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Industry Regulations


OVERVIEW

As an industry, advertising recognizes its obligation to consumers with regard to truth in advertising by enforcing self-imposed regulations to prevent or modify deceptive and/or false claims in advertisements. They are:

1. Agency and advertiser checkpoints
2. Television and radio clearances
3. The self-regulatory systems:

  • The National Advertising Division (NAD)
  • The National Advertising Review Board (NARB)
  • The Children's Advertising Review Unit (CARU)
  • Local Advertising Review Panels (LARPs)

Since 1924, the American Association of Advertising Agencies (AAAA) has had a written Creative Code. The current version of the code says:

We, the members of the American Association of Advertising Agencies, in addition to supporting and obeying the laws and legal regulations pertaining to advertising, undertake to extend and broaden the application of high ethical standards. Specifically, we will not knowingly create advertising that contains:

a) False or misleading statements or exaggerations, visual or verbal
b) Testimonials that do not reflect the real opinion of the individual(s) involved
c) Price claims that are misleading
d) Comparisons that unfairly disparage a competitive product or service
e) Statements, suggestions or pictures offensive to public decency or minority segments of the population

AGENCY, ADVERTISER AND MEDIA CHECKPOINTS

Within most agencies, creative (storyboards, copy and layouts) is screened by the legal department to adhere to agency and client legal and ethical standards. In addition, the advertiser's marketing department reviews all creative and their research and technical departments approve all product claims. Creative is then sent to the company's legal department and frequently to top management for final review.

MEDIA CLEARANCE

Broadcast
Further monitoring of product claims occurs at the individual television networks. Before a commercial runs on a network, the storyboard and copy must be submitted to its clearance department. Proof of product claims may be requested, and a spot can be rejected for inaccuracy or bad taste. Finished commercials are always submitted for final network approval before they are aired.

Certain products such as toys and those with health-related claims, must also be submitted to the Code Authority of the National Association of Broadcasters. The Code Authority may reject a storyboard which networks have approved.

Print
Each publication has its own policies and standards regarding the acceptance of ads. They, too, have in-house departments set up for review purposes; however, guidelines vary dramatically from one publication to the next, and tend to be less stringent. Benetton print advertising is a good example. The Benetton social conscience campaign, which ran for a number of years, was extremely controversial with many ads singled out as offensive, particularly their "Death Row" corporate campaign, featuring prison inmates. Some magazines accepted these ads while others rejected them, each based their decisions on their own standards, knowledge of their readership and an awareness of the public outcry. Benetton parted ways with their longtime Creative Director for a more mainstream campaign.

THE SELF-REGULATORY SYSTEM

The mechanism employed to implement voluntary self-regulation nationwide is the National Advertising Review Council (NARC), which is comprised of the National Advertising Division (NAD), the National Advertising Review Board (NARB) and, at the local level, the Local Advertising Review Panels (LARPs). The NARC is a strategic alliance formed by the advertising industry and the Council of Better Business Bureaus.

The system was established in July 1971 on a voluntary basis in response to public disenchantment with the industry and an increase in regulatory efforts. It was founded by the Association of National Advertisers (ANA), the American Association of Advertising Agencies (AAAA), the American Advertising Federation (AAF) and the Council of Better Business Bureaus (CBBB). The NARC has continuously worked to protect the public from false and misleading advertising. The NARC, together with the CBBB, provides advertising with a comprehensive self-regulatory system unmatched by any other industry.

Since its formation in 1971, over 4,100 complaints have been successfully handled. Considering that the typical consumer is exposed to over 3,000 commercial messages per day, this is evidence to the fact that the majority of advertising is reviewed even before the public sees it.

In 2003 alone, the NARC handled 296 cases. Of those cases, 147 were presented to the NAD, 144 to CARU and 5 to the NARB.

