The FTC today announced that it reached a settlement with Lord & Taylor over a native advertisement and promotion that relied on social media “influencers” to promote a particular product.

This was the first native advertising settlement reached by the FTC since it issued its Policy Statement on Native Advertising in December 2015.

The campaign at issue involved Lord & Taylor’s promotion of its Design Lab clothing collection, which featured a paisley asymmetrical dress.  The FTC identified two problems with Lord & Taylor’s practice.

First, the FTC alleged that Lord & Taylor paid Nylon, an online fashion publication, to post an article about the Design Lab collection that featured a photo of the dress.  Lord & Taylor reviewed and approved the article but did not disclose its commercial nature.  Nylon also posted on Instagram a photo of the dress that Lord & Taylor reviewed and approved without requiring any disclosures.

Second, the FTC alleged that Lord & Taylor undertook a broader Instagram campaign that engaged 50 online fashion influencers to post a photo of themselves online wearing the dress.  The FTC alleged that these fashion influencers were given the dress for free and were paid between $1,000 and $4,000 to post their photos.  According to the FTC, Lord & Taylor contractually obligated the influencers to (1) use the @lordandtaylor Instagram user designation; (2) tag the photo @lordandtaylor; and (3) use the hashtag #DesignLab.  The company pre-approved each proposed post and also edited some of the language used by the influencers.  According to the FTC, the contract did not require the influencers to disclose that Lord & Taylor had paid them.

The FTC complaint charged Lord & Taylor with three violations: (1) falsely representing that the 50 Instagram images and captions reflected independent statements of impartial fashion influencers; (2) failing to disclose that the influencers were the company’s paid endorsers; and (3) falsely representing that the Nylon article and Instagram post reflected Nylon’s independent opinion about the Design Lab line of clothing.

Under the terms of the settlement, Lord & Taylor must adhere to the FTC’s Endorsements and Testimonials Guides and cannot falsely claim that an endorser is an independent user or ordinary consumer and must disclose any material connection “in close proximity” to the claim.  Furthermore, Lord & Taylor cannot suggest or imply that a paid ad is a statement or opinion from an independent or objective publisher or source.

Megan Rodgers is the author of this article.