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Lord & Taylor Settles FTC Charges Over Paid Instagram Posts

Department store chain Lord & Taylor is the latest company to come under fire for the growing practice of “native advertising,” in which paid ads are passed off as legitimate editorial content.

The company has agreed to settle charges from the Federal Trade Commission that it deceived customers with paid advertising on Instagram and other sites last year.

The FTC’s complaint, announced Tuesday simultaneously with the settlement, arose from allegations that Lord & Taylor partnered with fashion bloggers and the online edition of Nylon magazine last March to promote a specific clothing line without making it clear that the posts were paid ads.

Lord & Taylor paid 50 “fashion influencers” up to $4,000 each to post a photo of themselves wearing a flowing, paisley dress from the company’s Design Lab collection but did not require the bloggers to say in the post that it was an ad, the FTC says.

The campaign violated the Federal Trade Commission Act’s mandate that companies not engage in unfair or deceptive marketing, the FTC says. The settlement is the latest in the FTC’s crackdown on the murky world of social media influencers and corporations that surreptitiously pay for favorable articles or photos without disclosing that they are ads.

The FTC settled charges against Sony last year involving its ad campaign for PlayStation Vita after the FTC alleged the advertising agency working with Sony had its employees tweet about the gaming console’s features without disclosing their connection to the brand. Another settlement with gaming website Machinima last year alleged the company paid “influencers” to post YouTube videos endorsing Microsoft’s Xbox One without disclosing “that they were being paid for their seemingly objective opinions,” the FTC said.

Lord & Taylor says it responded immediately when it realized there was an issue and has fully cooperated with the FTC’s investigation.

“A year ago, when it came to our attention that there were potential issues with how the influencers posted about a dress in this campaign, we took immediate action with the social media agencies that were supporting us on it to ensure that clear disclosures were made,” Lord & Taylor spokeswoman Molly Morse told USA TODAY.

The FTC’s complaint also alleges Lord & Taylor ran a paid article in Nylon and that the magazine posted the same paisley dress to its Instagram feed without disclosing the nature of the content on either platform. The dress sold out after the advertising campaign bombarded social media and reached 11.4 million Instagram users over two days, the FTC says.

The proposed settlement agreement, which is subject to a 30-day comment period, would prohibit Lord & Taylor from “misrepresenting that paid commercial advertising is from an independent or objective source,” according to the FTC, and would put the company’s endorsement campaigns under a monitoring and review period.

The sometimes confusing relationship between independent bloggers and corporate brands on social media has become a sticky issue in recent years as sites like Instagram and Twitter have become extremely influential platforms for reaching customers.

The issue lies in people, often ones with large social media followings of their own, talking about brands or products without making it clear that they are being paid to do so, says Mary Engle, associate director for advertising practices at the FTC.

“The use of influencers right now is huge for brands,” she says. “We are just emphasizing through this case and other investigations that we’ve had that when companies are paying consumers to help promote their brands, that that needs to be made clear to consumers; that advertising should be identifiable as advertising.”

It’s a relatively new phenomenon, and the Lord & Taylor case is technically the first one the FTC has addressed specific to native ads in an online publication rather than solely “influencer” posts. The case will act as a warning to other companies as native advertising only becomes more popular, says Ron Urbach, chairman of law firm Davis & Gilbert LLP, which concentrates on the advertising and marketing sectors.

The reason the line between editorial content and ads becomes blurry on social media compared with traditional paid advertising is due to the personal nature of social posts, Urbach says. On digital and social platforms, content “is more likely to be presumed by the consumer as not being advertising,” he says.


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