NAD Declines to Reopen First Case Under New Rule

Advertising Law

In the self-regulatory body’s first case under a new rule, the National Advertising Division (NAD) denied LG Electronics’ request to reopen a case and referred the claims at issue to the Federal Trade Commission (FTC) for further review.

At its recent annual conference, the NAD announced its revised procedures that will permit advertisers to introduce new evidence regarding closed proceedings. Pursuant to the change, an advertiser now has two choices if it believes it has developed new substantiation when the NAD has recommended that certain claims be discontinued.

The advertiser can resume use of the disallowed claims and request that the NAD consider the new evidence in any compliance proceeding; or it may request that the NAD reopen the proceedings and review the new evidence prior to resuming use of the claims.

It didn’t take long for an advertiser to try out the new rule.

Earlier this year, Samsung Electronics challenged claims made by LG. Samsung introduced a new line of televisions in 2017 dubbed QLED, and advertised the line as a significant improvement in TV technology and performance that eclipsed other products, including LG’s Super UHD and OLED sets.

LG responded with claims on its website that the name QLED was “created to confuse consumers” and “the ‘Q’ in QLED is just marketing.” Samsung argued that these claims were false and disparaging. For its part, LG told the NAD that the statements reflected merely LG’s opinion, not facts. Samsung also challenged LG’s express performance claims, that its UHD and OLED TVs provide “infinite contrast. Perfect black is only attainable on an LG OLED TV.”

After reviewing the claims, the self-regulatory body recommended that LG discontinue the statement that QLED’s name was “created to confuse consumers” as well as the “perfect black” and “infinite contrast” claims. The NAD agreed with the advertiser that the claim “the ‘Q’ in QLED is just marketing” was framed as a clear statement of LG’s opinion, however.

Disagreeing that the “perfect black” and “infinite contrast” claims needed more consumer-relevant support, LG appealed this part of the NAD decision to the National Advertising Review Board (NARB), which affirmed the NAD decision.

When the rule change was announced, LG petitioned the NAD to reopen the proceeding based on new evidence. It presented the NAD with new, independent consumer perception evidence that it argued showed “near-zero” probability that black hues on OLED televisions emit any light detectable by the human eye.

The NAD denied the petition to reopen the case and offered LG an additional opportunity to comply with the self-regulatory body’s original recommendation. When the advertiser refused, the NAD referred the matter to the FTC.

To read the NAD’s press release about the decision, click here.

Why it matters: The NAD did not explain the reason for its denial of the petition to reopen. The case serves as a lesson for advertisers that although the self-regulatory body’s rules have changed to permit cases to be reopened, it doesn’t mean the NAD will automatically do so. The NAD director has sole discretion to permit the reopening, and may take into account whether there is satisfactory proof that the new evidence was not reasonably available at the time the NAD record was closed, as well as whether the new evidence would have been likely to change the NAD or NARB decision in a material way.