Beyond Litigation: Pushing Back on Competitors’ False Advertising Using Self-Regulation

It's a dilemma that most marketers face at one point or another: a competitor runs an ad that isn't quite aboveboard. Maybe the ad overstates a product’s performance. Maybe it asserts superiority without appropriate substantiation. A first thought might be litigation. But unseating false claims, while important, does not always warrant the time and expense of litigation. 

In these instances, many companies choose to take on competitors’ ads using the advertising industry’s self-regulatory forum. The National Advertising Division (“NAD”), an industry-backed dispute resolution body that operates as part of BBB National Programs, has reviewed thousands of ad campaigns over the past 50+ years for truth, accuracy, and compliance with advertising law. As a faster and less expensive alternative to litigation, NAD has become the default dispute resolution forum for advertisers in many industries. 

In 2023, for example, NAD issued 126 decisions—45 in the telecommunications sector, 14 in the food and beverage sector, and dozens more in categories including household products, health products, financial services, sports, jewelry, and many others. The vast majority of these disputes are initiated when one competitor seeks to do away with another’s claims. (The others are initiated by NAD itself pursuant to its “monitoring” function.) 

Not surprisingly, many of the challenged claims are comparative in nature—as in, “Toothpaste X whitens teeth twice as well as Toothpaste Y.” But NAD’s scope of review extends beyond comparative advertising. Competitors can challenge one another’s sensory claims, performance claims, ingredient claims, environmental claims, “Made in USA” claims, technical claims, and more.

The challenge process moves quickly with each party submitting two written briefs followed by a meeting with NAD. Generally, within eight months of filing a challenge, NAD publishes its decision.  

NAD differs from litigation in several important respects. One notable difference is that the NAD process is voluntary. NAD issues “recommendations” rather than binding decisions. Technically, companies that are called upon to participate are free to opt out. And technically, even after submitting to NAD’s jurisdiction, companies are free to ignore its recommendations. That said, blowing off NAD comes with consequences; NAD issues press releases announcing non-compliance and non-participation, and NAD refers these companies to the “appropriate governmental agency” (normally the FTC) for further review. Ignoring NAD may also bode poorly for a company’s future reliance on the forum as a tool for initiating a company’s own challenges. For these reasons, NAD’s compliance rate is extremely high, hovering at 90-95%. 

Of course, the self-regulatory process is just one of many tools that keep competitors’ advertising in line. Demand letters can sometimes be effective. Litigation can also be a reasonable approach. Sometimes companies respond by launching a counter-offensive ad campaign of their own. For many companies, however, the NAD process offers a quick and relatively low-cost method for keeping competitors in line.