Victory: FTC tells search engines to stop disguising ads as search engine results

[Gary Ruskin]

Commercial Alert			July 1, 2002

Commercial Alert filed a deceptive advertising complaint with the
Federal Trade Commission (FTC) last year against eight major search
engines for disguising ads as search engine results.  

On July 27, 2002, the FTC agreed with our complaint, and is telling
search engines to make "clear and conspicuous disclosure" of ads in
search engine results.

Following is today's Wall Street Journal article about our victory.

http://online.wsj.com/article/0,,SB1025301112186101960,00.html

FTC Wants Web Search Sites To Be Clearer About Paid Listings

By NICK WINGFIELD and NICHOLAS KULISH 
Staff Reporters of THE WALL STREET JOURNAL

Federal regulators have concluded that some Internet search engines
aren't adequately informing consumers when advertisers pay for prominent
placement in search results.

In a letter to search engine sites, the Federal Trade Commission is
recommending the companies review their Web sites to make sure that "any
paid ranking search results are distinguished from non-paid results with
clear and conspicuous disclosures." The commission made the same
recommendation for search engines that offer "paid inclusion," a similar
feature in which search engines freely mingle paid-listings with search
results that aren't paid.

With the letter, the commission was responding to a complaint filed last
July by Commercial Alert, a consumer advocacy group in Portland, Ore.,
affiliated with Ralph Nader, which asked the commission to investigate
whether several search sites were engaging in unfair or deceptive
practices. Those sites included AOL Time Warner Inc., Microsoft Corp.,
Ask Jeeves Inc.'s Direct Hit Technologies, iWon Inc., AltaVista Co.,
LookSmart Ltd. and Terra Lycos SA.

The commission's letter didn't represent a compliance action, but was a
first step toward clarifying acceptable behavior for search engines. "We
think responsible companies will take the concerns we've raised
seriously," said J. Howard Beales III, Director of the Bureau of
Consumer Protection at the commission. But instead of a formal approach,
"we'd rather get there more quickly and voluntarily," said Mr. Beales.

Paid search results are an increasingly common form of advertising on
the Internet, but it isn't clear to many consumers when the search
results they get are promotions or gathered through more objective means
-- typically, automatic indexing technologies that scour the Web or
editorial teams. A survey by the advocacy group Consumers Union found
that 60% of Internet weren't aware that certain search engines received
fees to feature some sites more prominently.

The search engine iWon.com shows the ambiguity: a search for the term
"wine" turns up seven Web sites described as "featured listings" at the
top of the screen, with ten results beneath them described simply as
"Web sites." An iWon spokesman confirmed the featured listings were
paid, but declined to comment on why the company doesn't more explicitly
disclose that fact on the same Web page as the results.

Spokespeople for iWon, Microsoft and Ask Jeeves said the companies
hadn't received the letter from the commission and couldn't comment on
the matter until they did so. AOL, LookSmart and Terra Lycos couldn't be
reached for comment.

"We believe that the paid listings that we display on our site are
delineated from our search results and that the disclosure is not
misleading," said Fred Bullock, AltaVista's Chief Marketing Officer. "If
and when we do receive such a letter, we will take it very seriously and
review its recommendations carefully. We will then respond accordingly."

Gary Ruskin, executive director for Commerical Alert, applauded the
commission's letter, saying his group's original complaint was "part of
a broad defense of the advertising and editorial line."
<–-–article ends here--—>

BACKGROUND:
For more information about how search engines disguise ads as search
engine results, see Commercial Alert's web page on search engines, at
<http://www.commercialalert.org/index.php?category_id=1&subcategory_id=24&article_id=113>

Commercial Alert's FTC deceptive advertising complaint is at:
<http://www.commercialalert.org/index.php?category_id=1&subcategory_id=24&article_id=33>.

The FTC's response is at:
<http://www.commercialalert.org/PDFs/ftcresponse.pdf> (this is a big
file).

Commercial Alert's mission is to keep the commercial culture within its
proper sphere, and to prevent it from exploiting children and subverting
the higher values of family, community, environmental integrity and
democracy. For more information, see Commercial Alert's website at
<http://www.commercialalert.org>.

Commercial Alert's materials are distributed electronically via our
mailing list <commercial-alert@lists.essential.org>. To sign up for our
email list, go to
<http://lists.essential.org/mailman/listinfo/commercial-alert> 
or send a blank message to <mailto:subscribe@commercialalert.org>. 
Subscribers receive 1-2 emails per week.

This note is posted at:
<http://lists.essential.org/pipermail/commercial-alert/2002/000116.html>.
-- 
To sign up for Commercial Alert's email list, go to
<http://lists.essential.org/mailman/listinfo/commercial-alert> 
or send a blank message to
<mailto:subscribe@commercialalert.org>.  
Subscribers receive 1-2 emails per week.

Gary Ruskin | gary@commercialalert.org 
Commercial Alert | http://www.commercialalert.org/
Congressional Accountability Project |
http://www.congressproject.org/
phone: 503.235.8012 | fax: 503.235.5073