Lord & Taylor settled a complaint brought by the Federal Trade Commission alleging that influencers engaged by the retailer failed to disclose that they were paid for content highlighting the retailer’s private label clothing line and that the retailer further failed to require adequate disclosures in paid editorial content.
According to the FTC’s complaint, in connection with Lord & Taylor’s launch of its private label clothing line, Lord & Taylor paid influencers to post Instagram photos of themselves wearing a dress from the collection along with a @lordandtaylor mention and #DesignLab hashtag. However, the retailer did not require influencers to disclose that they had been compensated for their posts. Furthermore, Lord & Taylor’s representatives allegedly reviewed and approved the influencers’ posts, which did not include the required material connections disclosures, before the influencers posted them on Instagram.
In addition, Lord & Taylor partnered with Nylon Media, which published an article about Lord & Taylor’s private label collection that was paid for, reviewed, and approved by Lord & Taylor. The article also allegedly failed to disclose the commercial nature of the article.
The FTC’s Guidelines on the use of Endorsements and Testimonials in Advertising and its recent policy statement on native advertising clearly set out the FTC’s expectations of advertisers, specifically that disclosure is required if there are material connections between the advertiser and an influencer that would likely affect the weight a consumer may give the influencers’ opinion or content. The guidelines also provide that the advertiser is responsible for training its influencers, monitoring content, and taking corrective actions when content is found to be non-compliant. Further, the FTC’s policy statement on native advertising states that paid-for articles require adequate disclosure to ensure that the commercial nature of the article is clear to readers. Here, the FTC did not believe that the inclusion of #DesignLab or the tag @lordandtaylor in the Instagram posts clearly disclosed the material connection between the advertiser and the publisher or influencers.
It is also notable that the FTC held Lord & Taylor responsible for the publisher’s failure to disclose that its article was sponsored. It does not appear the FTC took action against either the publisher, Nylon, or the individual influencers who posted the content, even though it has stated that such parties can be personally liable for their failure to adequately disclose a material connection when making an endorsement. The FTC’s history, along with this action, shows that the FTC believes the advertiser is primarily responsible for the actions of any third party that it engages to promote its products.
The settlement agreement requires Lord & Taylor to get a signed statement from each paid influencer that acknowledges the influencer’s responsibility to disclose its material connection, as well as to monitor the activities of these influencers and terminate any influencer who fails to clearly disclose his or her material connection.
TIP: This action by the FTC is another example of the increased enforcement by the FTC of advertiser/blogger activity based on the principles set forth in its endorsement and testimonial guidelines and one of few recent enforcements on native advertising. The action drives home that the FTC is looking to advertisers to make sure that plain language, clear disclosures of material connections are used (e.g., #ad, #paid) and highlights the FTC’s expectations that advertisers provide training to its influencers, including guidelines and instructions on disclosure, as well as monitor content and resolve deficiencies.