The CRN Foundation pledged $735,000 to keep the National Advertising Division program afloat for an additional three years. The NAD is part of the Better Business Bureau. The program funded by CRN is specific to the dietary supplement industry and aims to make advertisements for these products are truthful and not misleading. With this latest pledge, the total funding provided by CRNF for the program will total $2.8 million since its inception in 2006.
In recent years, the foundation had found additional sources of funding through what are called 'cy pres' funds, which is money left over after distribution of class action settlements. Not all potential members of a class bother to sign up to receive distributions, which in some cases might amount to only a few dollars. Those leftover awards add up, creating funding blocks that typically are made available to non profit groups that are working in an area related to the nature of the class action.
“When we initially created this program we had expected that CRN would have to bear full burden of these grants,” said Steve Mister.
Cy pres funding
Mister said in one case leftover funds were awarded to Consumers Union, which used the money to start a newsletter that lambasted the dietary supplements industry. When that happened, it woke CRN up to the possibility that these funds could be used to help support the industry, too, rather than just tear it down.
But cy pres funding is hit and miss, and when the money for that effort ran out, so did Consumer Union’s newsletter. CRN’s cy pres well has now run dry, too, which made the new funding grant for the NAD program imperative. Even though it’s a big chunk of cash, Mister said the foundation’s board is committed to keeping the program alive as one of the best cases to be made for the viability of industry self regulation.
Measuring the effectiveness
Mister said there are several ways to look at the effectiveness of the program. The growth in the number of cases, their precedent-setting value and how the program is viewed by regulators are all metrics that could be used, he said.
“The easiest thing to measure is the number of cases that come before the NAD. We are now over 300 cases. That means more than 300 pieces of advertising that have been evaluated for which there are written opinions,” Mister said.
There are tens of thousands of dietary supplements on the market, each with its own ad campaign. Not all of these are high profile, and only a minority of those could be assumed to be making misleading claims. Nevertheless, the raw NAD case numbers might not seem to be making much of a dent in that avalanche of information. But Mister said the decisions are proving to have a multiplier effect.
“Once they’ve issued a decision, NAD will sometimes go back to see if those companies are continuing to make the same claims. NAD tells us that they have a higher rate of compliance in the supplement space than in some other consumer categories they operate in,” he said.
“In talking with attorneys in the industry, we ask them whether they use the NAD decisions in talking with their clients. These decisions are not legally binding but they can serve as a precedent. They could say that a claim just like yours didn’t get through the NAD and here’s why,” Mister said. Mister said CRN has also received statements from regulators who laud the program's benefits.
Backing for claims gathers momentum
Mister said that over the years he has seen an evolution in the industry. In the early days of the program, cases typically involved companies making claims for which they had no backing whatsoever. Now companies more often have at least some science to point to, and the question becomes whether the ad campaign has extrapolated a claim beyond what the data would support.
Mister said the decisions on whether to refer cases to NAD is made through a five member panel. He said checks and balances are in place—including a mandatory recusal provision—try to ensure that the program does not become merely a way for companies to chip away at their competitors.
“This shows there is an ongoing commitment in this industry to try to self regulate. This self funded program is unique in our industry and is really unique within consumer goods. Computers don’t have it; cars don’t have it,” Mister said.