What does it mean when the National Advertising Division refers a case to the Federal Trade Commission? At this year’s NAD Annual Conference, Mary K. Engle, the associate director of the FTC’s Division of Advertising Practices, and NAD director Laura Brett sorted fact from fiction about NAD referrals and shared their perspectives from both sides of the process. Read on to learn more about the referral process and the key takeaways from their discussion.

To start, Ms. Brett acknowledged that in an ideal world, parties would voluntarily participate in and comply with the NAD review process, which would eliminate the need for referrals to the FTC. Although referrals constitute a small percentage of the work the NAD does, Ms. Brett views referrals as a failure of the self-regulatory process. Ms. Brett went on to explain that referrals arise from one of two main scenarios: (1) failure to file a substantive written response or (2) failure to comply with a NAD or NARB decision. That latter category can be further broken down into situations where (a) the advertiser has not agreed to comply with a decision, or (b) the advertiser has not complied by failing to make a bona fide attempt to bring its advertising into compliance with NAD/NARB recommendations after a reasonable amount of time. Once a decision has been made to refer the case to the FTC, the NAD packages up the case file and sends it to the Advertising Practices Division (the “Division”).

Ms. Engle explained that the Division’s chief of staff takes the first look at a referral and ultimately handles the bulk of it on her own. Recently, the FTC has been releasing closing letters more quickly than it has in the past. Ms. Engle attributed this to a few things: (1) the Division having more time to devote to referrals; (2) deferring to other agencies the matter is also referred to, such as the FDA; and (3) the parties deciding very quickly to return to the NAD upon learning of the referral. Ms. Engle added that the faster response reflects the FTC’s support for self-regulation. As a matter of course, the Division also sends an acknowledgment of receipt of the referral to the NAD. The Division then turns to the question of what to do with the referral.

Often the Division urges the parties to go back to the NAD if they did not participate the first time around, Ms. Engle explained. Ms. Brett added that many non-participants are companies that have never heard of the NAD before, let alone participated in the NAD process. To combat non-participation in the first place, the NAD is redoubling its efforts to reach out to these companies, many of which are small businesses or are otherwise new to the NAD. However, Ms. Brett acknowledged that it is difficult to convince companies that self-regulation is and should be a part of the company’s responsibilities as an advertiser. In the end, the Division will have closed the matter, referred the parties back to the NAD, deferred to a sister agency, or decided to investigate further.

The conversation wrapped up with a discussion of how NAD referrals fit more broadly into the FTC’s operations. Ms. Engle emphasized that the Division has not changed the way it treats NAD referrals despite the change in administration. She referred back to Director Andrew Smith’s opening remarks at the NAD Annual Conference and reiterated that the new slate of commissioners is committed to and supportive of self-regulation. To conclude, both Engle and Brett stressed the importance of participation and compliance, regardless of the forum.