Video Ads and Commercial Regulatory Frameworks & Compliance 3 — Questions and Answers
Question 1: The NAD (National Advertising Division) is best described as:
- A federal agency with subpoena power over advertisers
- An industry self-regulatory body that reviews advertising claims (Correct answer)
- A division of the FTC that handles broadcast complaints
- A court system dedicated to resolving ad disputes
Correct answer: An industry self-regulatory body that reviews advertising claims
The NAD is a self-regulatory organization administered by the BBB National Programs that reviews the accuracy and truthfulness of national advertising claims.
Question 2: Under FCC rules, what is the 'lowest unit charge' requirement for political advertising?
- Broadcasters must charge political candidates the same rate as any advertiser
- Broadcasters must give political candidates the lowest rate charged to any advertiser for the same class of time (Correct answer)
- Political ads must cost less than 50% of standard commercial rates
- Broadcasters must offer free airtime to qualified political candidates
Correct answer: Broadcasters must give political candidates the lowest rate charged to any advertiser for the same class of time
FCC lowest unit charge rules require broadcast stations to sell political candidates time at no more than the lowest rate the station charges its most favored commercial advertisers for the same class and amount of time.
Question 3: A video ad that superimposes text to contradict an exaggerated spoken claim is an example of:
- An illegal bait-and-switch tactic
- Using a disclaimer to cure a potentially misleading claim (Correct answer)
- Comparative advertising requiring competitor consent
- A puffery statement exempt from FTC scrutiny
Correct answer: Using a disclaimer to cure a potentially misleading claim
Advertisers often use on-screen disclaimers to clarify or qualify spoken claims, though the FTC requires such disclosures to be clear, conspicuous, and not contradicting the main message.
Question 4: Under the Lanham Act, a competitor can sue another company for false advertising if:
- The ad uses similar brand colors without permission
- The ad contains a false statement of fact that causes commercial harm (Correct answer)
- The ad is louder than industry audio standards allow
- The ad airs during a competitor's sponsored program
Correct answer: The ad contains a false statement of fact that causes commercial harm
Section 43(a) of the Lanham Act allows competitors to bring civil suits for false or misleading statements of fact in advertising that cause competitive harm.
Question 5: When a video testimonial features a paid actor portraying a real customer, the FTC requires:
- The actor's union affiliation to be disclosed on screen
- A disclosure that the person is a paid actor, not an actual customer (Correct answer)
- The ad to be filed with the FTC consumer protection bureau
- Customer testimonials to be replaced with aggregate data instead
Correct answer: A disclosure that the person is a paid actor, not an actual customer
Using actors to portray typical customers without disclosure is deceptive under FTC guidelines; the paid or fictitious nature of the testimonial must be clearly disclosed.
Question 6: Which statement about puffery in video advertising is accurate under U.S. law?
- Puffery claims require the same substantiation as objective product claims
- Puffery is generally not actionable because it consists of vague, subjective boasts (Correct answer)
- Puffery is illegal if it appears in food and drug commercials
- Puffery must be labeled as an opinion in all broadcast ads
Correct answer: Puffery is generally not actionable because it consists of vague, subjective boasts
Courts and the FTC generally hold that puffery—vague, subjective superlatives like 'the best ever'—is not actionable because reasonable consumers do not take such statements as factual claims.
Question 7: The Video Privacy Protection Act (VPPA) is relevant to digital video advertisers primarily because it:
- Requires all video ads to carry content ratings before distribution
- Restricts the disclosure of consumers' video-viewing records without consent (Correct answer)
- Mandates closed captioning on all commercially distributed video content
- Prohibits the recording of user interactions with interactive video ads
Correct answer: Restricts the disclosure of consumers' video-viewing records without consent
The VPPA prohibits video service providers from knowingly disclosing consumers' video rental or purchase records, which courts have extended to streaming viewing histories used in ad targeting.
Video Ads and Commercial Regulatory Frameworks & Compliance 3
The NAD (National Advertising Division) is best described as: