Consumer Group Asks FTC To Investigate Search Ads

Is it deceptive advertising to include paid listings in your search results and not clearly label them as ads? A group backed by consumer advocate Ralph Nader believes so, and it's asking the US Federal Trade Commission to take action against seven major search companies.

Commercial Alert filed its complaint with the FTC on Monday, claiming that AltaVista, AOL Time Warner, Direct Hit, iWon, LookSmart, Microsoft and Terra Lycos are violating US law by inserting paid listings within their search engine results "without clear and conspicuous disclosure that the ads are ads."

It is significant that the complaint doesn't suggest that the ads shouldn't be allowed, only that they be clearly labeled and distinct from more editorially-derived listings. Indeed, Google is singled out for praise because its paid listings appear with "Sponsored Links" identifiers and are thus considered to be clean.

Ironically, most of the services named are in trouble mainly for carrying paid placement listings from GoTo under euphemisms such as "Featured Listings" or "Partner Search Results" while GoTo itself was not named. This is probably either because GoTo has no long history of carrying editorial-results or because the "Cost to advertiser" labels associated with each paid listing at the GoTo site itself is deemed to be clear enough to consumers.

The companies named certainly could make life easier for themselves by changing the wording associated with the paid listings carried by their search engines, but that wouldn't take care of issues connected with paid inclusion listings.

In the case of paid inclusion, sites are paying to have better representation in search results but usually do not gain any ranking boost. Thus, it is more difficult to completely classify paid inclusion content as ads (though, interestingly, companies like LookSmart may call those who take out paid inclusion listings "advertisers").

It's unlikely that the FTC will take any immediate action, but the story is already generating headlines and may produce some abrupt changes, if only to solve a PR nightmare. Expect follow-ups, as necessary.

Commercial Alert Files Complaint Against Search Engines for Deceptive Ads
Commercial Alert, July 16, 2001
http://www.commercialalert.org/releases/searchenginerel.html

The actual complaint and background about why it was filed.

Internet search engines charged with deception
Reuters, July 16, 2001
http://news.cnet.com/investor/news/newsitem/0-9900-1028-6582874-0.html

Search Engines Accused of Deception
AP, July 16, 2001
http://www.msnbc.com/news/601205.asp

More about the complaint, plus quotes from Consumer Action and from search engines defending themselves.

Group Charges Search Engine Results Deceptive
NewsFactor.com, July 16, 2001
http://dailynews.yahoo.com/h/nf/20010716/tc/12047_1.html

Another story about the complaint.

Watchdog group awaits FTC action on search engines
ZDNet eWeek, July 20, 2001
http://www.zdnet.com/eweek/stories/general/0,11011,2792725,00.html

The FTC speaks -- but only to say they can't confirm or deny if they got the complaint. It also explains that assuming it does investigate, it would try to reach a settlement with the search engines first, then take legal action should that fail.

Search Engines and Editorial Integrity
Online Journalism Review, July 24, 2001
http://ojr.usc.edu/content/story.cfm?request=611

Examines the complaint and comments on the growth of paid listings, ending with a call for users to let search engines know that they want paid content clearly labeled.

Pay For Placement?
http://searchenginewatch.com/resources/paid-listings.html

Not familiar with the concepts of paid placement or paid inclusion. You'll find plenty of articles on the topic here, written by me and others.

Search Engines & Legal Issues
The FTC has taken action against third-parties who posted misleading information in search engines, as described on this page. Will it now take action against the search engines itself?

Search Engine Strategies: San Francisco
http://seminars.internet.com/sew/sf01/agenda2.html#st1

Next month's Search Engine Strategies conference presented by Search Engine Watch will feature a panel on search engines & legal issues, as part of the two-day event.