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The Kelsey Report® Advisory

Does 'Pay-for-Placement' Mislead Consumers?
Bobbi Loy-Luster , 7/11/2002

Issue: FTC Guidelines Affect IYP, Search Space

News: The Federal Trade Commission (FTC) recently responded to a deceptive advertising complaint, filed July 16, 2001, by the watchdog group Commercial Alert. The group requested an investigation of various search engines' paid placement/paid inclusion programs as a possible violation of the Federal Trade Commission Act. Companies named in the complaint were AltaVista, AOL, Direct Hit, iWon, LookSmart, Microsoft and Terra Lycos.

The FTC Act (15 U.S.C. 45(a)(1)) "prohibits unfair or deceptive acts or practices in or affecting commerce." Commercial Alert claimed that search engines may have violated the act by leading consumers to believe that all search results were ranked by relevance and not informing them that some search results could be paid advertisements.

The FTC decided to take no formal action at this time. However, the commission has established definitions of paid placement and paid inclusion and recommended that all search engines follow these guidelines to differentiate between paid and non-paid content.

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