U.S. Advertising Industry Organizes Self-Regulation Summary

  • Last updated on November 10, 2022

The National Advertising Review Board was established by various advertising industry organizations to institutionalize self-regulation in order to stem the prospect of increased governmental regulation of advertising.

Summary of Event

In response to a growing threat of tighter governmental regulation, the advertising industry in the United States created an elaborate self-regulatory apparatus in 1971 to curtail deceptive practices in advertising. This apparatus included the National Advertising Division (NAD) of the Council of Better Business Bureaus Council of Better Business Bureaus (CBBB) and the National Advertising Review Board (NARB). The initial phase of any investigation on any deceptive advertising case would be conducted by the former body; if the judgment rendered by the NAD was satisfactory, the case stood resolved. If the case remained unresolved or unsatisfactorily resolved at the NAD level, the NARB represented a higher (and final) court of appeals within the self-regulatory apparatus. Advertising;National Advertising Review Board National Advertising Review Board [kw]U.S. Advertising Industry Organizes Self-Regulation (May 18, 1971) [kw]Advertising Industry Organizes Self-Regulation, U.S. (May 18, 1971) [kw]Self-Regulation, U.S. Advertising Industry Organizes (May 18, 1971) [kw]Regulation, U.S. Advertising Industry Organizes Self- (May 18, 1971) Advertising;National Advertising Review Board National Advertising Review Board [g]North America;May 18, 1971: U.S. Advertising Industry Organizes Self-Regulation[00290] [g]United States;May 18, 1971: U.S. Advertising Industry Organizes Self-Regulation[00290] [c]Marketing and advertising;May 18, 1971: U.S. Advertising Industry Organizes Self-Regulation[00290] [c]Business and labor;May 18, 1971: U.S. Advertising Industry Organizes Self-Regulation[00290] [c]Organizations and institutions;May 18, 1971: U.S. Advertising Industry Organizes Self-Regulation[00290] Ewen, William Yost, Charles Baker, Fred Bell, Howard Elting, Victor, Jr.

The late 1960’s and early 1970’s witnessed an unprecedented amount of congressional and federal attention to consumer protection issues. Criticism and publicity focused on alleged inaction by the Federal Trade Commission Federal Trade Commission;advertising (FTC) during the early 1960’s. This attention led to new leadership and a revitalization of this agency. In the early 1970’s, the FTC processed an unusually large number of cases, with typical sanctions harsher than before.

The advertising industry perceived a need for an active response to these developments. Three people made seminal contributions to building the advertising self-regulatory apparatus: Howard Bell, president of the American Advertising Federation American Advertising Federation (AAF); Victor Elting, Jr., chairman of the AAF; and Fred Baker, a past chairman of the AAF. At the annual meeting of the AAF in June, 1970, both Bell and Elting stressed the importance of advertising self-regulation. Elting later proposed a structure for a regulatory apparatus, patterned closely after the system used successfully in Great Britain.

The British model contained two principal tiers: the Code of Advertising Practice Committee (CAP) and the Advertising Standards Authority (ASA). Elting also envisioned a two-tier system. To render the self-regulatory system powerful, Elting’s proposal initially included a sanction mechanism that had worked effectively in Great Britain. The British system was equipped to punish offending (that is, deceptive) advertisers through sanctions ranging from confidential blacklisting to public disclosure of offending advertisers. Elting’s proposed sanction mechanism was abandoned eventually because incorporating it into the proposed self-regulation system would violate U.S. antitrust laws (the British system did not face similar antitrust laws); for example, sanctions directed at a firm by an industry body would constitute an unfair restraint of trade under the Sherman Antitrust Act of 1890. Sherman Antitrust Act (1890)

In 1970 and 1971, the proposal to institutionalize advertising self-regulation won the support of four influential industry groups: the AAF, the American Association of Advertising Agencies, the Association of National Advertisers, and the Council of Better Business Bureaus. Representatives were drawn from these four organizations to form a National Advertising Review Council (NARC), which served as a supervisory and policy-making body for both the NAD and the NARB but was not directly involved in routine disposition of complaints and cases.

The administrative structure envisaged was as follows. When first submitted, any complaint would be processed by the NAD to determine whether the case involved misleading or deceptive advertising and was national in scope. If the complaint failed to meet these requirements, it would be dismissed. For complaints that satisfied these requirements, the NAD would ask the advertisers involved to discuss and substantiate claims in their advertisements. The NAD would then judge whether the substantiation was satisfactory and indicate appropriate remedies if necessary.

