Lessons Learned from Lord & Taylor’s Run-In with the FTC

June 27, 2016

In case you missed it, Lord & Taylor recently came under fire with the Federal Trade Commission (FTC) as a result of one of its influencer marketing campaigns. The brand had partnered with several fashion bloggers and Nylon.com to promote a new clothing line; however, Lord & Taylor neglected to make it clear to consumers that influencers’ Instagram posts and the Nylon.com coverage were paid ads, not genuine editorial content.

Like many large brands, Lord & Taylor had appointed a third-party social media agency to hire influencers and carry out the campaign on its behalf. But, despite the additional parties involved, the FTC declared Lord & Taylor solely responsible for violating its mandate that companies not engage in unfair or deceptive marketing. This precedent could change, of course, especially as influencers continue to evolve into well-established celebrities and/or businesses themselves. But for now, it’s worth noting that, according to the FTC, the burden of responsibility for influencer marketing campaigns falls singularly on the brand (or advertiser).

Noncompliance is probably happening more than the FTC realizes, as brands go directly to creators. Many campaigns are not getting the required labeling correct and aren’t complying with FTC guidelines. So, who should be the responsible party be if creators don’t disclose that their video is part of a paid opportunity: the brand, agency, platform vendor, MCN or the creators themselves?

In a recent conversation with Paul Kontonis, president of the Global Online Video Association, he recommends the age-old rule of following the money. “Start at the top. Ultimately, the brands are starting the chain of events and should be responsible for ensuring disclosure,” Kontonis said, adding that the responsible thing for agencies and vendors to do is educate brands on best practices and offer guidelines that help them to stay within the bounds of the program.

If the Lord & Taylor incident has taught us anything, it’s that:

  • Influencer marketing has significant power:Influencer marketing is no longer just a nebulous concept that brands can loosely use to “promote awareness.” Rather, it’s a highly powerful, established marketing channel capable of producing significant results, and as such, it must adhere to the rules and regulations set forth by the FTC.
  • The market needs better education:Many influencer marketing agencies and vendor platform companies are not putting enough emphasis on FTC compliance and disclosure and, as a result, brands risk meeting the same fate as Lord & Taylor. In a recent conversation with Vidcon editorial director Jim Louderback, he suggests that agency management is the first line of defense and is where the education needs to happen – something he hopes to do through Vidcon.
  • Disclosure statements need to be everywhere:It’s not enough to simply state in the video’s YouTube copy that the video is a paid sponsorship. Once that video gets shared to other platforms, such as Facebook, that disclosure might not be seen. Brands must ensure that disclosure is also part of the creator’s actual content – whether it be a video or a photo, it has to be everywhere.
  • The onus is on the brands:Regardless of who is responsible for educating all parties, the Lord & Taylor ruling has set the precedent that the brand will ultimately be responsible, so brands should look to partner with agencies and vendors that are adamant about FTC compliance.

Remember, it’s not just your business or brand reputation that’s at stake here. If customers feel that a brand has duped them with unclear influencer advertising, customer loyalty can also be compromised.

Jessica Rich, the director of the Bureau of Consumer Protection, summed up the Lord & Taylor matter well. In a statement about the incident she said, “People browsing the Web, using social media, or watching videos have a right to know if they’re seeing editorial content or an ad.” This couldn’t be truer – and brands, agencies and creators need to uphold this promise to consumers.

If you’d like to read the FTC’s new enforcement policy statement as a result of the Lord & Taylor incident, click here.

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