Transcript Title

National Advertising Division (NAD)
Advertising & Self Regulation
Kathryn L. Farrara
NABCA 16th Annual Symposium on
Alcohol Beverage Law & Regulation
March 9-11, 2009
History of NAD
1971 – NAD was formed by advertising
trade associations and the Council of
Better Business Bureaus.
SELF-REGULATION COMPONENTS
NARC
NAD
NARB
CARU
ERSP
Why Choose NAD over Federal
Court?
• Low-cost
• No standing issues
• Speedy
• Voluntary participation
• Substantially easier
burden of proof
(reasonable basis)
• Ample opportunity to
be heard and full
access to NAD
throughout the process.
• Challengers do not
have to prove that the
advertising is
misleading.
• Confidential
Product Categories Reviewed:
Automobile Accessories
Communications
Computers/Electronics
Clothing/Accessories
Cosmetics
Drugs/Healthcare
Energy
Financial Services
Food and Beverage
Alcoholic Beverages
Hardware/Garden
Products
Home Furnishings
Household Products
Insurance
Leisure/Toys
Restaurants/Retail
Chains
Sports Products
Telecommunications
Travel/Accommodations
NAD examines many types of claim
substantiation:
– Puffery
– Consumer surveys
– Product testing
– Demonstrations
– Taste tests
– Pricing
– Disclosures
NAD Review Process
1.
Challenge/ Monitoring
•
2.
The source of an NAD case can be competitors, consumer
complaints, referral by local BBB, trade associations, advocacy
groups or the NAD monitoring program.
Two Rounds of Submissions
•
Opportunity for expedited proceeding.
3.
Meetings with NAD
4.
NAD Decision
NAD’S Approach to Claim Review
• What are the messages that are reasonably conveyed?
• Determines whether the advertiser has established a
“reasonable basis” for its claims (does the testing/data
support the challenged claim?)
• “Steps into the shoes” of the reasonable consumer to
determine all reasonable interpretations of the advertising
at issue.
• Consult regulatory authorities for “guidance” where there
is a clearly articulated position and harmonize its
decisions whenever possible.
Russian Standard Vodka, Inc., Case #4591,
NAD/CARU Case Reports (January 2008).
Procedural History
• Initiated June 2006
– Advertiser argued that the advertising at issue was not “national
advertising” within the scope of NAD’s jurisdiction, and the statements
at issue were the subject of pending litigation.
• NAD concluded that jurisdiction was proper.
– §1.1 (A) “National Advertising” shall include any paid commercial
message, in any medium (including labeling), if it has the purpose of
inducing a sale or other commercial transaction or persuading the
audience of the value or usefulness of a company, product or service...
– Both actions cited by the Advertiser had been dropped prior to
resolution of the issues and therefore not considered the subject of
pending litigation.
• Advertiser filed a complaint seeking declaratory
judgment – NAD administratively closes the proceeding.
• Federal court stayed the case for 30 days,
pending resolution of the NAD proceeding, and
NAD reopened the original review proceeding.
• The Court stated:
– “Allowing NAD to complete its decision regarding
Stoli’s authenticity as a Russian vodka would allow it
to set advertising standards for the industry on an
important issue. The public and industry would
benefit greatly from hearing the NAD’s opinion on the
issue …”
Challenger’s Position:
• Stoli is produced in Russia from 100% Russian wheat, water, and
yeast.
• US “country of origin” laws require Stoli be described as a “Product
of Russia.”
– Under Customs regulations the country of origin remains the country of
production so long as the packaging process does not change the name,
character, or use of the product.
• Russian labeling requirements are inconsistent with US law and
irrelevant.
• Advertiser’s consumer perception survey is flawed and irrelevant.
Advertiser’s Position:
• Stoli sold in the US is filtered, bottled, labeled, packaged in and
exported from Latvia.
• Consumer Perception Survey – 90% believe that an “authentic”
Russian vodka must be bottled in or imported from Russia.
