At NAD's annual conference yesterday, NAD's Director, Laura Brett, yesterday announced significant revisions to NAD's current procedures. These changes now permit advertisers to introduce new evidence to substantiate claims that NAD previously determined should be modified or discontinued.
Specifically, the new procedures provide that a "closed NAD or NARB case may be reopened if the NAD Director, in his/her sole discretion, determines that extraordinary circumstances warrant the reopening. In making this determination, the NAD Director shall take into account (1) the advertiser’s compliance with any recommendations by NAD or NARB relating to the claims at issue; (2) if the reopening is requested based on new evidence, whether there is a satisfactory showing that the new evidence was not reasonably available to the party at the time the NAD record was closed; (3) if the reopening is requested based on new evidence, whether the new evidence would have likely changed the NAD or NARB decision in a material way; and (4) whether the request has sufficient merit to warrant the expenditure of NAD resources."
While NAD's procedures have always permitted the reopening of a case based on "extraordinary circumstances" (see my previous post about NAD reopening a case from 1994), the new procedures spell out the factors that NAD can and will take into account and explicitly recognize the potential for new evidence. Previously, it was very difficult for an advertiser to introduce new evidence or substantiation to support a previously discontinued claim; NAD was reluctant to allow cases to potentially continue indefinitely.
Now, there are two avenues that an advertiser can pursue if it has new evidence to support a previously disallowed claim: it may resume use of the claim and request that NAD consider the new evidence in the event that the original challenger initiates a compliance proceeding, or it may seek NAD’s review of the new evidence prior to resuming use of the claim. If an advertiser seeks to reopen a case, it must petition the NAD Director and pay a non-refundable petition fee of $5,000. If the petition is grant, it must pay an additional nonrefundable filing fee equal to the applicable NAD Challenge Fee minus the $5000 initial petition fee.
Although this procedure is a potential option available to either party to the original dispute, advertisers are likely to be most interested in re-opening a case, especially if they develop new substantiation for a claim that they are still invested in using. Such new substantiation could potentially address any flaws that NAD previously found precluded earlier use of the claim.
This change, which was developed in response to the recommendation offered by the ABA Antitrust Section’s Working Group (disclosure: I was part of the Working Group), aligns the self-regulatory approach more closely with an advertiser's legal requirements: the truthfulness of a claim is paramount.
Under the revised procedures, an advertiser making claims that NAD previously recommended be discontinued may follow one of two courses if it believes it has developed new substantiation for those claims: The advertiser may either resume use of the disallowed claim and request NAD consider the new evidence in any compliance proceeding that may be initiated or the advertiser may seek NAD’s review of the new evidence prior to resuming the claims.
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