July 24, 2002, 12:00 AM

FTC urges clearer disclosure of paid placements in search results

Seven search engines have received letters from Federal Trade Commission urging them to state more clearly when marketers have paid to have sites appear in search results. The letter was in response to a complaint of a consumer advocacy group.

The Federal Trade Commission has advised web search engines that, in delivering search results, they need to more clearly distinguish paid placements and listings for which sponsors have paid a fee to be included.

In a response to a complaint filed last summer by consumer advocacy group Commercial Alert regarding the disclosure of paid search results by seven search engines including those of AOL Time Warner Inc., Alta Vista Co., Looksmart Ltd. and others, the agency in June issued letters to search engine companies outlining the need for “clear and conspicuous” disclosures of paid placements and paid inclusion. The complaint had asked the FTC to investigate whether the search engines were violating Section 5 of the Federal Trade Commission Act, by failing to disclose that advertisements are inserted in search results lists. It claimed that without sufficient disclosure, “concealment may mislead search engine users to believe that search results are based on relevancy alone, not marketing ploys.”

Though the FTC’s Bureau of Consumer Protection says it will not recommend that the agency take formal action against the search engines listed in the complaint at this time, its letter to the engines says their current disclosure of paid placements may not be sufficiently clear. In addition, the letter urges clearer disclosure on the use of paid inclusion, including “more conspicuous descriptions of how any such program operates and its impact on search results."

The search engine companies named in the complaint also are being urged to discuss the need for clear disclosure of paid placement and paid inclusion with any third parties, including other search engines to which they supply search results, to ensure that these criteria are met.

Other search engines named in the complaint are Direct Hit Technologies, iWon Inc., Microsoft Corp., and Lycos S.A.

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