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Imagine your company has invested a significant amount of marketing money to develop and conduct testing to substantiate a No. 1 claim for your product. As part of the launch, you have redesigned product packaging and advertising campaigns and even secured a spokesperson to support this exciting claim.
But weeks before the launch, your chief competitor floods the marketplace with a bold, unsubstantiated claim: They are No. 1. You know from careful testing that the competition has engaged in false and misleading advertising. As your market share hemorrhages and metrics flatline, your company faces a brutal choice: spend years and millions of dollars in federal court bringing a claim of false advertising against your competitor or leverage the National Advertising Division to dismantle these claims in months, not years.
The National Advertising Division functions as a self-regulatory body for national advertising in the United States, providing an alternative to traditional litigation or regulatory complaints before agencies such as the Food and Drug Administration or the Federal Trade Commission. Bringing a claim before NAD provides a cost-effective, efficient avenue for resolving advertising disputes outside of court. Understanding the process from complaint preparation to compliance enables challengers and advertisers to navigate NAD proceedings effectively.
Any business, advocacy group or consumer, ranging from pharmaceutical companies to trade associations, may initiate a challenge before NAD as a “challenger” against an advertiser. This accessibility makes NAD a popular forum for companies seeking to address competitive concerns efficiently, outside traditional court proceedings. Typically, disputes focus on allegations that a competitor’s advertising is false, misleading or unsubstantiated. Examples include claims about product performance, superiority or the sufficiency of disclaimers. However, NAD will not consider complaints about political or issue advertisements, general consumer satisfaction or claims unrelated to advertising accuracy.
NAD’s process can be particularly relevant to industries such as pharmaceuticals, where substantiating advertising claims is critical and the risk of regulatory scrutiny is high. Unlike the FDA, which governs drug labeling and promotion specifically, or the FTC, which broadly oversees advertising practices, NAD offers a voluntary, industry-driven channel for resolving disputes over the truthfulness and accuracy of advertising.
NAD offers several procedural tracks, but the most common is the “Standard Track,” which handles multiclaim challenges for a single product or product line. When initiating a Standard Track proceeding, the challenger’s first step is to prepare a detailed complaint (limited to 20 pages) that identifies the specific advertising and claims at issue and sets out the reasons and evidence supporting the assertion that these claims are misleading or unsubstantiated. Supporting evidence, such as copies of the advertisements, expert opinions or consumer surveys, can be included with the complaint. While some challengers attempt to resolve the matter informally first, there is no requirement to contact the advertiser before filing with NAD. When initiating a filing, the complaint and a filing fee must be submitted through NAD’s online portal.
Once the complaint is filed and accepted, NAD opens the case and notifies the advertiser, who is then given 15 days to respond with substantiation for the challenged claims and any jurisdictional objections. The challenger may reply within 10 days, and the advertiser may submit a final reply 10 days thereafter.
Notably, unlike litigation, there is no formal discovery process; the parties must submit all relevant evidence themselves. After the written briefing, both parties are afforded the opportunity to meet individually with NAD to present their positions and answer questions. The discussion must be limited to the arguments and evidence already on record. NAD decisions typically issue within 20 business days after these meetings. The decision is first shared with the advertiser, then with the challenger. If the advertiser agrees to comply and no appeal is indicated, the case is closed. In the event of non-compliance, NAD can refer the matter to regulators, such as the FTC, and the advertiser’s response is included in NAD’s public press release. Notably, NAD prohibits either party from using the decision for publicity purposes and encourages inquiries to be directed to the official press release.
Appeals from NAD decisions are possible. Typically, advertisers have an automatic right of appeal to the National Advertising Review Board, while challengers must request permission to appeal. If an advertiser has committed to comply but fails to modify its advertising, the challenger can seek a compliance proceeding through NAD.
While participation in NAD proceedings is technically voluntary, refusal to participate can have adverse consequences for an advertiser. NAD regularly refers non-participating advertisers to regulatory agencies such as the FTC or FDA for further action, a significant concern in industries like pharmaceuticals, where regulatory enforcement can be swift and severe. NAD may also notify digital platforms (such as Facebook and Instagram) of its findings, potentially triggering further review under those platforms’ own advertising policies.
NAD’s role in the regulatory landscape is complementary rather than duplicative. While the FDA and FTC possess enforcement powers that NAD lacks, including the ability to impose fines or order corrective actions, NAD’s influence lies in its ability to encourage voluntary compliance and to serve as a bridge to regulatory oversight when necessary. This makes NAD particularly effective for industries under heavy regulation where the risk of reputational or regulatory harm from adverse findings is significant.
NAD’s influence, especially in regulated industries such as pharmaceuticals, underscores the importance of accurate, substantiated advertising claims. For legal counsel and business teams, familiarity with NAD’s procedures can be instrumental in managing advertising risk and regulatory exposure.•
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Clavio is an intellectual property counsel at Faegre Drinker’s Indianapolis office. Carrafiello is an intellectual property associate at Faegre Drinker’s office in Washington, D.C.
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