WASHINGTON — The Federal Trade Commission said Monday it has approved a final consent order prohibiting Lord & Taylor from using what it said were “deceptive advertising techniques” stemming from a complaint involving native ads and endorsements that was settled in March.
The FTC voted 3 to 0 to approve a final order after a 30-day public comment period.
The agency reached a settlement agreement with L&T in mid-March on charges that the retailer deceived consumers after failing to disclose paid promotions in a major media campaign centered around the launch of a new dress collection last year. An FTC spokesman said Monday that the FTC reviewed public comments after the initial agreement and proposed consent order was announced, but “none of them resulted in changes to the order.”
“We will be monitoring for compliance,” he said. “If they violate the order, we can bring action against them seeking civil penalties.”
A final FTC consent order carries the force of law with respect to future actions. Each violation of an order may result in a civil penalty of up to $16,000.
The order prohibits L&T “from failing to properly disclose paid native advertising and online endorsements for its products,” the FTC said.
“The consent order prohibits Lord & Taylor from misrepresenting that paid ads are from an independent source or that an endorser is an independent or ordinary consumer,” the FTC said. “In addition, the company must ensure that its endorsers clearly disclose when they have been compensated in exchange for their endorsements.”
According to the FTC complaint filed in March, L&T “deceived consumers” with paid-for native advertisements, including a “seemingly objective news” article in the online publication Nylon and a Nylon Instagram post, “without disclosing to consumers that the posts were paid promotions for the launch of its private-label Design Lab collection in March 2015.”
L&T also paid 50 online fashion “influencers” to post Instagram photos of themselves wearing the same Design Lab paisley asymmetric dress from the new collection, but again failed to disclose that they had given each person the dress, as well as $1,000 to $4,000 each, in exchange for their endorsement, the FTC said.
Despite the FTC’s allegation that L&T “deceived consumers” and that it violated provisions of the Federal Trade Commission Act, which led to the settlement and consent order, the retailer contended that “there is no finding of wrongdoing whatsoever.”
“Lord & Taylor is deeply committed to our customers and we never sought to deceive them in any way, nor would we ever,” the retailer said.
“A year ago, when it came to our attention that there were potential issues with how the influencers posted about a dress in this campaign, we took immediate action with the social media agencies that were supporting us on it to ensure that clear disclosures were made,” the company said. “We cooperated fully with the FTC’s inquiry into the marketing of this dress and have of course agreed to uphold the current version of the guidelines.”
The company stated that the FTC has changed its guidelines since last year and applauded the new guidelines clarifying its rules.
“We have educated our teams about them and require that any outside agencies or partners we work with understand and adhere to them as well. Further, we encourage the FTC to continue to update and communicate their guidelines clearly and swiftly as the digital and social media landscape rapidly evolves. We remain dedicated to our core values of transparency and honesty in everything that we do for our customers,” the retailer said.
The settlement with L&T follows on the heels of new guidelines and rules on the controversial practice of online native advertising that the FTC issued in December. The FTC’s new guidelines contain examples that companies should follow to ensure consumers know they’re viewing an advertisement or promotional message and not editorial content.