New York, NY - November 5, 2004. Recently, the National Advertising Review Council (NARC) was asked to increase the visibility and transparency of its self-regulatory process. For example, in his suggested draft policy statement for the NARC white paper on self-regulation of food advertising, Bill MacLeod (outside counsel for GMA) stated, "GMA expressed a desire for more disclosure of the sometimes unpublished consultations and decisions that CARU reaches in its reviews. GMA's challenge to NARC was to be more visible, more transparent, and more public."

In addition, various CARU Advisory Board members expressed concern that the "informal" cases that result from use of the expedited procedure and their attendant activity report entries lack the guidance and precedential value of published decisions. Therefore, at the June 2 meeting of the NARC Board of Directors, which sets policy and procedures for the self-regulatory system, CARU submitted a proposal to eliminate the §2.12 expedited procedure ("informal inquiries") from the NAD/CARU/NARB Procedures.

In response to that proposal, Thomas Conley, president of the Toy Industry Association (TIA), in a letter to CARU, wrote, "With all of the scrutiny on advertising to children worldwide, it's imperative that our self-regulatory system operates with as much transparency and visibility as possible. The Expedited Procedures prevent us from shining a light on the system and showcasing its remarkable effectiveness."

The NARC Board agreed that the proposed greater visibility, transparency and guidance were desirable and charged CARU to solicit input from its Advisory Board, prior to any final vote. What follows is a summary of our discussion at the June 2 meeting, and of CARU's dialog with its Advisory Board.

The informal summaries generated pursuant to the §2.12 CARU Expedited Procedure offer little in the way of guidance or precedential value, and CARU's inability to publicize the great majority of its determinations diminishes its effectiveness in offering guidance to the industry and illustrating to consumers and regulators alike the remarkable success of its self-regulatory process. In short, it prevents NARC from meeting GMA and the industry's challenge to be more visible and transparent.

The §2.12 CARU Expedited Procedure was adopted in 1991 to address a specific situation that no longer exists. At that time, the preponderance of CARU's cases involved the depiction of performance and method of operation of toys. The changes in technology, both in the toys themselves and in the computer graphics and animation techniques used to advertise them, made it impossible for CARU to determine from the ads whether the product performed as represented; we had to examine the product to determine what was actual product and what was enhancement. As a result, CARU was initiating cases in all of these instances, and the vast majority was found to be substantiated. In an effort to speed the handling of inquiries (CARU had an ad review staff of one attorney at that time) and to obviate the need for drafting detailed decisions, §2.12 was added to the Procedures. The trade-off was that we had a significantly smaller body of work to provide guidance.

In 1992, 69 of the 85 informal inquiries involved product presentation of toys. The situation today is very different. Out of 113 informal inquiries in 2003, only eight involved product presentation of toys and of these, two were substantiated.

CARU and its Advisory Board determined that, in certain very limited circumstances, the Expedited Procedure does still serve a valid purpose. In the attached document you'll see that we've made two distinct changes. First, the new §2.12 "Request for Product" addresses the situation in which we need to see a product or package in order to determine in the first instance whether the advertising raises any concerns under the Guidelines. If CARU receives the requested product within five business days and there are no concerns, there will be no inquiry, formal or informal, and therefore, of course, no report.

As for the new §2.13 "Expedited Procedure," the revision makes clear that this route is appropriate for traffic or placement errors (which several CARU advisors mentioned) as well as technical errors such as privacy issues concerning missing or broken links or cookies, networks cutting off island shots, and the like.

Any matters that do not fit within the categories carved out in these two sections will be conducted, as they are at NAD, according to the standard NAD/CARU/NARB Procedures.

These changes to the Procedures will be effective December 1, 2004.

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The National Advertising Review Council (NARC) was formed in 1971 by the Association of National Advertisers, Inc. (ANA), the American Association of Advertising Agencies, Inc. (AAAA), the American Advertising Federation, Inc. (AAF), and the Council of Better Business Bureaus, Inc. (CBBB). Its purpose is to foster truth and accuracy in national advertising through voluntary self-regulation. NARC is the body that establishes the policies and procedures for the CBBB's National Advertising Division (NAD), the Children's Advertising Review Unit (CARU), and the National Advertising Review Board (NARB).

NAD and CARU are the investigative arms of the advertising industry's voluntary self-regulation program. Their casework results from competitive challenges from other advertisers, and also from self-monitoring traditional and new media, including the Internet. The National Advertising Review Board (NARB), the appeals body, is a peer group from which ad-hoc panels are selected to adjudicate those cases that are not resolved at the NAD/CARU level. This unique, self-regulatory system is funded entirely by the business community; CARU is financed by the children's advertising industry, while NAD/NARB's sole source of funding is derived from membership fees paid to the Council of Better Business Bureaus.