Vigilance and compliance are lessons companies should take from FTC's Lord & Taylor settlement, attorney says

By Karen Kidd | Apr 11, 2016

WASHINGTON, D.C. (Legal Newsline) - Vigilance and compliance with Federal Trade Commission disclosure requirements are the take away for observers, especially companies, in the Lord & Taylor settlement over disguising paid promotions as posts.

"The primary lesson companies should take away from the settlement is to be vigilant in paying attention to and strictly complying with the FTC disclosure requirements," said Kimberly Buffington, a partner in the Los Angeles office of Pillsbury Winthrop Shaw Pittman LLP, specializing in business and commercial litigation, intellectual property matters and insurance coverage disputes.

"Brand companies need to take the FTC disclosure requirements and other rules seriously. The FTC’s past actions demonstrate that they are proactively enforcing the rules. If a brand does not want to be fined and subsequently monitored closely by the FTC, they need to heed the rules."

A settlement was announced earlier this month over FTC allegations that national retailer Lord & Taylor paid for native advertisements without properly disclosing the posts were paid promotions.

“Lord & Taylor needs to be straight with consumers in its online marketing campaigns,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in the settlement announcement. “Consumers have the right to know when they’re looking at paid advertising.”

Lord & Taylor ran into trouble with the FTC during its Design Lab clothing campaign and over a single weekend in late 2015. The FTC alleged Lord & Taylor paid for a native advertisement in Nylon and gave 50 select fashion influencers the same free dress. Lord & Taylor also allegedly paid the same fashion influences $1,000 to $4,000 each promote the dress in social media post.

The FTC maintained Lord & Taylor failed to properly disclose they had paid for the Nylon advertisement and filed to direct the influencers disclose the paid nature of their posts.

Under the settlement, Lord & Taylor will refrain from misrepresenting its paid ads are from an independent source and ensure influencers clearly disclose when they have been compensated.

Buffington and Pillsbury colleague Carolyn S. Toto recently blogged about the settlement.

Only those close to the case know why Lord & Taylor did not disclose they had compensated influencers to promote their dress, they noted.

"Since we were not involved in Lord & Taylor decision making, we can only speculate as to why the company did not make the necessary disclosures," Buffington told Legal Newsline. "It could be that the company did not know about the FTC disclosure requirements. It is also possible that Lord & Taylor thought that what they did was sufficient or that they would not come under scrutiny."

However, the FTC allegations against Lord & Taylor are not unique to that company, Buffington said, referring to another blog post she wrote with Toto, this one about the FTC's response to the growth of digital influences.

"The FTC is continuously sending out cease and desist letters," she said. "More well-known recipients include Cole Haan, Ann Taylor and HP."

The agreement in Lord & Taylor's case currently is subject to a 30-day review, after which the commission is expected to decide whether to make the proposed consent order final. During the review period, interested parties may submit comments.

The FTC generally issues an administrative complaint when there is reason to believe a law has been or is being violated and that FTC action is in the public's interest. Each violation of an FTC issued consent order, once final, can result in a civil penalty of up to $16,000.

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