What options do you have when your competitor's advertisements stretch the truth, to your competitive disadvantage?
Every business sells something. And they all want to potential customers to notice them--to hear their ads amidst the noisy background of their competitors' marketing. On top of that, we've all come to have certain expectations of advertisements--that they'll speak in marketing lingo rather than plain language. The temptation is always present, therefore, to stretch the truth in ads.
The trouble is, not only do false advertisements deceive and mislead customers, they also disadvantage competitors who tell the truth and play by the rules. Worse, these aggrieved businesses often feel like there's nothing they can do about it. Filing a federal lawsuit is often just too expensive, and complaining to a state Attorney General or the Federal Trade Commission rarely feels like it accomplishes anything.
These are among the reasons that the Council of Better Business Bureaus (CBBB) created the National Advertising Division (NAD). NAD is an arbitration forum created to help the advertising industry regulate itself. Panels consist of veteran advertising lawyers with experience in reviewing and substantiating claims made in advertisements. And yet most companies probably still don't know that the process even exists.
The arbitration process begins with one company filing a complaint with the NAD over a competitor's national ad (including online, but not regional) that the complainant finds misleading, untrue, or deceptive. The NAD panel then works closely with the advertiser's in-house or external lawyers, marketing executives, and consultants to see if the challenged claims can be substantiated.
The NAD process offers several important advantages over litigation. For one thing, it's much faster. NAD aims to resolve complaints within 60-90 days--while the campaign is still running. For another, it's confidential; the data collected doesn't automatically go into the public record.
And it's usually much cheaper than a federal lawsuit. Filing an NAD complaint costs $10k for CBBB member companies, $15k for companies making less than $1 billion, and $25k for larger companies. That's not an insignificant chunk of change, to be sure, but since the NAD process resolves quickly, the expenses won't continue to mount for as long as they might do in regular litigation. NAD is also in the process of an outside audit of its procedures, to make them even more efficient.
NAD decisions have teeth. They don't award money to the complainant, but they do boast an approximately 90% compliance rate. That's due in part to the fact that advertisers who refuse to obey NAD's recommendations get referred to the FTC, which makes a practice of following through on such referrals in order to encourage the self-regulation process.
Complaining companies are forbidden from publicly touting their victories over competitors, but the NAD does issue short press releases detailing its decisions. From these, we see that companies in nearly every industry have, at one time or another, been subject to, and have agreed to comply with, the NAD process. Not every challenge is upheld, though. Recently, for example, Comcast agreed to modify its characterization of a competitor's services, but was able to substantiate its own claims of having the "fastest, most reliable internet." NAD also publishes digests of its recent decisions in major categories of ads, including social media, dietary supplements, environmental, cosmetics, telecommunications, and website privacy.
So the next time you're frustrated by ads that go too far in depicting a competitors' product, don't assume there's nothing you can do about it. Give some serious thought as to whether an NAD complaint might be a cost-effective way to rein in marketing that is doing you competitive harm.
