Lord & Taylor has agreed to settle federal charges that it deceived consumers by paying fashion “influencers” thousands of dollars each to promote its products on Instagram, without disclosing that the posts were paid advertisements. The retailer was also charged with deceiving consumers by placing a paid article in Nylon magazine without disclosing that the article was a paid ad, the FTC said.
The company’s actions violated federal trade laws against unfair or deceptive marketing. The settlement amounted to a slap on the wrist: The FTC reminded Lord & Taylor that it is prohibited from misrepresenting the sources of its paid ads. The FTC also told Lord & Taylor that it is required to ensure that “influencers” it pays to endorse its products clearly disclose when they have been compensated for those endorsements.
“Lord & Taylor needs to be straight with consumers in its online marketing campaigns,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, in a prepared statement. “Consumers have the right to know when they’re looking at paid advertising.”
Lord & Taylor got into trouble in March, 2015 over the social media campaign for its Design Lab collection. According to the FTC, the company gave 50 fashion influencers a free Paisley Asymmetrical Dress and paid them up to $4,000 each to post a photograph of themselves wearing the dress on their Instagram feeds. The company pre-approved the posts, and required the influencers who participated to include “@lordandtaylor” and “#DesignLab” in the posts.
“Lord & Taylor did not require the influencers to disclose that the company had compensated them to post the photo, and none of the posts included such a disclosure,” the FTC said in a statement. The posts reached 11.4 million Instagram users, leading to 328,000 brand engagements, according to the FTC, which notes, “The dress quickly sold out.”
Lord & Taylor’s violations occurred before the FTC explained last year in a policy statement how laws against deceptive marketing apply to so-called “native advertising,” or advertising that appears to be editorial content published by third parties. The policy statement addressed social media campaigns, and guidelines for advertisers to follow for disclosing paid endorsements that appear on social media.