If a company sues a competitor about an advertisement that the company believes is false or misleading about the company’s product, a court victory is frequently cause for a press release, as well as announcements on social media and to bloggers. When the complaint is made to the National Advertising Division (NAD) of the Council of Better Business Bureaus; however, those announcements can violate NAD procedures and can result in unfavorable press releases from the NAD.
Many of our readers may not be familiar with the NAD, which is run by the Council of Better Business Bureaus (CBBB), the national hub of locally situated Better Business Bureau organziations in the US and Canada. Companies can challenge their competitors’ ads before the NAD in a voluntary proceeding that is confidential. (There is a filing fee.) The NAD program is part of the advertising industry’s process of voluntary self-regulation. If the NAD finds that changes should be made to an advertisement, the company is not required by law to make those changes, but can appeal within the CBBB. Even if the company loses on appeal, it is still not required to make the changes, but if it does not, the CBBB can refer the matter to the Federal Trade Commission or other federal or state government regulator. If, however, the company agrees to change its ads in response to the proceeding, the NAD’s press release about the NAD decision frequently notes that fact and typically includes a quote from the company about its cooperation.
The NAD rules state that the proceedings are confidential and that only the NAD can publish final NAD case decisions and summaries of other actions, and only the NAD can issue press releases about them. (Procedure 2.1.E(i).) In addition:
(ii) By participating in a[n] NAD . . . proceeding, parties agree (a) not to issue a press release regarding any decisions issued, and/or (b) not to mischaracterize any decision issued or use and/or disseminate such decision for advertising and/or promotional purposes. NAD . . .may take whatever action it deems appropriate if a party violates this provision, including the issuance of a public statement for clarification purposes.
Companies may find the NAD to be a viable procedure to complain about a competitor’s advertisements, but need to be aware that the rules are different from court proceedings. Sending materials to bloggers—or even having the company describe the proceedings on its own blog—can turn a victory into a public relations defeat.
Sue Ross (email@example.com/ +1 212 318 3280) is a lawyer in Norton Rose Fulbright’s US intellectual property practice.