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.
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.
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:
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.
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.
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.
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 takeaway from the settled complaint against Lord & Taylor: