The potential pitfalls of native advertising were on display this month at the Federal Trade Commission (FTC). The agency reported that national retailer Lord & Taylor settled with it on charges that the company improperly paid for native advertisements. Lord & Taylor allegedly did not disclose that an article in the online publication Nylon, as well as a Nylon Instagram post, were paid promotions for one of the company’s clothing collections. In addition, the company allegedly gave fashion "influencers" dresses and then paid them to post photos wearing them on social media. The company’s contracts with the influencers obligated them to use the "@lordandtaylor" Instagram user designation and hashtag "#DesignLab" in the captions of their photos. The FTC charged that Lord & Taylor did not require the influencers to disclose that they were compensated by the company (none did).
The FTC unanimously voted to issue a complaint and approve a proposed consent agreement. The agreement:
prohibits Lord & Taylor from misrepresenting that paid commercial advertising is from an independent or objective source. It also prohibits the company from misrepresenting that any endorser is an independent or ordinary consumer, and requires the company to disclose any unexpected material connection between itself and any influencer or endorser. Finally, it establishes a monitoring and review program for the company’s endorsement campaigns.
The proposed consent order will be subject to public comment through April 14, 2016.
Businesses should make sure to check out the FTC’s recent enforcement policy statement for guidance on required disclosures for native advertisements. As we've previously blogged, certain acts and omissions by an advertiser may be viewed as a false or misleading and, as a result, violate the FTC Act. If you pay for endorsement but don't require disclosure of that fact, be wary of FTC enforcement.