Takeaways from the 2024 National Advertising Division Annual Conference: Charting the Global Future of Ad Law

Businesses, regulators, academics, and advertising and legal professionals connected in New York City in September to discuss the “Global Future of Ad Law” at the National Advertising Division (NAD) Annual Conference. Some key topics discussed included best practices in claims substantiation, challenges in social media advertising, and what lies ahead for artificial intelligence.

This LawFlash details the key takeaways from the conference.

SUBSTANTIATION REMAINS PARAMOUNT

Substantiation has been, and will continue to be, a focus of Federal Trade Commission (FTC) enforcement, NAD challenges, and civil litigation.

What Is Substantiation?

Substantiation refers to the process of demonstrating a reasonable basis for a claim. Before an advertiser disseminates an advertisement, the advertiser must have substantiation—i.e., a reasonable basis—for all claims that the advertisement conveys to reasonable consumers. Of note, this includes express claims (i.e., claims that are explicitly stated) and implied claims (claims that are indirectly inferred or suggested).

When Is Substantiation Required?

As a general rule, advertisers should always have a reasonable basis for their claims. The level of substantiation required depends on the nature of the claim. Objective claims (i.e., claims that are factual and measurable) must be supported by objective evidence (i.e., factual and, where needed, technical or scientific support). Although advertisers should steer clear of claims that lack reasonable support, puffery remains a narrow exception. Puffery generally refers to vague, subjective, non-qualified language for which reasonable consumers expect no substantiation.

The NAD Annual Conference underscored the key factors that the FTC and NAD consider when determining whether an advertisement qualifies as an objective, measurable claim or mere puffery, including the following:

• The context of the advertisement
• The nature of the statement, including whether it addresses specific, measurable attributes and characteristics
• The impression on the reasonable consumer

How Do Businesses Determine the Appropriate Support, or Substantiation, for Their Claim(s)?

The appropriate means of substantiation is determined by a mix of law, marketing, and scientific review. Because substantiation can take a variety of forms (e.g., internal testing, central location testing, third-party certifications, and clinical trial(s)), it is important that companies consider industry standards and reasonable consumer expectations. This is one of the areas where experienced advertising counsel can add material value—providing important guidance regarding the need for substantiation, the best support for a company’s claims, and the need for experts or scientific or technical review to enable substantiation.

How Does a Business Choose the Right Method of Substantiation?

Ultimately, determining the appropriate method of substantiation will require in-depth consideration of the scope of the claim(s) at issue, the nature of the underlying product(s) and industry, and consumer expectations. However, there are some best practices to keep in mind:

• The supporting data must correlate with the claim that a company is trying to make. For example, sensory-based data (e.g., respondents reporting they felt more energetic after drinking a certain brand of drink) does not translate to performance claims (e.g., a certain drink brand will provide the consumer with more energy).
• The quality of studies—and whether they actually support the intended claim—are critical.
• When extrapolating from test results conducted on other products or ingredients, any differences between the tested product and the advertised product must not bear on the results.
• Differences in the data between the tested product and the advertised product should not impact consumer decision-making in a relevant and meaningful way.
• Relying on widely respected industry standard tests, such as the American Society for Testing Materials, will often provide a reasonable basis for a claim.

EXPECT INCREASED SCRUTINY OF ONLINE REVIEWS AND SOCIAL MEDIA ADVERTISING

The NAD Annual Conference confirmed that online reviews and social media advertising will continue to be an increased area of focus for the FTC and NAD. Armed with the recently updated Guides Concerning the Use of Endorsements and Testimonials in Advertising (Endorsement Guides) and Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (the so-called “Fake Reviews Rule”), the FTC and NAD will continue to target advertising that involves the use of deceptive or misleading endorsements and testimonials.

Navigating Social Media Endorsements

An endorsement refers to any advertising, marketing, or promotional message for a product that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. For social media, this can be complicated. Anyone can be an endorser—and tags, demonstrations, and videos can all be “endorsements” in the eyes of the FTC and NAD. The FTC and NAD will continue to hold brands accountable for the representations conveyed by their endorsers, and when a brand “reposts” or “reshares” an endorsement, it effectively takes on that claim as its own.