• Export records and chemical testing demonstrate significant
differences between US Stoli and the vodka exported from Russia
by S.P.I.
• Stoli’s claims of Russian authenticity have been questioned and
rejected by international tribunals
The Challenged Claims
• There is an “absence of a firstrate, authentic Russian vodkas
in the [U.S.] luxury [alcohol]
marketplace”
• “Stolichnaya brand vodka is
not authentically Russian.”
• “If Stolichnaya vodka comes
from Latvia rather than Russia,
then they should be honest
about that. We think they
should be proud of their
Latvian heritage.”
Product Denigration
Issue:
• Can the advertiser truthfully make certain
statements in its advertising questioning the
nature and origin of Stolichnaya Vodka without
falsely disparaging Stolichnaya Vodka?
Rule:
• Denigrating claims must be truthful, accurate,
narrowly drawn and do not falsely disparage a
competitor’s product.
Does evidence indicate that more than just
filtering and bottling is taking place in
Latvia?
NAD reviewed the following evidence submitted by
the parties:
•
•
•
•
Customs Records
Chemical Testing
KPMG Report
Statements made by Pernod
NAD Concluded:
•
The evidence was inconclusive and could not individually, or in
total, provide a reasonable basis for claims that anything more than
filtering, bottling and labeling of Stolichnaya vodka was taking place
in Latvia.
Assuming only filtering and bottling take
place in Latvia, does this action render
Stolichnaya “not authentically Russian”?
Consumer Perception Survey:
1.
“What, if anything would have to occur for a brand of
vodka to be called Authentic Russian Vodka?”
2.
“If you saw a vodka advertised as authentic Russian
vodka, which, if any, of the following would you expect
to be true about that brand of vodka?”
•
•
•
•
•
•
The vodka is made with Russian ingredients
The vodka is distilled in Russia
The vodka is bottled in Russia
The vodka’s bottle is labeled in Russia
The vodka is imported from Russia
The vodka is sold in Russia
Consumer Perception Surveys
• As a general rule, open-ended questions are better indicators of how
consumers interpret a commercial message because respondents’
answers are not colored by the suggestions contained in the
questions themselves.
• Closed-ended questions typically are reserved for situations where
the researcher wants respondents to choose between the parties'
respective interpretations of a claim or where an open-ended
approach would not pick up subtle differences in meaning.
• The absence of a control advertisement is not necessarily a fatal
flaw, though it can be particularly useful when survey respondents’
answers are likely to reflect pre-existing beliefs rather than
impressions produced by the advertisement.
In the absence of reliable consumer perception
data, NAD will use its experienced judgment to
determine the reasonable messages conveyed
by an advertisement.
• NAD reasoned that while some vodka drinkers may find these
factors to be essential to the Russian-ness of authentic Russian
vodka, others may not.
• Regardless of customs laws, certain vodka drinkers/consumers may
want to know that Stolichnaya vodka is filtered, bottled and labeled
in Latvia, not Russia.
• NAD concluded that the consumer should be the one to determine
what is, and is not, authentic Russian vodka.
Conclusion
• NAD recommended that the advertiser discontinue
making claims that Stolichnaya is distilled in Latvia
including statements that ‘[Stolichnaya vodka] is distilled
and bottled in Latvia,” and that Stolichnaya products
“should be proud of their Latvian heritage.”
• In addition, NAD found that the advertiser could question
the “Russian authenticity” of Stolichnaya vodka in its
advertising, as long as the advertiser clearly and
adequately discloses why it believes Stolichnaya vodka
is not truly authentic Russian vodka.
NAD Case Reports
• Available via online subscription at:
www.nadreview.org/
• Archives serve as a research tool offering education,
guidance and support; access NAD decisions, NARB
appeals and more;
• Search by issue, company, date
or key phrases
Thank you.
Kathryn L. Farrara
[email protected]