THE NATIONAL ADVERTISING DIVISION (NAD)

The NAD is the investigative division of the self-regulatory system. It consists of a small group of full-time advertising review specialists with backgrounds varying from legal to nutrition to corporate regulations. They continually monitor television, radio and print advertising and research those ads that may be inaccurate or misleading. The majority of cases come from competitive challenges between national advertisers to particular advertising claims. However, about 30 percent of challenges are brought forth by ongoing monitoring conducted by the NAD and the rest are comprised of challenges from consumers or the Better Business Bureau (BBB).

Some cases are resolved informally, (i.e., consumer complaints) while others are referred to outside organizations depending on the nature of the grievance. Some are out of the scope of the NAD's review, such as issues unrelated to advertising (i.e., non-delivery of goods).

EXAMPLE 1: KFC Corporation

Basis of Inquiry
Due to its ongoing monitoring, NAD inquired about the truth and accuracy of two television commercials for KFC fried chicken. The first commercial claims that "Two Original Recipe chicken breasts have less fat than a BK Whopper." The second commercial states "One Original Recipe chicken breast has just 11 grams of carbs and packs 40 grams of protein. So if you're watching carbs and going high protein, go KFC." Both commercials end with the voiceover tagline "For a fresh way to eat better, you gotta KFC what's cookin'!" NAD requested that KFC substantiate its claims because of concerns that the commercials implied that eating fried chicken is part of a healthy diet and can help you lose weight.

Advertiser's Position
In response to the challenge, KFC submitted nutritional summaries as substantiation for the express nutritional claims made in the commercials. KFC contended that the advertisements do not convey the implied message that fried chicken in general is healthy or that eating KFC can help people lose weight. For that reason, it did not provide evidence addressing those concerns. KFC also informed NAD that the commercials had been discontinued with no plans to run them in the future.

NAD Decision
NAD determined that the supers that appeared in the commercials did not provide sufficient nutritional information or qualify the commercial's health-related claims. However, because of NAD's concerns about the implied messages regarding the healthfulness of KFC fried chicken, NAD appreciated KFC's decision to discontinue running the commercials.

THE NATIONAL ADVERTISING REVIEW BOARD (NARB)

The NARB is the appeals body of the self-regulatory system. If the NAD and an advertiser reach an impasse, either party may request review by the NARB, an organization comprised of 85 members representing three different categories: Advertisers, Advertising Agencies and Public/Academia. In this instance the NARB functions as a peer review group. A panel of five NARB members meets as needed to determine whether to uphold or overturn an NAD decision. In this forum, involved parties express their viewpoints via written statements that are used as the basis for a verbal hearing.

Even the largest advertisers usually adhere to the decision made in the verbal hearing. If, however, the advertiser being challenged refuses to modify or discontinue the ad in question, the matter is turned over to the Federal Trade Commission (FTC), which is empowered to impose penalties. Very few advertisers who have participated in the complete process of an NAD investigation and an NARB appeal have refused to comply with the panel decision.

EXAMPLE 2: General Mills, Inc.

Basis of Inquiry
Kellogg Company, maker of Special K cereal, challenged a comparative claim by General Mills, Inc. in a television commercial for Total Cereal. Kellogg argued that the commercial expressly and asserts that because Total has more calcium than Special K, a diet including Total rather than Special K will result in greater weight loss - (a claim declared in the absence of any conclusive research comparing the weight loss performance of the two cereals). The commercial merely restates the results of a recent "Zemel Study" which was based on supplements, not cereals.


Advertiser's Position
General Mills contends that the challenger misrepresents the plain wording of the commercial and noted that the announcer clearly states that the study referenced is a "study of calcium supplements and reduced calorie diets," and not a study of cereals. Further, to prevent any miscommunication, they added a super stating "study did not test cereals" - a super that appears on screen for a significant length of time. The advertiser asserted that its commercial is not misleading - it speaks about calcium, its benefit, and where to find it.

NAD Decision
NAD concluded that the challenged commercial conveyed an, albeit unintended, message that simply substituting Special K cereal with Total in one's reduced calorie diet, by itself, will result in more weight and fat being lost - a message that the underlying science does not support. NAD further concluded that the super contradicts rather than qualifies the implied message conveyed. Consequently, NAD recommended that the commercial be discontinued or modified.

