Study: Marketers Have Nothing to Fear From Advertising Self-Regulation

Little correlation to class-action suits

Self-regulation is great if it keeps the government off your back, but does it also give attorneys a green light to pursue class-action suits?

As it turns out, class-action lawsuits against marketers have been on the rise,  circling their prey like hungry sharks. It's given some companies second thoughts About participating in the advertising industry’s self-regulatory program, since they fear doing so could lead to greater legal headaches.

Since 2010, there have 80 class action suits alleging false or misleading advertising or product claims for cosmetics or personal care products alone. Other categories like food and dietary supplements also appear more at risk.

But a new study—analyzing such lawsuits that named companies in decisions rendered by the Advertising Self Regulatory Council’s National Advertising Division—found little correlation.

The fear, however, that NAD provides a roadmap for plaintiff attorneys, is real, said John Villafranco, a partner with Kelley Drye & Warren, who presented the study Monday before the ASRC conference in New York. “You go through this tortuous NAD process, and along come these plaintiff attorneys and it makes your life miserable,” said Villafranco.

In his analysis, Villafranco found 63 cases since 2009 that were filed against companies that were mentioned in an NAD decision. Settlements for the cases ranged from $300,000 to $3.7 million, some as high as $5 million. Analyzing each one, and eliminating duplicate cases against the same product, Villafranco found only three cases filed within six month of an NAD decision and referencing NAD language. But in all three cases, the claims against Crest Sensitivity, Prestone De-Icer, and Citracal, were eventually dismissed.

“I don't know if it’s conclusive, there could be more research, but this makes it clear that the concern is overblown and not nearly as pronounced as some companies feared,” Villafranco said.