(Adds statement from Lord & Taylor)
By Diane Bartz
WASHINGTON, March 15 (Reuters) - Lord & Taylor, which is owned by Hudson's Bay Co, has settled with a U.S. regulator over the store's decision to advertise in an online magazine without disclosing the article as advertising, the Federal Trade Commission said on Tuesday.
The practice, known as native advertising, is only allowed by the FTC if the company distinguishes the advertising from objective content. Not to do so is misleading, according to the FTC.
The settlement is the first regarding native advertising since the agency issued guidelines in December, according to Lesley Fair, an attorney with the FTC's Bureau of Consumer Protection.
Lord & Taylor caught the attention of the agency when they paid for an article in the online fashion publication Nylon Magazine that the store reviewed and approved, and then paid for the dress to appear in Nylon's Instagram feed but did not identify either as advertising, according to the FTC complaint.
Instagram is a photo-sharing app.
"Lord & Taylor needs to be straight with consumers in its online marketing campaigns," said Jessica Rich, director of the FTC Bureau of Consumer Protection. "Consumers have the right to know when they're looking at paid advertising."
The company also gave the dress to "50 select fashion influencers" and paid them $1,000 to $4,000 to post a photo on Instagram of them wearing the dress but without disclosing the payment, the complaint said.
Lord & Taylor noted in a statement that the FTC did not find any wrongdoing on the part of the company in its ad campaign.
"When it came to our attention that there were potential issues with how the influencers posted about a dress in this campaign, we took immediate action with the social media agencies that were supporting us on it to ensure that clear disclosures were made," the company said. "We cooperated fully with the FTC's inquiry into the marketing of this dress and have of course agreed to uphold the current version of the guidelines."
Under the terms of the settlement, Lord & Taylor is barred from presenting advertising that it pays for as coming from an independent source, such as a magazine. It also agreed to require any fashion influencers that it hires to disclose that they have been paid.
Lord & Taylor did not immediately reply to email and telephone requests for comment. (Reporting by Diane Bartz; Editing by Meredith Mazzilli and Chris Reese)