General Mills, Inc. appealed the NAD decision to the NARB.

NARB Decision
The panel agreed with the advertiser and determined that General Mills has competent and reliable evidence to support the express and implied messages reasonably conveyed by the challenged advertisement. NARB also determined that use of the super is not contradictory to the messages reasonably conveyed by the commercial.

THE CHILDREN'S ADVERTISING REVIEW UNIT (CARU)

The Children's Advertising Review Unit (CARU) was established by advertisers in 1974 to promote truthful and accurate advertising to children under the age of 12. CARU's Self-Regulatory Guidelines for Children's Advertising go beyond the issues of truthfulness and accuracy by recognizing the effects advertising has on an impressionable and vulnerable child audience.

Cases are brought to CARU in much the same manner as with the NAD. CARU monitors children's print, television and Internet advertising routinely and, on request, reviews ads prior to production. CARU then determines whether ads meet its guidelines. CARU also provides educational services to assist advertisers in adhering to its policies.

CARU has recently developed guidelines unique to Internet advertising issues. In order to coincide with the Children's Online Privacy Protection Act of 1998, the data collection guidelines apply to Web sites directed to children under 13 years of age.

(Note: See Children's section.)

EXAMPLE 3: McNeil-PPC, Inc.

Basis of Inquiry
This commercial was brought to the attention of CARU through its routine monitoring. A bouncing strawberry is shown attempting to squeeze into the opening at the top of the Tylenol bottle. It then pushes its way into the bottle, transforming its white outer shell to show a red liquid, similar to fruit punch that children frequently consume. CARU's Guidelines state that "…medications, drugs and supplemental vitamins should not be advertised to children." Given that the commercial aired during Saturday morning children's programming, CARU took the position that this product should not be advertised in such a time slot.

Advertiser's Position
The advertiser informed CARU that its intended target audience for Children's Tylenol is mothers of young children, not children themselves. Asserting that the commercial inadvertently aired during Saturday morning programming, the Advertiser provided CARU with its media plan, which demonstrated that the advertising was targeted to air during daytime and evening programming directed to adults. The Advertiser stated that it was taking measures to help ensure that the spot airs during appropriate times in the future.

CARU Decision
CARU determined that the representations made by McNeil-PPC, Inc. effectively address CARU's concerns with respect to the subject advertising.

LOCAL ADVERTISING REVIEW PANELS (LARPs)

Because advertising - particularly at the local level - continues to have a reputation for being untruthful, the CBBB (Council of Better Business Bureaus) has decided to become more of a watchdog. In 1995, the Council issued a renewed charter to local Better Business Bureaus to review local advertising, respond to complaints and conduct ad reviews, similar to what the NAD does on a national level.

If these bureaus are not able to resolve complaints, a local advertising review panel will attempt to resolve the case. The LARPs have been given their impetus from the American Advertising Federation (AAF) and the CBBB, which have formed a partnership called the Joint Committee on Self-Regulation.

INTERACTIVE ELECTRONIC MEDIA

Rapid growth of the Internet has created ethical marketplace issues never before considered. The Council of Better Business Bureaus (CBBB), together with the Federal Trade Commission (FTC), has developed voluntary self-regulation mechanisms that will maintain standards of truth in online advertising directed to both children and adults.

A subsidiary of the CBBB, BBBOnLine has developed guidelines for corporate Web sites. A "Code of Online Business Practices" will provide guidelines to online merchants that address issues unique to the interactive medium, such as consumer protection.

(Note: See Interactive presentation.)


VIEWPOINTS

There is general agreement that the advertising industry's self-regulatory system has been a success. The role of the NAD/NARB has been highly praised by the White House, Congress and the FTC. With guidelines in place, the industry has the incentive to communicate truthful and accurate product benefits to consumers.


 

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