The NAD procedural rules require parties who participate in the process to keep the proceedings confidential while the case is pending and not to use the decision for promotional purposes. In the old days, it was not uncommon for a party feeling they were vindicated by NAD to hold their own press conferences. The NAD clarified it rules and added to its participation agreement language prohibiting such marketing tactics in the late 90s. Now the only press release comes from Linda Bean at NAD itself (although savvy challengers know they can recommend the story to trade journals and other potentially interested media outlets). Participants in the NAD process often ask the meets and bounds of this limitation. A common question is whether the sales force can share the decision with customers. This has always struck us as not comporting with at least the spirit of the NAD rules, which are designed to encourage participation in the process and not serve a punitive function.

The NAD apparently agrees as it recently issued two news releases critical of the actions of several consumer electronics companies. NAD found an electronics company violated NAD procedures by contacting customers regarding the outcome of its challenge against a rival’s 3D televisions in advance of the NAD’s decision. The timing of the communication was an issue for NAD but the contact was also deemed for promotional purposes. Interestingly, in the same case the rival company was also criticized in a separate press release after NAD learned one of its executives contacted customers (electronics dealers and retailers) regarding the outcome of the case.

How bad is it for a company to be stung by an NAD press release simply stating the company had violated the rules by contacting customers regarding a decision? There is no referral to the FTC for such companies as promotion of an NAD decision does not violate Section 5 even though the other party might find such tactics unfair. The slap on the wrist press release may call out the offender to the rest of the advertising community, but to what result? The possible lasting stain will be with the NAD staff itself. For companies who are repeat players at NAD, all understand that credibility with the NAD lawyers is critical. Today’s hoped for modest sales bump could spell strained relations in
future actions. Is it worth it?