This week the FTC settled charges against Lord & Taylor from alleged deceptive native advertising during its March 2015 Design Lab social media campaign. http://1.usa.gov/22h3sJ7 A big takeaway from this settlement is the FTC’s position that a company not only has to comply with the Native Advertising/Endorsement disclosures on its own social media platforms, but also has to ensure (by contract and monitoring) that its paid endorsers make the requisite disclosures on their own social media posts.

For its sales campaign, L&T focused on one product, the Paisley Asymmetrical Dress, to flood the Internets. The native advertising included:

  • L&T gave the Dress to 50 select fashion influencers (what a job!) who were paid $1,000-$4,000 to post pictures of themselves on Instagram wearing the Dress. By contract, L&T required them to use %E2%80%9C@lordandtaylor” and “#DesignLab” in the posts. The contract did not require the influencers to disclose in their postings that they had been compensated by L&T. L&T pre-approved each of the posts to ensure use of the user designation and hashtag. None of the posts had any endorsement disclosure and L&T did not add any.
  • L&T contracted with the fashion magazine Nylon to run an article with a picture of the Dress, which L&T pre-approved. L&T did not require Nylon to disclose the relationship in the article.
  • L&T also contracted with Nylon to post a picture of the Dress on Nylon’s Instagram page; again, no disclosure requirement.

The campaign was a huge success; it reached 11.4 million Instagram users and produced over 300,000 brand engagements; and the Dress sold out in days. But while women everywhere said yes to the Dress, the FTC said bad to the ads.

The FTC charged L&T with misrepresenting the postings and failing to disclose material connections in accordance with the FTC Native Advertising and Endorsement Guidelines.

As part of the proposed Consent Order, the FTC mandated that in future advertising, L&T shall:

  • Provide each endorser with a clear statement (countersigned by the endorser) of his/her responsibility to clearly and conspicuously disclose any material connection to L&T;
  • Establish and maintain a system to monitor and review the disclosures of endorsers;
  • Terminate endorsers who don’t comply;
  • Create and maintain reports showing the results of such monitoring;
  • Maintain for five years and make available to the FTC all ads and contracts with endorsers.

Unfortunately, the FTC was typically vague about exactly what specific disclosures should be made, but it did provide guidance on how to make the disclosure:

  • If the communication is solely visual or solely audible, the disclosure must be made in the same manner;
  • If the communication is both visual and audible, the disclosure must be made simultaneously in both the visual and audible portions of the ad;
  • Visual disclosures must stand out from any accompanying text in size, contrast, location, and length of time they appear;
  • Audible disclosures must be at a volume, speed and cadence that is easily understood;
  • On the Internet, the disclosure must be “unavoidable”;
  • The diction and syntax must be understandable and in all languages of the communication;
  • The disclosure cannot be contradicted or mitigated by anything else in the communication;
  • The disclosure must be tailored to any intended audience (kids, elderly, etc.);
  • The disclosure must be “very near” the triggering endorsement. On mobile devices, it must be viewed at the same time and in the same viewable area; pop-ups and hyperlinks are insufficient. The disclosure also cannot be on a different printed page from the endorsement.

This blow comes on the heels of the FTC’s recent Native Advertising Enforcement Statement http://1.usa.gov/1m6uikm (see discussion at http://youmightbeawinner.com/ftc-addresses-nativity-advertising-just-in-time-for-xmas/) and likely portends serious efforts by the FTC to monitor native advertising with serious consequences for non-compliance with policies that are (some say) difficult to administer and creatively stifling. Maybe we should hear from the women who bought the Dress.