Has Versace mastered the art of disclosure?

That Instagram contest you just entered to win free merchandise may be a violation of the FTC Guidelines! The FTC Endorsement Guidelines state that it is deceiving to have individuals participate in a contest for a chance to win without disclosing they are doing so.

In 2014, Cole Haan launched an Instagram contest that asked followers to create a Pinterest board and pin 5 photos using the hashtag #WanderingSole. Doing so entered each individual in a contest to win a $1,000 shopping spree. The FTC was quick to act and sent the retailer a warning letter. The letter stated that Cole Haan’s #WanderingSole was an insufficient disclosure and because Cole Haan did not require people to disclose that they were entering a contest, the posts violated the FTC Guidelines. The FTC acknowledged that it had never specifically addressed social media contests so they did not fine Cole Haan. Instead they asked Cole Haan to require disclosure that the posts were part of a contest. However the new FTC Guidelines released in 2015 specifically discussed social media, giving retailers no excuse to not disclose properly in the future.

Last year, Versace decided to launch its own contest to promote its Greca Stars sunglasses. The contest asked consumers to take a selfie with the Greca Stars sunglasses in select Versace boutiques worldwide and post it online with the hashtag #VersaceSelfie or to “like” pictures of Donatella Versace wearing the Greca Stars sunglasses on the Instgram profiles @VersceHomeWW, @DVHomeMilan and @VersaceBoutiques in order to win a free pair of Greca Stars sunglasses. Similar to Cole Haan, Versace did not require participants to disclose that they were participating in a contest with a chance to win a free product, which is in direct violation to the FTC’s 2015 Guidelines. Versace did include the hashtag #Contest in its own Instagram posts about the contest, but according to the Guidelines this is still an insufficient disclosure. The FTC could potentially fine Versace half a million dollars, but has yet to decide whether to take action. I hold that Versace has NOT mastered the art of disclosure!


Has Lord & Taylor mastered the art of disclosure?

After my last post you may have found yourself asking: what happens to those violating the FTC Act?

In 2015, Lord & Taylor began a campaign to promote a paisley dress that was part of its new collection called DesignLab. The retailer chose 50 fashion influencers to advertise their dress and gave each influencer a free paisley dress and between $1,000 and $4,000 each to post a photo of themselves wearing the dress on Instagram. The retailer required each influencer to tag their Instagram and include the hashtag DesignLab. Obviously someone in legal gave thought to the FTC guidelines because the tags seemed like efforts to let consumers know that this was part of the retailer’s campaign.

Alas, the FTC charged Lord & Taylor with deception of its consumers. The FTC’s complaint noted that the retailer did not require any of the 50 influencers to disclose that the company had paid them to post photos and sent them a free dress, and that none of the posts included any such disclosures (DesignLab was insufficient). The retailer settled and agreed that they would be prohibited from misrepresenting that paid commercial advertising was from an independent or objective source, and that they would disclose any connection between themselves and any influencer. The order also established a monitoring and review program for the retailer’s endorsement campaigns. This punishment is adequate because the FTC does not give monetary fines for first time violators. However, a second offense would result in a fine of $16,000, per violation, per day until the conduct is corrected.

Considering that the influencers’ posts were seen by 11.4 million Instagram users, led to 328,000 interactions with the retailer’s account and to the paisley dress immediately selling out, the punishment doesn’t seem too bad. However, a second offense of this scale would amount to a hefty fine. Although the retailer did not get it right the first time,they have promised to clean up their act and have made sure to make disclosures in all promotions. Thus, I hold that Lord & Taylor has subsequently mastered the art of disclosure!