If the case remained unresolved at the NAD level, either because the advertiser did not agree with the NAD or because the NAD found the advertiser unwilling to cooperate, the case would be referred to the NARB, which would consist of thirty advertisers, ten representatives of advertising agencies, and ten public members noted for their contributions to the public interest. A special panel of five NARB members would hear each case referred to the board. If the panel decided that the advertisement involved was not misleading, the case would be dismissed; however, if the NARB found the advertisement to be deceptive, the advertiser would be directed to make suitable changes. If the advertiser failed to comply with this directive, a public announcement outlining the case details, the NARB decision, and the advertiser’s position would be made. In addition, the matter would be submitted to an appropriate federal agency.

Because the NARB structure dealt with only national advertisements, a similar structure was proposed to consider misleading commercials at local levels. Local advertising review boards (LARBs) would be patterned after the NARB, with board membership made up of the same mix of advertisers, advertising agency representatives, and members of the general public. It was proposed that local Better Business Bureaus would work with the LARBs to resolve local cases in a manner analogous to the interaction of the NAD with the NARB at the national level. In 1971, William Ewen of the Borden Company was chosen as the first executive director of the NARB. He chose Charles Yost, then U.S. ambassador to the United Nations, to be the chairman of the NARB.

Significance

By November, 1971, several complaints alleging deception in advertisements had been referred to the NARB. Most complaints had originated from consumer activists and were designed to test the fairness and expedience of the newly established self-regulatory system. During this period, the NARB was reluctant to make its proceedings public. The ostensible intent of this secrecy was to safeguard the interests of the advertisers involved, who preferred that the self-regulatory apparatus be a forum for settling disputes without the embarrassing publicity that often accompanied skirmishes with regulatory agencies such as the FTC. This nondisclosure policy was criticized even within the advertising industry. Although the industry had a body of useful precedents and information in the NARB cases, the advertisers could not benefit from it because they were denied access to it.

Two important steps were taken in 1972. First, it was decided to make the NARB decisions public. Second, Yost announced new procedures to facilitate the generation of more cases through monitoring activities as opposed to complaints and referrals. As a consequence, NARB activities benefited from public scrutiny and became more focused on cases that truly involved deceptive or misleading advertising.

To assess the impact of the NARB, it is useful to review decisions of various NARB panels. Some panels led to case dismissals that reinforced prior NAD action. For example, one panel was formed following an appeal by Mark Silbergald, Silbergald, Mark a consumer activist, to overturn a previous NAD dismissal of his complaint concerning a commercial for the Fifth Avenue candy bar. In this advertisement, an actor in a football uniform claimed to have consumed an entire case of candy bars before a game in order to become tough, mean, and smart. The NARB concurred with the NAD’s decision that the advertisement was a satire that was not meant to deceive.

Several other NARB panels judged advertisements in their respective cases to be misleading or deceptive. In all such cases, the advertisers were forced to modify or discontinue the offending advertisements. One case centered on a commercial from the American Dairy Association that claimed that milk provides instant energy. Reversing a previous NAD decision, the NARB panel ruled that the advertisement contained false claims. The American Dairy Association indicated that it was not currently using the offending advertisement and promised not to use it in the future.

In at least one instance, the NARB panel did not deliberate on a case because of an assurance that the offending advertisement would not be used again. The case concerned an advertising claim by Zenith Radio Corporation that its product was made in the United States. The company disagreed with an earlier NAD ruling that this claim was misleading because 14.5 percent of the product’s components were of foreign origin. When the case was referred to the NARB, Zenith agreed to discontinue use of the advertisement.

A few NARB cases concerned comparative advertisements that allegedly disparaged competitors without adequate substantiation. One panel deliberated over a commercial by Drackett Company that compared its Behold furniture polish with Lemon Pledge. The manufacturers of Lemon Pledge lodged a complaint with the NAD, which judged the advertisement in question to be misleading. When Drackett appealed this decision, the NARB concurred with the NAD’s verdict. The NARB’s reasoning was that although Behold was proven to be superior on one attribute (removing oil-based stains), Drackett’s advertisement misleadingly implied overall superiority. The panel indicated that advertisements that claimed total superiority faced the burden of substantiation with regard to all product attributes.

