Lord & Taylor Settles with the FTC over Native Ads
The FTC approved a final consent order against clothing store Lord & Taylor (“L&T”), following allegations that it failed to disclose paid online native advertising and endorsements for its Design Lab product roll out.
The FTC alleged in its complaint that L&T deceived consumers by placing what appeared to be an objective news article about Design Lab in Nylon online and also paying fashion influencers to post pictures of the collection on Instagram, without disclosing that the content was actually paid native advertisements for Design Lab.
Specifically, the FTC alleged that as part of the release of the new clothing line, L&T paid dozens of online fashion influencers to post pictures of themselves wearing a paisley dress from the clothing line on Instagram. The posts reach 11.4 million individual users and the dress quickly sold out. L&T contractually obligated the influencers to tag the @lordandtaylor Instagram account and use the hashtag #DesignLab in their photo captions. L&T also pre-approved each proposed post. However, L&T did not require, and the influencers did not disclose, that L&T compensated them between $1,000-$4,000 and provided them with the dress in exchange for posting the photos.
As part of the consent decree, L&T is prohibited from misrepresenting that paid ads are from an independent source or that promoters are independent customers. L&T must also require that its endorsers clearly disclose when they have been compensated in exchange for posting content on L&T’s behalf.
The FTC has been extremely active in the native advertisement and endorsement space. In December 2015, the FTC issued an enforcement policy statement addressing issues surrounding native advertising. You can learn more about the FTC’s native advertising rules and cases, including the Lord & Taylor case, from our March 2016 webinar where we discussed these issues in depth. The webinar is available here.