FTC Assault on Lord & Taylor Follows Viral Product Bomb Campaign

Industry members were surprised to see swift enforcement of the FTC’s Native Advertising Enforcement Policy, disseminated in December 2015. On March 15, 2016, the FTC announced its first consent order under this policy. Retailer Lord & Taylor (L&T) had run a highly successful social media “product bomb” campaign in March 2015 to launch its apparel line Design Lab. The campaign focused on one paisley, asymmetrical dress. L&T contracted with Nylon, an online fashion magazine, to run an article about the collection and feature the paisley dress. L&T also required Nylon to post a photo of the dress on its Instagram page. L&T reviewed both the article and the Instagram post before publication but failed to require a disclosure that they were paid advertising. Instead, the FTC alleged that L&T falsely and deceptively presented Nylon’s content as independent opinion about the Design Lab line.

The FTC also focused on the significant lapses pursuant to the FTC’s Endorsement & Testimonial Guides. L&T paid fifty independent influencers between $1000-$4000 and gave them all the dress. In return, the influencers posted photos of themselves wearing the dress on Instagram on the “product bomb” weekend, identifying their posts with L&T and Design Lab tags. Again, while L&T preapproved the posts, even editing some of them, the retailer failed to require a disclosure of the material connection between the influencers and L&T.

 As I discuss in my interview with The Mobile Marketer, the Lord & Taylor case is significant in that it ended with a consent order rather than a closing letter. The FTC is clearly moving into an enforcement stage with regard to violations of its Endorsement & Testimonial Guides. We can definitely expect to see more investigations and charges filed. With regard to pure native advertising cases,  FTC representatives have indicated that they are in an education phase, tryingto help industry understand its Enforcement Policy from December 2015.The Lord & Taylor case, however, shows that if native advertising deception were tied to violations of the FTC’s Endorsement & Testimonial Guides, the FTC would not hesitate to bundle deception charges together.

Nonetheless, the Lord & Taylor case should not scare brands away from influencer programming and native advertising. Brands can successfully work with social influencers. It just takes planning. Nothing in the law or FTC’s guidelines prohibits social influencer programs. These programs can be successfully and legally implemented so long as they focus on transparency and disclosure.

Best practices include internal training for marketers on the FTC guidelines, enforcement activity, and risk mitigation. In addition, brands should create clear guidelines for social influencers about their expectations for disclosures and have a monitoring program with teeth, similar to the ones laid out in the FTC’s Machinima and Lord & Taylor cases. The best protection for a brand is to show a regulator that it is training its influencers, enforcing disclosure requirements, and parting ways with influencers who are not onboard.