Clients often ask whether it’s better to go to NAD or court when they’re unhappy about the claims their competitors are making.  The main considerations are usually speed and cost, likelihood of success, and impact of potential victory. Typically, NAD is faster (unless you’re going for a TRO), a lot cheaper, more likely to be addressed by an adjudicator who deals with advertising day in and day out, and a lot less painful for both parties because there’s no discovery.  Of course, some litigants do want to inflict pain, not (necessarily) because they’re sadists, but because they’re convinced that inflicting some pain will be the only way to really get the advertiser to mend its ways. 

Also, an NAD Decision may be faster to get, but can take a while to see implemented, especially if there are on-pack claims involved. And an NAD Decision can’t be publicized by the victor. So, for some challengers, the choice is not always obvious that NAD is the better forum, especially if they're dealing with an advertiser who isn't familiar with the self-regulatory process. Thus, there’s some important strategizing to do when companies are faced with competitive advertising they want to see disappear from the marketplace, particularly if the cost of bringing a challenge is not the determining factor.   

But there’s another very important consideration for potential challengers: what is the burden of proof?  Will the challenger have to prove that the advertiser’s claim are false, or will the advertiser have to prove that its claims are true?  As a very general rule, courts require the former and NAD requires the latter.

This post will not explore the myriad issues and cases relating to burden of proof under the Lanham Act for establishment claims. Rather, the rest of this post will discuss a recent decision in the Northern District of California involving a putative class action that followed from an NAD Decision. Because the case was a consumer action rather than a competitor action, the allegations were asserted under California’s Consumer Legal Remedies Act, Unfair Competition Law and False Advertising Law, and the standards and cases under these statutes are not the same as those under the Lanham Act.  However, the case highlights the difference between courts and NAD in addressing charges of false advertising. And it’s one of the handful of cases where an NAD Decision was introduced into the record, here as “proof” of falsity.  Pretty interesting for ad law geeks like me and you, dear reader.

By way of background, NAD issued a Decision in 2022 regarding claims made by i-Health Inc. for Culturelle® IBS Complete Support, a product labeled as a medical food for the nutritional management of irritable bowel syndrome (“IBS”) and IBS-related symptoms. P&G challenged several of the advertiser’s claims, including variants on the claim “clinically shown” to address various abdominal symptoms. To support its claims, i-Health provided several clinical studies conducted on patients suffering from IBS or involving the effect of prebiotics on gut health generally. Starting from the premise that advertisers must have a “reasonable basis” for their claims, and that establishment claims such as “clinically proven” require scientific evidence that proves or “establishes” the truth of the claim, NAD determined that the advertiser failed to meet its burden. According to NAD, not only were the clinical studies so flawed that they could not adequately substantiate the advertiser’s “clinically shown” claims because they lacked reliable controls and blinding, but they were even insufficient to support many of the product efficacy claims and the name “IBS Complete Support.”  NAD recommended discontinuance of several claims.

Armed with this Decision, a putative class member sued i-Health in the Northern District of California, alleging that the defendant’s advertising statements on the product’s label were false and misleading because the Product has “not been ‘clinically proven’ to be effective” in treating IBS symptoms, and because the plaintiff herself “did not experience any of the relief” the label claimed the product would provide. As noted by the court, the “primary basis” of plaintiff’s claim of falsity was the NAD Decision finding that “the sole clinical study offered by Defendant to support its labelling claims was methodologically unreliable.”  

Ruling on defendant’s motion to dismiss, the court took judicial notice of NAD’s Decision but determined that it was not an adequate basis, in and of itself, for an allegation of falsity under the applicable California statutes.  Rather, the court found, the authority to challenge advertising on lack of substantiation grounds is reserved to the government: a private plaintiff must instead allege specific facts pointing to “actual falsehood” of the statements.  Here, the complaint was fatally flawed because it failed to cite evidence, such as actual testing or other studies yielding contrary results, to allege that the results of the underlying study were disproved or refuted, or that other experts in the field have confirmed that the study’s results were disproven by the scientific community. 

Accordingly, the court determined in granting defendant’s motion (in part, with leave to amend), that the crux of the allegations was lack of substantiation and such allegations are insufficient: NAD’s Decision did not hold, nor did plaintiff otherwise allege, that the underlying study’s findings regarding the Product’s intended benefits were wrong.  As the court noted, “[t]hat a research study may be unreliable does not mean that its conclusions are necessarily incorrect.”  (Would the analysis of the pleading requirements for an establishment claim and the sufficiency of the NAD decision as a predicate for challenging such a claim be different under the Lanham Act? Maybe so.) 

What does this all mean? Do advertisers not need a reasonable basis for their claims?  Can even flawed substantiation pass muster?  These are not the take-aways here. As the FTC, state Attorneys General, courts, and NAD, have all made abundantly clear, advertisers do not have a license to lie and their advertising claims must be truthful and appropriately supported. What this case does mean, however, that challenging an advertiser’s claim in court is a different matter than challenging it at NAD. The burden of proof is yet one more issue to consider in evaluating which forum to use.

One other takeaway.  While many in the advertising law community have fretted about the weaponizing of NAD Decisions by the class action bar, this case shows us two things: one, NAD Decisions are indeed read by class action lawyers. That is something that both NAD participants and NAD itself have to reckon with.  However, to the extent that the class action bar thought that an NAD Decision finding flaws in an advertiser’s substantiation could obviate the need for proof of falsity, or at least get a complaint past a motion to dismiss, such thinking has been proven wrong.  At least by the Northern District of California.

i-Health Inc. (Culturelle IBS Complete Support), NAD/CARU Case Reports, Report #7080 (May 2022)

Malia Obillo v. I-Health Inc., Case No. 24-cv-02459-PHK (N.D.CA), 2025 WL 844389