LORD & TAYLOR SETTLES WITH FTC OVER DESIGN LAB COLLECTION LAUNCH
Lord & Taylor has agreed to settle with the US Federal Trade Commission (FTC) on charges that its paid campaigns for its Design Lab collection violated FTC guidelines regulating digital advertising.
FTC's alleged that Lord & Taylor's Design Lab collection launch deceived consumers. For the collection's rollout, Lord & Taylor selected 50 fashion influencers and paid them fees ranging from $1,000 to $4,000 each to post themselves wearing a Design Lab asymmetrical, paisley dress (pictured right). While the bloggers were contractually obligated to include the company's Instagram handle, @lordandtaylor and the hashtag #DesignLab in their caption, the company did not require any language informing consumers that Lord & Taylor sponsored the posts. The campaign proved to be very successful for Lord & Taylor. The sponsored posts reportedly reached 11.4 million Instagram users and the dress used in the bloggers' posts quickly sold out.
Lord & Taylor also allegedly violated FTC guidelines when it paid for native advertisements in Nylon and paid Nylon to post about the Design Lab collection on its Instagram account. Native Advertisements, according to the FTC guidelines, are "a form of content that bears a similarity to the news, feature articles, product reviews, entertainment, and other material that surrounds it online." As part of the campaign, Nylon included an article in its publication. Lord & Taylor not only paid for the article but also edited the article that was featured in Nylon and also paid Nylon to post the same asymmetrical, paisley dress on its Instagram. Neither the article in Nylon nor the Instagram post included a disclaimer that Nylon received compensation.
As part of the proposed settlement, "Lord & Taylor can’t falsely claim – expressly or by implication – that an endorser is an independent user or ordinary consumer." The FTC also offered guidance to companies who engage in social media campaigns:
- If you use native advertising, consider the context
- If there is a material connection between your company and an endorser, disclose it
- Disclosures of material connection must be clear and conspicuous
- Train your affiliates and monitor what they're doing on your behalf
Not only does the Lord & Taylor settlement offer guidance for companies, it should also serve as a reminder to bloggers and influencers about the importance of disclosures. It is clear from this situation that the FTC is not playing around when it comes to transparency.