A COMMEMORATIVE;25 YEARS OF SELF-REGULATION (PART TWO OF TWO)

By Published on .

Compliance with NAD and NARB findings was to be voluntary. Cases where advertisers refused to cooperate were to be referred to appropriate government agencies for review and possible further action.

The credibility of the NAD/NARB system got a boost with the selection of the 10 outside members. Skeptical consumer activists suspected the panels would be little more than industry-backed shams. But that fear eased when Kenneth Cox, an attorney and liberal Democrat, considered a "regulator" when he served as a member of the Federal Commun-ications Commission, joined the NARB. In 1976 Mr. Cox became NARB chairman, a position he would hold for the next 20 years.

NEW PRESTIGE

In October 1971, Charles Yost, a former U.S. Ambassador to the United Nations, lent his prestige to the new venture by becoming NARB's first chairman. He called its first meeting for Nov. 18, 1971, although the board would not tackle its first case, which challenged General Motors' use of the slogan "Mark of Excellence," until the following May. (It found no deception in the slogan.)

Consumer activists wanted codes and initially distrusted the case-by-case approach taken by the NAD/NARB system as too arbitrary. They quickly tested the NAD with a flood of challenges to ads. The NAD knew it was under intense scrutiny. But as the case load developed, the results gave the skeptical reason to relax.

"The FTC began to take us seriously," says Mr. Bell. "And even Ralph Nader conceded the system had some credibility. His imprimatur was vital to us continuing."

Eventually, consumer complaints about ads declined, but increas-ingly advertisers relied on NAD to resolve complaints about truth-fulness in competitive ads.

To induce the industry to submit to its decisions, the NARB felt obliged to at first offer a promise of confidentiality. Within the NARB, this was a sore point from the start. Those favoring secrecy insisted publicity would mean holding up individual advertisers to ridicule.

DECISIONS MADE PUBLIC

But others, including Messrs. Bell and Cox, consumer groups and the editorial columns of Advertising Age, said decisions behind closed doors had no credibility. Finally in November 1972, policy changed and all NARB decisions were made public. The NAD began issuing summaries of its cases in 1973.

The system always had to walk a line, balancing the expectations of its three supporting organizations. It had to be tough enough to satisfy the consumer advocates. It also had to demonstrate a respect and understanding of advertising's role in the marketing process if advertisers were to accept its judgements. All this, while keeping the confidence of the FTC in order to keep the industry from facing more direct government regulation.

Sometimes it seemed a losing battle-especially in the mid '70s.

Peggy Charren was a Newton, Mass., housewife who was determined to put an end to advertising targeted at children. In the early '70s she formed Action for Children's Television (ACT), which pressed for government action. In 1975 she so petitioned the FTC for an ad ban.

Although the NAD was an independent industry body, it was the FTC that set the tempo of government scrutiny, and that tempo was the force that lay behind self-regulation. Whoever chaired the FTC was, therefore, a bellwether of pressure levels the industry could expect to face.

CARTER APPOINTEE

In 1977 Jimmy Carter appointed as FTC chairman a consumer-oriented Senate staff attorney, Michael Pertschuk, who began proposing sweeping trade reg-ulation rules (TRRs) covering whole industries. In Mr. Pertschuk, ACT found a strong ally.

"The most infamous of Mike's TRRs," recalls Howard Bell, "was the "Kidvid" proposal limiting what you could say in kids' TV ads and when you could put them on. It created a firestorm of protest among advertisers and calls for his impeachment. We went to court to get him legally recused. We argued he had made so many speeches against the industry and children's advertising that he had prejudiced himself and shouldn't vote on the kidvid proceedings."

AGGRESSIVE MONITORING

The industry could not ignore the challenge. In 1974 NAD and NARB had been joined by a third independent panel, the Children's Advertising Review Unit (CARU). Unlike its sister boards in the NARC structure, CARU did not wait for cases to drop over the transom. More than 95% of its cases would originate from its own monitoring. "We still tape six hours of children's programing a day," says CARU director Elizabeth Lascroutx, "then fast forward through the programming to the commercials."

CARU was more disposed to proceed on the basis of codes and rules. Fortune magazine attacked one major CARU injunction against any children's advertising that suggests a product might make one child superior in any way to another.

"What's wrong with the idea that certain products might give them a sense of superiority?" Fortune asked. "The NAD is crazy if it thinks little people are less competitive than big ones."

"But we still say you cannot suggest that having a product will make you more popular than not having it," says Ms. Lascroutx. "Years ago a regional baker did a spot that said kids who ate wheat bread were dorks. That crossed the line. Parents were telling us their kids wouldn't eat it anymore."

Some believe the FTC, for all its good intentions, overreached during those years; that changed with the arrival of Ronald Reagan. The big news of the '80s was Chairman James Miller's laissez faire FTC, policies continued under his designated successor in October 1985, Daniel Oliver. Both shifted from flyspecking major mainstream advertisers to chasing the outright scams rampant on the edges.

The Miller-Oliver era had several consequences for self-regulation. First, a curtailed FTC removed the silent sword that had hung over the industry and was the major deterrent to careless claims and the bedrock of self-regulation. "Miller gave speeches suggesting maybe the FTC didn't need the substantiation policy that had stood since the days of Kirkpatrick," says Mr. Bell. "I went ballistic because that would have completely emasculated self-regulation. If the FTC said you don't have to substantiate claims, how could NAD require it?"

And as the FTC went away, who ran in to fill the void? The states. When the Center for Science in the Public Interest, for example, went after McDonald's in 1985 for claims about Chicken McNuggets, it not only went to the FTC, which it assumed would ignore the case. It went to the New York State Attorney General, which it assumed would not. Advertisers soon found that fighting a 50-front advertising war through the states was as punishing on them as their adversaries.

NAD LOOKED GOOD

Ironically, Mr. Miller made the work of the NAD even more important. Indeed, the NAD looked good. It was free and reasonably expeditious. Consumer complaints virtually disappeared. It was advertiser-to-advertiser challenges that filled the dockets. "Because," Mr. Bell notes, "no one watches your advertising more closely than your competitor."

Among the most troublesome categories has always been retail. Often the issue is semantics and its implications. When the NARB told Wal-Mart to modify its long-standing slogan, "Always the low price," the retailer complied and fell back to "Always low prices."

CENTRIST POSITION

Weight reducing plans may be the biggest sinners. The category falls through the cracks because it's not regulated by the FDA, even though it makes drug-like claims. One promised to "blast 49 pounds away in 29 days."

With the election of Bill Clinton in 1992, the FTC under Robert Pitofsky moved back to a more centrist position and a more-productive partnership with the NAD. "We have excellent relations with the FTC," says NARB Executive Director Eric Haueter, "which otherwise might claim jurisdiction but instead kisses us on both cheeks for what we are doing."

What they are doing, with a staff of 11 and a $1.4 million annual budget, is the detail work of truth and accuracy in national and regional advertisers, leaving the FTC free to concentrate on the charlatans. Behind that lies the support of 137 Better Business Bureaus and an army of advertisers from which comes about 70% of current cases.

PROCESS MOVES QUICKLY

Over the years the NAD has heard about 3,300 cases, with voluntary compliance at better than 97%. Only 91 cases have been appealed to the NARB, about a third of them partially reversed or modified.

Confidentially remains the rule until a decision is reached. Any leaks or publicity and the case is dropped. But the process now moves relatively fast-60 business days with time periods strictly enforced.

Do the NAD, NARB and CARU still need a strong FTC lurking in the background?

"Yes," says FTC Chairman Pitofsky. "Although the NAD can work because this is an industry that realizes the incentive of credibility and knows that all legitimate elements are hurt when there's false advertising, in the final analysis, without a government to back up self-regulation, chances are the less-responsible elements would win out."

Today the NAD can point to a playing field significantly different and more level than 25 years ago. Asked to place his level of oversight on a sliding scale between Messrs. Kirkpatrick and Miller, Mr. Pitofsky finds it hard to do because the atmosphere is so different.

"When Kirkpatrick was chairman," he says, "there were a large number of very inviting targets that were out of bounds. People referred to the `free fire zone' of advertising where many were making false claims. Therefore, the FTC was very active in challenging national advertising. Today we are as willing to engage in enforcement as the Kirkpatrick commission. But there aren't that many targets. And a large part of the reason is self-regulation."

John McDonough is a Chicago-based free lance writer and frequent contributor to Advertising Age.

In this article:
Most Popular