The Lord & Taylor dress that drew the FTC’s attention. Image source: FTC

Expect the Federal Trade Commission (FTC) to begin penalizing brands for publishing deceptive advertising and failing to disclose payments to influencers.

The FTC issued guidelines last December on native advertising that is designed to integrate seamlessly with websites’ editorial content. The guidelines reaffirmed its principle that “advertisements and promotional messages that promote the benefits and attributes of goods and services should be identifiable as advertising to consumers.” The FTC has also published Endorsement Guidelines, based on truth-in-advertising principles. The guidelines outline how companies should reveal monetary compensation to social media influencers who endorse their products.

Many marketers have not yet gotten the message.

The Lord & Taylor Case

Most recently, the FTC called out Lord & Taylor for paying influencers to share photos of themselves wearing its dress.  The company paid 50 fashion influencers between $1,000 and $4,000  to share a photo of themselves wearing a dress from the company’s “Designer Lab” collection on Instagram, according to the FTC.

The campaign reached 11.4 million users and generated 328,000 brand engagements. The dress quickly sold out. The company didn’t tell the influencers to reveal that the posts were essentially paid advertisements, although it did pre-approve the posts and require them to include the hashtag #DesignLab for tracking purposes.

Lord & Taylor also paid online fashion magazine Nylon to run a native advertising article on the dress collection, again not disclosing that it was sponsored.

“The FTC’s policy applies time-tested truth-in-advertising principles to modern media,” stated Jessica Rich, director of the Bureau of Consumer Protection, in the FTC press release. “People browsing the Web, using social media, or watching videos have a right to know if they’re seeing editorial content or an ad.”

The campaign results raise the question: Would customers have purchased the dress if they had known the posts were paid advertisements?

No Fines Issued — Yet

The agency leveled no monetary fine. Instead, the settlement essentially tells the company to adhere to its guidelines going forward and re-emphasized its rules.

“As the FTC issues more complaints against brands that fail to insist on complete disclosure, you can expect to see more punitive settlements,” comments BusinessGrow contributing columnist Kerry O’Shea Gorgone, a lawyer and digital marketing expert.  “Makes sense: they’ve told you they’re serious, you need to listen.”

Gorgone urges brands to create written agreements with influencers they work with and create a formal band ambassador program. “When you formalize your relationship with brand ambassadors, you deepen your relationship with them and increase the likelihood that they’ll adhere to brand guidelines relating to disclosure,” she advises.

Native Ad Guidelines

To avoid allegations of deception in native advertising, the FTC recommends considering:

Transparency. An advertisement or promotional message shouldn’t suggest or imply that it’s anything other than an ad.

Disclosures. If it’s not clear that the ad is commercial in nature, a disclosure may be necessary to ensure consumers understand that the content is advertising.

Clear disclosures. If a disclosure is needed, it must be clear and prominent. Consumers must be able to see and understand them. In video ads, they must be on the screen long enough to be noticed, read, and understood. For audio disclosures, they must be read at a cadence that’s easy to understand. The FTC says clear disclosures are:

• in clear and unambiguous language,
• as close as possible to the native ads to which they relate,
• in a font and color that’s easy to read and
• in a shade that stands out against the background.

Bottom Line: An FTC settlement with a major brand over its native advertising and influencer marketing program is probably only the first of more to come. The agency is likely to become increasing punitive against companies that don’t disclose that native ads and influencer posts are paid advertisements.

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William Comcowich

William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.