Miracle on 36th Street

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In the holiday classic "Miracle on 34th Street," optimists and skeptics debated the existence of Kris Kringle. Nobody would liken effective advertising self-regulation to Santa Claus, but the National Advertising Division of the Council of Better Business Bureaus (NAD) – located on 36th Street in New York – has made believers out of a lot of people. Kicking off its annual conference today, the NAD is a forum for monitoring and evaluating truth and accuracy in national advertising. Competitors (and the public) can use NAD’s processes to challenge national advertising claims that might be deceptive.

A voluntary advertising industry forum that furthers truth in the marketplace? At first blush, that seems as likely as a chubby fellow in a red suit who brings toys on a sleigh. But in its 39-year history, NAD has delivered valuable gifts to businesses and consumers. For advertisers, the NAD offers a forum for resolving disputes swiftly and inexpensively without the burdens of litigation. Furthermore, companies that take pains to substantiate their ad claims shouldn’t have to go head-to-head against competitors that cut corners. Thus, the NAD plays an important role in encouraging vigorous – and fair – competition in the marketplace.

But consumers, too, benefit from the NAD process. Of the more than 3,700 advertising disputes the NAD has considered, it boasts a compliance rate nearing 96%. Any process that causes companies to pull questionable ads offers a net benefit for buyers.

Of course, no system of voluntary self-regulation can be a substitute for vigorous federal, state, and local law enforcement. Agencies like the FTC make independent case selection judgments and participation in the NAD process is no guarantee that parties won’t face scrutiny from government ad cops. But in a unique carrot-and-stick arrangement, flouting the process without a compelling reason is a sure-fire method for ensuring an NAD referral to enforcers. And the one place companies don’t want their ads to be showcased is at the top of the FTC’s IN box with a referral from the NAD clipped to the corner.

An impressive line-up of FTC Chairmen and Commissioners have referred to the NAD process as the "gold standard" of self-regulation. As more and more industries follow the NAD’s model for effective voluntary compliance, companies and consumers can thank the NAD for setting that standard.

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