“To what extent, if at all, are self-regulatory principles effective?”
The Federal Trade Commission wants to know.
That’s one of the 95 questions the FTC is seeking feedback on as part of its advanced notice of proposed rulemaking (ANPR) regarding privacy and commercial surveillance, which the commission announced in August.
Although the FTC has historically been a fan of the ad industry governing itself, moves like the ANPR signal that the commission might start to reject self-regulatory practices, at least on the privacy front.
But when it comes to regulating false and deceptive advertising, the FTC still collaborates closely with the ad industry.
“We definitely support the self-regulatory process,” said Serena Viswanathan, associate director of the FTC’s division of advertising practices, speaking at the National Advertising Division’s 2022 conference this week in Washington, DC.
Truth be told
The FTC is the main government agency tasked with enforcing consumer protection and truth in advertising laws that aim to prevent deception, fraud and unfair business practices. And it’s been actively pursuing cases lately.
But many deceptive advertising cases are dealt with by the National Advertising Division (NAD) of BBB National Programs without the FTC getting involved.
You can think of the NAD as a bit like the ad industry’s own appellate court (although it only has the power to recommend that businesses modify or discontinue deceptive ad claims, and it can’t issue fines).
The NAD’s mission is to monitor and review advertising for accuracy and truthfulness, and companies participate in the self-regulatory process voluntarily to resolve their issues.
The group handles everything from businesses making unsubstantiated product claims to companies unfairly dragging their competitors in ads. It’s even adjudicated a case about one company using the nauseated face emoji in an ad to disparage a rival company (really).
While the NAD operates independently, it takes its cue from federal regulations, industry best practices and FTC guidance and standards, such as the commission’s endorsement guidelines for influencers. (Don’t forget that #spons won’t cut it.)
The NAD also fills a gap in regulatory efforts by the FTC and state AGs. Self-regulatory bodies “are a vital complement to our work,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
“We simply don’t have the resources or the manpower to do everything we can to monitor the marketplace without support from [the NAD],” he said.
Although the majority of the NAD’s cases are resolved without having to loop in the FTC, the NAD does sometimes refer cases to the commission for review if it’s particularly egregious and the company refuses to participate in the NAD’s process.
The NAD referred two cases to the FTC over the past year, and FTC makes sure to fast-track cases that the NAD throws its way, Viswanathan said.
The FTC’s ‘concerns’
But on the topic of data privacy, the relationship between the ad industry and the FTC has become more fraught and a lot less chummy.
“Self-regulation plays a critical role,” Levine said, “but in the privacy space, in particular, I think there’s a real question about what rules are being enforced.”
Which is why the FTC released its ANPR on the topic.
The FTC is putting out feelers to see “whether we should issue clear rules of the road for companies that collect or use consumer data,” Levine said.
The FTC’s approach is changing, in part, because the media and advertising landscape is just different today. More data is being collected than ever before, and “commercial surveillance practices seem to be growing more pervasive,” he said.
“We can’t be blind to the real problems that continue to exist in some of these marketplaces,” Levine said, “and we have to be prepared to use our full set of tools that Congress gave us to try and address them.”
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(And for anyone who stuck with this article until the end, here are a couple of fun facts about the NAD: The NAD was founded in the early 1970s through a partnership between multiple ad trade orgs, including the ANA, the 4A’s and the American Advertising Federation, as well as the Council of Better Business Bureaus, as part of an effort to rebuild trust in advertising.
At the time, there were calls for government regulation of the ad industry, as people became increasingly aware of misleading claims in advertising. There was also concern about kids being exposed to ads for alcohol or cigarettes.)
