Lessons Learned From The Lord & Taylor FTC Case
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What The Lord & Taylor Case Can Teach Us About FTC Compliance In Influencer Marketing
Just over two years ago, department store Lord & Taylor partnered with Nylon and Instagram influencers for a marketing campaign to promote a specific piece — a paisley dress — from its new Design Lab. The dress appeared on 50 influencer channels on the same day, and Nylon ran an article and posted a photo to its own Instagram account promoting the dress.
This is the way of new media advertising. In order to reach consumers effectively, advertisers have to find them where they’re spending time. Native advertising on social media platforms and on publishing websites is an effective method for reaching audiences in a way that’s natural and targeted. But when it failed to require disclosures from its influencers and from Nylon, Lord & Taylor found out the hard way that native advertising isn’t exempt from the Federal Trade Commission (FTC) guidelines and regulations that protect consumers from deceptive advertising practices.
A year after the campaign, the FTC filed a complaint against Lord & Taylor, which eventually settled and with requirements for stricter oversight and a more robust mechanism for monitoring campaigns and necessary disclosures.
What Does the FTC Do?
As the agency charged with curtailing deceptive practices by advertisers, the FTC establishes the guidelines for advertising and disclosure. Though it’s long enforced guidelines with regards to transparency and disclosure for traditional media, the rise of online advertising and social media has presented a unique challenge for the FTC.
It released disclosure guidelines for endorsements and testimonials in 2009, but platforms and best practices are constantly changing on social media. Since 2009, we’ve seen entire platforms come and go. Influencer marketing on Instagram is now a $1 billion market. The world of influencer marketing and native advertising is constantly shifting, and we’re still seeing FTC guidelines changing and adapting along with it.
Why Lord & Taylor Came Under Fire For Failure To Disclose
Lord & Taylor structured a smart campaign around a single product. Looking to promote its Design Lab and the paisley dress in particular, it put together a coordinated effort using Instagram influencers and a major publication. It worked, too. The dress Lord & Taylor highlighted in the campaign sold out. On Instagram alone, the campaign reached 11.4 million users and Lord & Taylor’s official Instagram account saw 328,000 brand engagements.
It was proof of concept for influencer marketing — a wildly successful campaign that activated choice influencers and had product selling out. But about a year later, in March 2016, the other shoe dropped for Lord & Taylor when the FTC filed a complaint against the company for violating FTC regulations on 3 counts:
- Misrepresenting the nature of the Design Lab posts on Instagram
- Failure to disclose the material relationship between Instagrammers and Lord & Taylor
- Misrepresenting the Nylon article and post as objective, non-biased, and unpaid
The complaint the FTC filed essentially came down to this: Lord & Taylor didn’t explicitly require Nylon or the Instagram influencers it teamed up with to include “clear and conspicuous” (in the FTC’s own language) disclosures to their posts that made it obvious that they were paid (in some cases up to $4,000 for a post) and had received the dress for the purpose of advertisement.
The FTC’s disclosure guidelines aren’t specific. There aren’t exact phrases that advertisers, influencers, or publications need to include in order to stay on the right side of the regulations, but the FTC does provide examples. For example, “#ad” and “#sponsored” are adequate disclosures, but “#spon” is not, nor is a blanket statement on another page of a website or in a bio on a social media profile.
Lord & Taylor ended up in hot water because it didn’t require any kind of disclosure, not even #ad. Despite having reviewed (and, in some cases, even edited) the Instagram posts and the Nylon article before they went up, Lord & Taylor failed to raise the issue.
Why FTC-Compliant Disclosures Are Important to Influencer Marketing
On the surface, the absence of #ad might seem like a small thing, but the FTC’s concerned about it because a failure to enforce these disclosures could lead to deceptive advertising practices. Improper or absent disclosures mislead consumers, which isn’t just bad for consumers — it’s bad for advertisers, too. Disclosure enforcement gives consumers a degree of confidence that the endorsements they’re seeing aren’t intended to deceive them.