Focus on Ratings and Reviews

According to reports referenced at the NAD Annual Conference, fake and misleading reviews account for roughly 30% to 40% of published, online reviews.

The FTC and NAD have zero tolerance for this type of deceptive advertising. The FTC’s Fake Reviews Rule (effective October 21, 2024), prohibits many of the practices defined as unfair or deceptive in the FTC’s Endorsement Guides—but unlike the Endorsement Guides, the Rule gives the FTC the ability to exact civil penalties and consumer redress for noncompliance.

Key examples of prohibited conduct under the Final Rule include the following:

• Writing, creating, selling, purchasing, or disseminating consumer reviews, consumer testimonials, or celebrity testimonials that materially misrepresent key aspects of the reviewer’s existence and experience with, or material connection to, the product, service, or business
• Providing compensation or other incentives in exchange for reviews that express a particular sentiment about a product, service, or business (note that this includes both positive reviews and negative reviews)
• The use of “insider” reviews and testimonials (e.g., reviews and testimonials written or created by a business’ officer or manager or their immediate relatives) without clearly and conspicuously disclosing any material connections to or relationships with the business
• Engaging in review suppression practices
• Buying or misrepresenting “indicators of social media,” (e.g., likes)
• Advertising brand-sponsored review sites as “independent”

There are some best practices to keep in mind to avoid deception in reviews. Companies should make every effort to take an even-handed approach when collecting, vetting, and disseminating reviews. Further, companies should avoid misrepresenting that select consumer reviews represent most or all reviews.

Disclosing Material Connections Between Brands and Endorsers

The NAD Annual Conference served as yet another reminder of the importance of disclosing material connections. To mitigate the risk of consumer deception, endorsements must clearly and conspicuously disclose any material connections—payment, relationships, free products, or other incentives—between a brand and an endorser.

The terms “clear and conspicuous” generally mean “unavoidable,” “difficult to miss,” and “understandable by the reasonable consumer.” Clear and conspicuous disclosures can be challenging on social media, and what is “clear” or “conspicuous” will vary based on the platforms. Generally speaking, companies should:

• Ensure that the disclosure remains “above the fold” (i.e., visible without scrolling) when the original endorsement is shared, posted across media, or viewed across platforms and across technology.
• Utilize built-in disclosure tools on platforms where available (in addition to, rather than in lieu of, other disclosures).
• Ensure the disclosure appears on the face of the advertisement or endorsement and is not available only after the consumer “clicks” through other media.
• Tailor advertisements and disclosures to the reasonable consumer audience (e.g., if the consumer audience is international, disclosures in multiple languages may be appropriate).
• Include disclosures in close proximity to the claim itself.

SPECIAL CONSIDERATIONS FOR ARTIFICIAL INTELLIGENCE

As the use of artificial intelligence (AI) has become more commonplace, companies have turned to these technology advances in their product marketing in advertising. Notably, AI advertising and marketing is not exempt from the prohibitions on deceptive and unfair practices. AI-generated claims about product use or performance require substantiation and disclosures just like those required of more traditional print and online advertising.

AI-generated reviews are already facing increased scrutiny from the FTC and NAD. At the NAD Annual Conference, NAD highlighted one of its lawyers who is specifically focused on AI-related issues. Further, at the end of September, the FTC announced its Operation AI Comply—a wave of law enforcement action against companies using AI to promote fake reviews and other misleading advertising claims.

As FTC Chair Lina M. Khan advised in a recent statement, “Using AI tools to trick, mislead, or defraud people is illegal. . . . The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books. By cracking down on unfair or deceptive practices in these markets, FTC is ensuring that honest businesses and innovators can get a fair shot and consumers are being protected.”

AI will undoubtedly remain a focus going forward—and may well be a hot topic at the 2025 NAD Annual Conference, which will take place on September 16 and 17, 2025 in Washington, DC.