NAD Signals Increased Scrutiny of AI Advertising Claims

As artificial intelligence (AI) functionality becomes a central selling point across industries, advertisers face growing scrutiny over how they market these capabilities. The National Advertising Division (NAD) of BBB National Programs is an advertising dispute resolution forum that says it has prioritized enforcement regarding advertising claims related to AI.  As its 2025 annual report notes, the year reflected growth in NAD’s focus on monitoring claims in the AI space and offers early guidance on how NAD may evaluate advertising regarding AI performance, functionality, and features.

Notably, one of NAD’s 2025 decisions stands out as the only case in which NAD squarely evaluated both the technical substantiation for an “AI-powered” claim and whether specific advertising conveyed unsupported representations about the functionality and reliability of the AI itself. In a joint inquiry, NAD and the Children’s Advertising Review Unit examined a baby monitor marketed as an “AI-Powered” solution capable of detecting crying, laughing, and movement. NAD found support for the general AI-powered claim based on the product’s AI chip. However, internal testing showed limited accuracy (approximately 89% for laugh detection and 78% for cry detection), and the technology only functioned at certain distances and when the infant was in frame. NAD determined that the motion and emotion detection claims could convey safety assurances that were not substantiated and recommended clear and conspicuous disclosure of these functional limitations. ADC Solutions USA, LLC d/b/a Horizon Brands, LLC, NAD Case #7486 (December 22, 2025).

Key Takeaways 

• NAD seems ready to use self-monitoring to examine AI claims, including those made by some of the largest and most sophisticated advertisers.  In each of the cases involving AI, NAD commenced an inquiry with its self-monitoring authority.  Although self-monitoring cases can be easier to defend because there is no motivated challenger, NAD’s commencement of a self-monitoring case signals its substantive concern.
• Nothing about AI changes the existing rule that one must substantiate performance claims with objective evidence. Claims about productivity, efficiency, accuracy, or performance must be supported by reliable testing or through data demonstrating actual results. Perception-based studies or user impressions alone are unlikely to suffice.
• Clearly disclose material limitations of AI functionality. If AI features work only in certain conditions, require specific inputs, or have material performance constraints, advertisers should disclose those limitations in their advertising.
• Carefully consider whether the technology is in fact “AI”, as broad claims such as “AI-powered,” “AI-enhanced,” or “AI-driven” must be supported by competent and reliable technical evidence. NAD has found such claims substantiated where the advertiser provided documentation regarding the underlying AI component, including information about the specific AI chip and product inspection reports confirming the technology’s functionality.