The Lord & Taylor case was the first major example of the FTC cracking down on an influencer marketing campaign, but it won’t be the last. Disclosures have long been a major issue in advertising and have been regulated in traditional media for a long time, and they’re becoming an increasingly vital part of influencer marketing now, too.
Capitalizing on the earned trust and influence of social media stars is an effective marketing tactic, but one that’s built upon a foundation of personal connection and a degree of transparency. Influencers are effective because their fans and followers connect to them. What an influencer says, does, eats, wears, and endorses matters to their fans.
It’s the responsibility of the FTC to monitor the way that advertisers communicate with and market to consumers in order to ensure that ads are obvious and easily distinguishable from genuine, non-biased reviews, comments, critiques, and praise. It’s a necessary enforcement of commercial speech that doesn’t just protect consumers — it also safeguards the efficacy of the advertising landscape.
The FTC is Still Fighting The Same Fight A Year Later, But It’s Bigger Now
As one of the first major instances of an FTC crackdown on influencer marketing, the Lord & Taylor case is still of major interest to marketers and influencers. For the most part, understanding about proper FTC disclosures has improved, but failure to disclose is still a pervasive problem on Instagram and other platforms.
Celebrities and influencers frequently post sponsored content without proper disclosures, and recently, the FTC’s vowed to take a closer look. In mid-April 2017, it sent more than 90 letters to Instagram influencers reminding them of the regulations surrounding disclosures and citing specific examples of possible violations. These weren’t formal complaints, but signal a move toward stricter enforcement.
Additionally, the FTC announced in March that it’s going to begin holding media companies responsible for disclosure failures, too. While advertisers were the focus of scrutiny before, Nylon’s involvement in the Lord & Taylor case may have prompted the FTC to focus more on the growing native advertising efforts of publications and media companies, too.
Key Takeaways & Lessons From The Lord & Taylor Case
The Lord & Taylor case may stand out as one of the most significant instances of failure to meet FTC disclosure guidelines in influencer media, but it’s just one of many major cases of violation, intentional or otherwise. It serves as a warning and a clear example of missteps, mistakes, and practices to avoid in structuring an influencer marketing campaign.
Here are key do’s and don’t’s we can take away from the settled complaint against Lord & Taylor:
- Review content — Lord & Taylor did review content before it was posted, but it failed to require disclosures. Checking over content before it’s posted for accuracy, appropriate brand messaging, and legal compliance is a key part of a successful influencer marketing campaign.
- Be clear in stating requirements — Had Lord & Taylor stipulated a requirement for disclosure, they would’ve also needed to make sure it was clear for influencers to avoid improper disclosures. Though not explicit, FTC guidelines require “clear and conspicuous” disclosures in close proximity to the sponsored content. This means that ambiguous hashtags like “#spon”, blanket disclosure statements on separate pages or in bios, and disclosures buried in a mess of hashtags at the bottom of an Instagram caption don’t make the cut.
- Check content and platform-specific guidelines — The FTC requires different disclosures for different mediums. For example, Instagram disclosures might be a hashtag, but YouTube disclosures should be verbal, spoken in the course of the video. Snapchat Story requirements aren’t the same as those for a Facebook post, so it’s important to clarify exact parameters. For a guide to platform do’s and don’t’s, see our FTC guidelines infographic.
- Allow or encourage ambiguous language — FTC regulations aren’t a case of “trying hard is good enough.” Influencers and advertisers must research what constitutes proper disclosure and be sure to include it in a way that’s obvious and in close proximity to the content in question. It doesn’t need to detract from the message, but it mustn’t be hidden.
- Call a hashtag “good enough” — Requirements vary by platform and medium. It’s important to be aware of which regulations might apply to a specific campaign, product, content type, and influencer.
- Fail to follow up — Part of influencer marketing is taking on the responsibility of disclosure for sponsored content. The Lord & Taylor case proves that advertisers are responsible for disclosure failures, so following up on content to make sure that FTC disclosures are properly executed is a good way to avoid a complaint like the one filed against Lord & Taylor.
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May 16, 2017 By Mediakix Team