Self-Regulation Shouldn't Be Advertising's Best-Kept Secret

NARC's Fine Work Needs to Noticed

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As if you needed another sign that times are tough, here's a fairly reliable measure: The number of cases handled by the advertising industry's best-kept secret -- self-regulation -- are on the rise.

Last year the National Advertising Division of the Council of Better Business Bureaus handled 214 cases, up 22% from 2007. And in 2008 ad challenges, in which one advertiser challenges a competitor's claim, rose 31% to 81 cases.

Why the increased activity? It's a deadly fight for share of market out there, and in down times advertisers tend to revert to hard-hitting comparative advertising. NAD's purpose is to substantiate these kinds of attack ads, and it can do it faster and cheaper than litigation can.

The Federal Trade Commission seems to like the idea of letting advertisers settle their own disputes. When the National Advertising Review Council, the body that sets the policies and procedures for the NAD to enforce, started 38 years ago, then-FTC Chairman Bob Pitofsky wasn't an early convert.

"If the truth be known," he said 10 years ago, "there was some skepticism about how the whole thing would work. The FTC had been burned time and time again by unkept promises of self-regulation by other industries. But this group has proved the skeptics wrong. Today, advertising has the best self-regulatory system of any industry in the country."

The outgoing chairman of the FTC, William Kovacic, is also a fan. But the current crop of FTC commissioners don't seem as convinced, although they seem somewhat willing to give self-regulation a chance. In issuing guidelines for online behavioral advertising, FTC Commissioner Jon Leibowitz said the industry needs to do a better job of "meaningful, rigorous self-regulation, or it will certainly invite legislation by Congress and a more regulatory approach by our commission."A joint industry task force quickly seized on that statement as an endorsement for self-regulation, and said it supported FTC's goal of a "comprehensive and effective self-regulatory program."

But in spite of rhetoric, advertising self-regulation still remains "relatively unknown and underappreciated by the industry it serves," in the words of C. Lee Peeler, president-CEO of the National Advertising Review Council. By "underappreciated," he means that self-regulation has a "low profile in comparison to its value" to the advertising industry.

Even financial support comes from a relatively small group. There are about 150 corporate supporters, 50-plus law firms, 10 or fewer ad agencies and a dozen associations, Mr. Peeler told me.

So why is NARC the best-kept secret in the business? "That's the puzzle," he said. "When self-regulation is working well, it goes relatively unnoticed. The work of NAD is really very workmanlike."

An exception, Mr. Peeler said, is the children's food and beverage initiative, which a recent survey shows has "pretty good recognition among parents and very strong support from children's food and beverage advertisers."

The Children's Advertising Review unit, as it's called, gets support from about 100 children's advertisers. But when the NARC strategic planning group reached out to key stakeholders last year, they were consistently told there were relatively low levels of awareness of NARC and its programs among advertisers, and especially among agencies.

I guess we're part of the problem because Mr. Peeler said the trade press doesn't do a very good job of covering case settlements or other NARC activity. Mr. Peeler, who worked for the FTC for 33 years before joining NARC in 2006, gently lifted us off the hook when he said that "we don't have winners and losers, but participants and supporters of the process."

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