The U.S. government is cracking down on an increasingly common form of ad infiltrating everyone's Instagram feed — paid posts. Lord & Taylor agreed on Tuesday to settle charges it paid off prominent Instagrammers to advertise its Design Lab line.
The Federal Trade Commission (FTC) says Lord & Taylor "deceived consumers" by not explicitly stating the Instagram posts were paid advertising.
The FTC accused the company of giving 50 prominent Instagram users, known to be "fashion influencers," a free Paisley Asymmetrical Dress and anywhere between $1,000 and $4,000 each to post a snap of themselves wearing the dress, the Commission said in a statement on Tuesday.
The Instagrammers were contractually obligated by the company to use the Lord & Taylor Instagram handle, @lordandtaylor, and the hashtag, #DesignLab, in the post's caption. The company also pre-approved each post.
The FTC also alleged the company pre-approved an Instagram post to Nylon Magazine's account and placed a "seemingly objective article" in Nylon magazine to promote its clothing collection, without any disclosure it was paid advertising.
The company is accused of violating the Federal Trade Commission Act, which prohibits companies from engaging in unfair or deceptive marketing.
The agreement between the FTC and Lord & Taylor, which is open for a 30-day comment period, prohibits the company from further misrepresenting that an endorser is an ordinary consumer and requires the company to reveal "any unexpected material connection between itself and any influencer or endorser," according to the Commission.
The company must also undergo monitoring and a review of its endorsement campaigns.
"Lord & Taylor needs to be straight with consumers in its online marketing campaigns," said Jessica Rich, Director of the FTC's Bureau of Consumer Protection. "Consumers have the right to know when they're looking at paid advertising."
The company's subtle Instagram campaign was over a weekend in March 2015 and included well-known Instagram stylists like Cara Santana, Wendy Nguyen, and Eugenie Grey, according to the complaint.
The FTC complaint alleges that Lord & Taylor didn't require the influencers to disclose that the company had paid them to post the photo.
The posts reached roughly 11.4 million Instagram users over the weekend and the Paisley dress quickly sold out, according to the FTC statement.
Lord & Taylor said in a statement to BuzzFeed News that it is "deeply committed to our customers and we never sought to deceive them in any way, nor would we ever."
The company took "immediate action with the social media agencies that were supporting us on [the campaign] to ensure that clear disclosures were made.""
"We remain dedicated to our core values of transparency and honesty in everything that we do for our customers," it said.
The FTC's agreement with Lord & Taylor is its latest attempt at reeling in the sprawling world of shadowy advertising partnerships between influential Instagram users and companies.
The FTC settled charges against Sony in March 2015 over an ad campaign promoting its PlayStation Vita. The Commission alleged the company's advertising agency, Deutsch LA, had its employees tweet about the gaming console's features without disclosing their relationship to the company.
Machinima, a gaming and media site, also settled with the Commission in September over allegations that it had influential YouTube users post videos promoting Microsoft's Xbox One without disclosing they were paid by the site.