Defending The Blitzkrieg Bop: Issues In Multi-Forum Advertising Challenges

Multifront wars are never easy, as the Germans discovered when they invaded Russia. Many advertisers and marketers of consumer products are feeling the pain these days of waging war on multiple fronts against those alleging that their claims are false or unsubstantiated. A company could be required to respond to a FTC investigation, defend the same campaign in a hearing before the NAD, comply with simultaneous investigation requests brought by states attorneys' general, and argue the merits of the advertising campaign in plaintiffs' class action litigation – all in an overlapping time frame and each resulting from the same advertisement.

There have been battles fought and won or lost along the way – Nestle's recent successful defense of a follow-on FTC class action and the recent debate over whether to accept settlements with a denial of liability are examples of both. However, an end to multifront advertising wars is nowhere in sight.

With all this action it can be hard to keep track of the moving pieces involved, but the consequences of defending an advertising dispute in multiple forums are significant. To help keep things clear, we've listed some of the most important issues to keep an eye on if you think this kind of dispute could be looming.

One of the biggest challenges of multi-forum enforcement is that it's unclear how much weight a NAD decision carries with the FTC. In some cases the FTC will give a company credit for making the changes that the NAD recommended, but other times the FTC will continue its case against a company regardless of a favorable NAD outcome. The NAD rules currently do not provide for dismissal of a case if an FTC investigation is pending, so a simultaneous FTC challenge will not excuse a company from a NAD inquiry. This raises the question of whether advertisers should voluntarily proceed with the NAD and hope for a favorable outcome or withdraw from NAD scrutiny.

Another issue is how plaintiffs' class actions factor into the mix. Class action complaints are often filed either immediately prior to or directly following the announcement of an FTC investigation, so companies should anticipate the possibility that class action counsel and the FTC will cooperate and share information. With respect to NAD cases, there has been a growing trend of class action complaints filed directly after a NAD announcement.

It's also important to expect that matters in different forums may not move forward at the same pace...