Flexible, Adaptable, Yet Firm in its Foundation: 50 Years of Advertising Industry Self-Regulation

May 19, 2021 by Laura Brett, Vice President, National Advertising Division

Picture the media scene in 1971: The decade-long rise in the number of U.S. households with television was nearly complete. This universality of TV led brands to compete fiercely for consumer attention. Each night of the week, even previously sacred Sunday nights, marketers were running spots with reasonable potential of reaching one in three TV households.

With the stakes so high, the consumerism movement, not yet mature, began to mount well-publicized attacks on the business community and advertising. While leaders in the advertising industry rejected the sweeping indictments, they felt there was enough evidence of poor - even indefensible - practices to warrant action.  

The action was swift. On May 18, 1971, the American Association of Advertising Agencies, the American Advertising Federation, and the Association of National Advertisers, in partnership with the Council of Better Business Bureaus, joined to create a mechanism of independent self-regulation for advertising in the U.S.  

This week we celebrate the 50th anniversary of independent self-regulation in advertising. On May 18, 1971, the National Advertising Review Board (NARB) and its investigative arm, the National Advertising Division (NAD) were announced. By the end of summer that year, NAD was staffed and began receiving complaints and reviewing national advertising for truth and transparency.

To mark the beginning of this anniversary, the same organizations that founded this successful system reconvened yesterday to participate in Honest Ads, a virtual event to discuss the pivotal moments, and challenges, faced by the advertising industry over those decades and discuss what the future of advertising law could likely hold.  

Moderating our discussion was Eric D. Reicin, the President and CEO of independent, non-profit BBB National Programs, under which NAD and NARB now operate.

After his opening remarks on advertising industry self-regulation, referencing what former Federal Trade Commission Chairman Robert Pitofsky referred to as “the best example of self-regulation that I am aware of in American industry,” Reicin asked me to discuss the history of NAD.

In setting that stage, I asked our attendees to think – or imagine – back to what TV advertising looked like in the 1960s and 70s. The airwaves were full of commercials for instant coffee, Alka Seltzer, paper towels, and other products that were promised to better our lives. And most consumers made their purchases trustingly, with the natural assumption that products would live up to the advertiser’s promises. 

Around that time, cigarette advertising was one of the largest industries being advertised on television, yet consumers were increasingly learning just how harmful cigarettes were to their health. The end of cigarette advertising on television in 1971 was a sign of the times – a growing consumer distrust in claims made in national advertising. This distrust is what led to the creation of the U.S. system of advertising industry self-regulation, the NAD and NARB, what fellow panelist Bob Liodice, CEO of the Association of National Advertisers (ANA), termed “the backbone of the advertising industry.” 

Liodice underscored that “the foundation for advertising success is trust and this system of self-regulation allowed us to elevate trust and ensure that the ads seen on television or radio were accurate.”  

One of our other panelists, Marla Kaplowitz, President and CEO of the 4A’s (American Association of Advertising Agencies) said that “self-regulation is about a community coming together.” She said “It’s not about how you do right by business, it’s about how business does right by the consumer.” 

 

Industry Self-Regulation & The Keys to Success

There are three pillars of success for NAD and NARB over these first 50 years: 

  1. Independence 
  2. Transparency
  3. The combined support of industry and regulators  

 

The independence of this system of self-regulation is what gives it credibility and allows it to succeed. In the early days of NAD, my predecessors would monitor the marketplace of national advertising to identify issues of truth and transparency and bring challenges against those advertisers potentially misleading customers.  

Gratifyingly, companies in the marketplace soon realized that this system of self-regulation was enhancing consumer trust in advertising. Competitor challenges began flooding the gates at NAD. In complement to our monitoring, companies doubled down on competitor challenges, with the goal to get misleading ads out of the marketplace altogether.  

For both consumers and businesses to be able to rely on this system, transparency was essential. Panelist Steve Pacheco, President and CEO of the American Advertising Federation (AAF), spoke about AAF alums Howard Bell and Wally Snyder, who together had the vision and insight to build this system of trust and transparency. 

During the Honest Ads event, each panelist noted the evolution of advertising through the decades. The rise of cable TV, the burst of interactive marketing in the digital age, the personalization of ads, the enormity of data collection, and the addition of social media and influencer marketing seem normal now, but each brought with it a tectonic shift in the advertising industry.

With each huge technological shift, consumers have done their best to keep up. Consumer trust has not only become increasingly important, but it is also rightfully seen as a two-way street. That’s because as consumers gain access to information from sources other than advertising and as brands have access to more information about consumers, consumers are demanding that their personal information must be protected.

As these shifts took place, the relationship between self-regulation and government regulation became symbiotic. NAD and NARB decisions were able to bridge gaps in regulatory guidance to tackle new issues caused by the shift in advertising formats and techniques. NAD cases began to, and still do now, provide guidance on emerging marketing trends, such as influencer marketing and testimonials, often before the FTC was able to issue its own guidance. 

Once FTC guidance is available, the advertising industry system of self-regulation can flex and expand its impact. NAD and NARB would not be successful without the partnership of the FTC. They take our case decisions seriously as demonstrated by their transparent record of following up on our referrals, which is one of the reasons why the NAD and NARB case decision recommendation rate of voluntary compliance is well over 90% year over year.  

 

The Future of Ad Law 

So, what does the future look like? Pacheco predicts that the next 50 years will bring three times the change we have seen over the last 50 years. Kaplowitz foresees a rise in the need to address consumer data privacy, saying “we all recognize that something needs to happen” and that “consumers are making it clear what they want to share and what they don’t want to share.” She opined that the solution is likely yet another partnership between government and industry self-regulation.  

Liodice challenged the advertising industry, asking whether it is prepared to keep up with the increasingly fast rate of change. He said “we cannot afford to let our guard down regarding how we operate within our ecosystem. We need to ensure the safety of our consumers is top of mind.” He concluded that we need to rely on this system of self-regulation that has helped us climb similar mountains in the past.

Reicin agreed, saying, “For the last 50 years in the advertising industry, companies have held each other to a higher standard, through independent industry self-regulation. After pressures grew on the power of ads and after criticisms grew on the perceived dishonesty of ads, the advertising industry created a mechanism of self-regulation that has stood the test of time and technological innovation.”

I have full confidence in our system of advertising industry self-regulation. Our decisions have helped the industry navigate emerging advertising and marketing trends, while always keeping consumers top of mind. The system is successful and thriving because it is flexible and adaptable, while built on a firm foundation of mutual trust. To meet each new hurdle and overcome every new challenge, we look forward to continuing our partnership with government and industry, and to leading independent self-regulation wherever the market takes us next.   

 

Watch the Full Event Recording

 

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