Lord & Taylor FTC

Native advertising, also known as advertorial, has long occupied a blurry space in print media. It creates the visual suggestion that an ad is editorial — it doesn’t appear as paid promotion unless you look at it a little more closely. You’ve probably seen these ads and possibly did a double take when you did.

These advertorials often run in travel or fashion magazines. They usually feature layouts similar to the style of the publications’ editorials. So, a quick glance at them might make you think they’re magazine articles too. However, they also include disclosures that say “advertorial” or something similar to alert readers to the fact that they’re really paid ads.

Now, digital native advertising is increasingly coming under the scrutiny of the Federal Trade Commission (FTC). The agency is aiming to play catchup with the many questionable and sometimes misleading online forms of the advertising practice. Protecting consumers from being misled online is just one part of the FTC’s job, and the undertaking is an enormous one.

A Cautionary Tale for Brands, Media and Influencers About Disclosure

The FTC’s recent Lord & Taylor case provides a cautionary tale for brands using native advertising and influencer marketing. Several years ago, the nearly 200-year-old New York City-based fashion retailer Lord & Taylor launched its Design Lab collection. The FTC alleged in a March 2016 complaint that the company ran a misleading ad campaign.

The agency asserted that the campaign was deceptively portrayed as independent, impartial editorial and objective influencer statements. And this ran afoul of FTC guidelines.

The case revolved around three actions that Lord & Taylor took during the campaign. The first was that Lord & Taylor paid for, reviewed and approved an article in the online version of Nylon, a fashion magazine. The second was that the retailer did the same with a post on Nylon’s Instagram page. Both the Nylon article and the Instagram post spotlighted the retailer’s asymmetrical paisley dress. However, the retailer didn’t require Nylon to include disclosures about the advertorial nature of the content in the online magazine article or on Instagram.

The third action was that Lord & Taylor also gave the dress to 50 fashion influencers. The company then paid them thousands of dollars to don the frock in photos for Instagram. This happened over one weekend in March 2015. The retailer also edited and approved the final posts influencers made showcasing the dress.

The posts were created complete with campaign hashtags and tagged the @LordandTaylor account on Instagram. The campaign was an enormous success, with the Instagram posts reaching more than 11 million viewers and the dress completely selling out.

But the FTC complaint alleged that one important thing was missing. There were no disclosures that Lord & Taylor paid the influencers for the posts or gave the influencers the dress. There was also no sufficient indication that the posts were actually advertising. Instead, they appeared to be impartial statements from fashion influencers — which they weren’t.

Disclosing a Material Connection

Lord & Taylor didn’t disclose what’s known as a material connection with the influencers. A material connection happens when a company and an endorser of its products have a relationship, often a financial one. This type of relationship could affect the endorser’s objectivity or believability when they promote the company’s products.

Say a company pays an influencer or media outlet to endorse its product. The influencer then doesn’t make it clear to the public that they received payment or gifts in exchange for their opinions about the product. When this happens, consumers could be misled about the item. The influencer or media outlet might not have even tried the product or might not be telling the truth about their experiences with it.

The Settlement

Lord & Taylor settled the FTC charges via a consent order. This prohibits the retailer from failing to disclose any material connection between influencers or endorsers and the company. Although the FTC could have imposed a fine of as much as $16,000 per violation, the agency did not. However, Lord & Taylor did agree to establish a program to review and monitor its endorsement campaigns. The retailer also has to report on the effectiveness of the program to the FTC.

The Takeaway

What’s the takeaway for brands, marketers and influencers? Clear disclosure is essential with digital native advertising and with influencer marketing. It’s all about transparency and context.

Digital native advertising can come in forms including sponsored social media posts, videos and blog content. With the sheer volume of information on the Internet it can be difficult to tease out what’s paid advertising and what’s trustworthy, impartial content.

The FTC’s Endorsement and Disclosure Guidelines

It can also be confusing for brands, marketers and influencers to know what and how best to disclose. That’s why the FTC has created “The FTC’s Endorsement Guides: What People Are Asking.” The guides answer a broad range of common questions and give clear-cut instructions on disclosure requirements.

The FTC guidelines stipulate that an ad should clearly be labeled as an ad. Companies working with influencers should ensure that the influencers display disclosures of material connections conspicuously and clearly. That means disclosures shouldn’t be tucked away via a hyperlink or slapped on as an afterthought where no one can easily see them. A disclosure should be as close as possible to the relevant content — in a place where consumers see it first.

The FTC’s brochure “.com Disclosures: How to Make Effective Digital Disclosures in Advertising” gives additional guidance on how to make disclosures prominent. The suggestions include using colors and fonts that are easy to read, and choosing shades that don’t fade into the background.

Disclosures also have to be clear and easy to read across the wide range of platforms and devices that viewers might use. If the ads are republished in other media, even if it’s non-paid, the disclosures have to stay.

Disclosures should also use language that isn’t too technical for consumers to understand or that could have a variety of different meanings. The language used to identify the ads should also be consistent.

The FTC guidelines further advise that companies train their affiliates about the disclosure requirements of social media campaigns. That includes establishing a compliance program and keeping a close watch on what influencers are doing. This includes performing online searches to make sure influencers are complying with disclosure requirements — and taking action if they’re not.

It’s also important for advertisers and influencers to know that the responsibility for proving product claims lies with advertisers. And, it’s the responsibility of the influencers to disclose their connections to advertisers.