The Federal Trade Commission (FTC) has announced an enforcement action against Lord & Taylor, a retail department store, for allegedly deceiving consumers by not disclosing paid endorsements and promotions during a social media marketing campaign. FTC Bureau of Consumer Protection Director Jessica Rich pronounced, "Consumers have the right to know when they’re looking at paid advertising."

As discussed in our prior alert about the FTC's enforcement policy related to native advertising (commercial marketing material incorporated into independent content), companies need to understand when disclosures are necessary to prevent deception and how to make clear and prominent disclosures when engaged in online marketing. It also is critical for companies to be familiar with the FTC's views set forth in its Endorsement Guides. This is the FTC's first enforcement action related to native advertising since the enforcement policy was issued in December 2015.

In this case, the FTC alleged that Lord & Taylor engaged 50 select fashion "influencers" and paid them between $1,000 and $4,000 each to post a photo of themselves wearing a particular dress on social media sites. Lord & Taylor contractually obligated them to use ''@lordandtaylor'' and other social media identifiers in the caption of each photo posted, and the company pre-approved the content of each post. However, Lord & Taylor allegedly did not require and the influencers did not include any disclosures in the posts that the company had compensated them to post the photos. The FTC's complaint also alleges that the company placed an article in a fashion publication without any disclosures to consumers that the article was a paid advertisement. Because Lord & Taylor retained editorial control over the content, the FTC did not pursue any enforcement actions against the influencers or the fashion publication.

Lord & Taylor has agreed to a proposed consent order that:

  • Prohibits misrepresentations that an endorser of such product or service is an independent user or ordinary consumer of a product or service
  • Requires the company to disclose clearly and conspicuously, and in close proximity to the representation, a material connection, if one exists, between the endorser and Lord & Taylor
  • Prohibits misrepresenting that paid commercial advertising is a statement or opinion from an independent or objective publisher or source
  • Requires the company to obtain signed acknowledgements from its endorsers that they will disclose their connection to Lord & Taylor, monitor the endorsers' representations and disclosures, maintain records of its monitoring efforts, and terminate endorsers who fail to disclose their connection to Lord & Taylor.
Companies should carefully assess any social media campaigns and the necessary disclosures that should accompany any native ad marketing. Members of Ballard Spahr's Fashion Group and Privacy and Data Security Group regularly advise companies on advertising content on social media and compliance with the FTC's Section 5 authority prohibiting unfair or deceptive acts or practices.

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