advertising are made by NAD, the advertiser must state whether it “(1) agrees to comply with NAD[‘s] recommendations, or (2) will appeal all or part of NAD[‘s] decision to the [National Advertising Review Board (NARB)].” Indeed, NAD procedures require that the Advertiser’s Statement (that appears with the final Decision) initially state whether the Advertiser accepts NAD’s recommendations or will file an appeal. Advertisers who fail to submit an Advertiser’s Statement are treated as having declined to comply and may be referred to the FTC for further review and potential enforcement. Several FTC enforcement actions were initiated from an NAD referral.

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