Into The Fire: Wal-Mart Opts Out Of NAD Review - And Is Referred To The FTC

The National Advertising Division ("NAD") - a widely respected alternative dispute forum for advertisers - recently referred Wal-Mart Stores, Inc. ("Wal-Mart")'s "Raise in Pay" campaign to the Federal Trade Commission ("FTC") after Wal-Mart declined to participate in NAD's process.It's unusual for leading advertisers to opt out of the NAD process. And we can't say how the FTC will handle the inquiry. But Wal-Mart's challenge shines a light on a critical, behind-the-scenes issue: NAD's willingness to initiate cases involving campaigns like Wal-Mart's that tout internal company initiatives rather than advertise products or services. Here's what you need to know.

Background.

The NAD, which is administered by the Advertising Self-Regulatory Council, provides a voluntary alternative dispute regulation process for advertisers. In addition, NAD has the authority to bring cases on its own initiative, called "self-monitoring" cases. NAD decisions on challenged advertisements are not binding, but most companies participate in the process and comply with the NAD's recommendations in part because NAD has the authority to refer matters to the FTC if the company opts out. Unlike NAD, FTC can impose monetary penalties, and its decisions and orders have the force of law.

The Wal-Mart "Raise in Pay" Ads.

As part of its routine monitoring program, NAD reviewed a broadcast ad from Wal-Mart that highlighted the company's recent initiatives to increase spending on higher pay, education and training for Wal-Mart employees. The commercial featured emotional vignettes of Wal-Mart employees and their families in their everyday lives, and included the following voiceover statements:

"It's hard to build a future if you can't see past today ... That's why Wal-Mart is investing in the most important part of our company, our people."

"a raise in pay ... raises us all," over a shot of check-out lane 15. NAD interpreted this as a reference to the $15-per-hour minimum wage goal of many wage activists.

Finally, the commercial closes with an onscreen end card that reads: "We are investing over $1 billion this year in higher wages, education and training."

The NAD Inquiry.

In its initial inquiry to Wal-Mart, NAD expressed concerns about whether the television spot implied that Walmart was actually raising employees' pay to $15/hour; and whether this "living wage" would enable employees to support themselves and their families and allow them to "build a future." The NAD...