Chances are, in April 2015, your Instagram feed may have flooded with posts featuring a certain paisley-print dress from Lord & Taylor. Everyone from Something Navy’s Arielle Charnas to Nylon Magazine were promoting the same salmon-colored dress from the retailer’s new Design Lab collection. A coincidence? It could have seemed so at the time, but given the Federal Trade Commission (“FTC”) investigation that followed, as well as the mass-editing of Instagram posts that were previously devoid of any #ad-related disclosure language, we know it was far from a fluke.
It turns out that Lord & Taylor had enlisted help. The retailer paid for an article to be placed in online fashion publication Nylon Magazine, an article that Lord & Taylor reviewed and approved before publication. It then paid for the dress to appear in Nylon's Instagram feed but did not require Nylon to identify either as advertising.
Additionally, Lord & Taylor also gave the dress to "50 select fashion influencers" and paid them $1,000 to $4,000 to post a photo on Instagram of them wearing the dress and attributing it to its new Design Lab but without disclosing that payment had exchanged hands or that they received the dress for free.
The Lord & Taylor Case
The details of the Lord & Taylor advertising scheme came out in waves – starting when the FTC initiated its investigation in 2015 and then in March 2016 when Lord & Taylor agreed to settle the case, in which the FTC alleged that Lord & Taylor had facilitated to the presentation of native advertising as objective content. In accordance with the parties’ settlement agreement, Lord & Taylor is barred from presenting content that it pays for as coming from an independent source, such as a magazine or influencer.
Jessica Rich, director of the FTC Bureau of Consumer Protection said at the time, "Lord & Taylor needs to be straight with consumers in its online marketing campaign. Consumers have the right to know when they’re looking at paid advertising." With this in mind, Lord & Taylor was also required to ensure that going forward, any fashion influencers that it hires must disclose that they have been paid.
Whose Duty is it Anyway?
As Mary Engel, head of the FTC’s Advertising Practices Division, said this past year, “The Lord & Taylor case gave notice to the fashion industry, which maybe wasn’t paying too much attention before. It’s important to everyone to understand their legal obligations.”
So, what are those obligations, exactly, and who do they fall on? Well, the FTC requires the disclosure of “material connections” between advertising brands/retailers and their endorsers. Put simply: When an influencer is compensated by a brand (with money or free clothes or a trip or other perks) to endorse or promote a brand/product outside of a traditional advertising medium (i.e., a paper ad in a magazine, television commercial, etc.), this must be disclosed.
The question that remains: Whose job is this, exactly, to ensure that such disclosures are made? While there is a significant misconception that this responsibility falls exclusively on the brand that is paying for the advertising, the FTC has made it clear that both brands and influencers have a duty to ensure that adequate disclosures are utilized and that both parties can take the hit if they run afoul of the law.
As noted by the FTC in its Guides Concerning the Use of Endorsements and Testimonials in Advertising, “Advertisers are subject to liability for … failing to disclose material connections between themselves and their endorsers. Endorsers also may be liable ....”
This language, namely, the part that states that “Endorsers … may … be liable,” could appear to suggest that the responsibility to ensure that disclosures are included lies more squarely with the advertisers, but the FTC has explicitly stated that this is not the case. In a September 2017 blog post, entitled, “Three FTC actions of interest to influencers,” the FTC highlighted its efforts to hold influencers accountable for failure to disclose.
For instance, last spring, the FTC sent 90+ letters to brand and influencers, alike, alerting them of their duty to disclose sponsored content. Moreover, in the first case of its kind, the FTC singled out and initiated a formal case against two YouTube influencers, Trevor "TmarTn" Martin and Thomas "Syndicate" Cassel. The two YouTubers ultimately agreed to settle the FTC’s case, but not before the FTC ordered that they must "clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service” going forward.
And still yet, the FTC held a question and answer session on Twitter in September that was specifically geared towards educating influencers about their obligations when it comes to sponsored posts.
Despite the FTC’s clear rules for influencers and brands, alike, many are still failing to obey by federal truth in advertising laws, which will be explored at length in tomorrow’s post, “The Annual Brand and Influencer Report: The Good, Bad, and Highly Problematic,” our yearly review of influencer and brand disclosure practices. Stay tuned!
* This is the latest in a series of articles – entitled, The Business of Influence – dedicated to exploring the state of influencer marketing, which you will find this week on TFL.