A US fashion firm has settled a case in which it was accused of failing to flag paid Instagram endorsements as being adverts.
Lord & Taylor had been charged with paying 50 “influencers” to post photos of themselves on the same weekend in March 2015 wearing one of its dresses.
The US trade regulator said the company had failed to disclose it had provided the dresses for free and paid each person thousands of dollars.
The firm did not admit wrongdoing.
However, as part of the settlement, it has agreed that in the future any influencers it uses must disclose they have been paid.
It marks the first case of its kind since the Federal Trade Commission (FTC) published guidelines for so-called native advertising last year.
The regulator’s complaint said that Lord & Taylor’s paid-for Instagram posts reached 11.4 million users over two days and led to its Paisley Asymmetrical Dress “quickly” selling out.
It noted that the “influencers could style the dress any way they chose”, but had to include the company’s Instagram account handle and use its hashtag – actions that helped the images go viral.
“The company also pre-approved each proposed post,” the FTC added.
“In addition… Lord & Taylor did not require the influencers to disclose that the company had compensated them to post the photo, and none of the posts included such a disclosure.”
The watchdog also complained that Nylon, a fashion news website, had also posted a photo of the dress on its Instagram account with a caption that Lord & Taylor had reviewed and approved, in addition to a “seemingly objective article” about the piece of clothing, neither of which indicated that they were paid-for ads.
Although the FTC has the power to impose a penalty of up to $16,000 (£11,140) for any such violation, Lord & Taylor has not been fined.
However, it has agreed to establish a monitoring and review programme for future endorsement campaigns and must report back to the FTC about its implementation.
The UK’s Advertising Standards Authority has already taken action of its own against social media product placements.
In 2014, it reprimanded Oreo-maker Mondelez for contacting vloggers to promote its biscuits without revealing they had been paid to do so.