Some cases were resolved outside the self-regulatory system, with minimal NARB contribution. For example, an advertisement by Kayser-Roth Corporation claimed that its No Nonsense pantyhose were superior to L’eggs pantyhose, manufactured by Hanes Corporation. Hanes filed a complaint with the NARB and initiated a damage suit against Kayser-Roth for $20 million. Kayser-Roth responded with a countersuit for $30 million. Before the NARB could offer a conclusive verdict, the two contending parties reached an out-of-court settlement that stopped further use of the No Nonsense advertisement.

A common denominator in the cases in which the NARB reversed NAD decisions is that the advertisements in question were required to be either modified or discontinued. Such NARB judgments were less harsh on the offending advertiser than those in similar cases in which the FTC had rendered judgment. The NARB found the advertisement to be misleading or deceptive in all such cases, and the FTC was known to impose more severe penalties, such as corrective advertising, when an advertisement was judged to be deceptive.

A complaint frequently directed at the NARB is that it takes more time than necessary or desirable to dispose of cases. Various industry leaders suggested that advertising self-regulation serves no useful purpose if the process is notoriously lengthy. For example, if an advertisement’s intended life is only six months and the self-regulatory process takes that long to render a decision, the outcome may be moot. Even if advertisers with offending commercials are required to terminate their campaigns, such directives may be painless because those commercials already were scheduled to be dropped.

Some of the NARB’s judgments involved cases initiated through monitoring activities. For example, a Sperry Rand Corporation commercial claimed that its Remington electric shaver was superior to Schick’s Flexamatic electric razor. Sperry Rand refused to provide supporting material to help the NARB reach a decision because the firm was engaged in litigation with Schick at that time. This case was terminated following an assurance that the advertisement in question would not be used again. This case demonstrates an aspect central to any successful industry self-regulation effort: the interests of individual firms in the industry were protected even though they did not initiate action through formal complaint channels.

The NARB made important contributions in two other areas: advertising to children and advertising to women. A children’s review unit was constituted as part of the NAD in 1974 and was mandated to work within the children’s television advertising guidelines formulated by the Association of National Advertisers. In a 1975 report, a NARB panel concluded that advertisers sometimes relied on outdated standards in messages directed at women. The panel outlined issues and questions to be considered by advertisers and advertising agencies when developing messages that either include or target women.

The NARB had a considerable impact on how important constituencies such as Congress, consumer groups, and government agencies evaluate the advertising industry and whether they perceive any need to regulate it. Self-regulation served the advertising trade as a means of eradicating deception and as a means of dealing with public criticism, with its attendant threat of government regulation. The NARB has attracted praise from federal officials and consumer activists over the years. The bulk of evidence suggests that the NARB has succeeded in achieving its goals. Advertising;National Advertising Review Board National Advertising Review Board

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Boddewyn, Jean J. Global Perspectives on Advertising Self-Regulation: Principles and Practices in Thirty-eight Countries. Wesport, Conn.: Quorum Books, 1992. This global study evaluates the effectiveness of the self-regulation process. Includes bibliographic references and index.
  • citation-type="booksimple"

    xlink:type="simple">Colford, Steven W. “Speed Up the NAD, Industry Unit Told.” Advertising Age 60 (May 1, 1989): 3. Summarizes recommendations made to revitalize the NARB, mostly by minimizing the time for processing cases.
  • citation-type="booksimple"

    xlink:type="simple">Kintner, Earl W. A Primer on the Law of Deceptive Practices: A Guide for the Businessman. New York: Macmillan, 1971. Discusses the foundations of laws concerning unfair and deceptive business practices, including advertising.
  • citation-type="booksimple"

    xlink:type="simple">Ulanoff, Stanley M. Advertising in America: An Introduction to Persuasive Communication. New York: Hastings House, 1977. Offers a relatively strong historical orientation. Several sections pertain to legal and regulatory issues.
  • citation-type="booksimple"

    xlink:type="simple">Zanot, Eric J. “The National Advertising Review Board, 1971-1976.” Journalism Monographs 59 (February, 1979): 1-46. Exhaustive review and critique of the formative years of the NARB.
  • citation-type="booksimple"

    xlink:type="simple">_______. The National Advertising Review Board, 1971-1976. Lexington, Ky.: Association for Education in Journalism, 1979. Offers an insider’s perspective on the NARB during its formative years.

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