FTC said to be 'strongly considering' paid listings probe

The federal agency is mulling whether to review how search engines are complying with 2002 guidelines regarding how paid listings in search results are disclosed to consumers, an industry group says.

The Federal Trade Commission is "strongly considering" a review of whether Web search engines are complying with 2002 guidelines governing how paid listings are disclosed to consumers, according to a search marketing industry group.

The revelation surfaced in a letter sent today to the FTC by the Search Engine Marketing Professional Organization (SEMPCO), in which the organization offers its assistance in revising guidelines on transparency of paid listings appearing in search results

From SEMPCO's letter, as reprinted by Search Engine Land (see full letter below):

We understand that the FTC's Consumer Protection Bureau is now looking closely at the issue of search labeling transparency and is strongly considering a formal review of compliance with the 2002 guidelines for search engine disclosure concerning paid advertisement appearances in search results, as well as a possible revision of the guidelines.

CNET has contacted the FTC for comment and will update this report when we learn more. The agency told Search Engine Land that it had received SEMPCO's letter but said it had not "announced any plans for a formal review."

CNET has also contacted Google, Yahoo, and Microsoft for comment.

In suggesting a revision of guidelines, SEMPCO points out that the search industry has changed dramatically in the decade since the current guidelines were created.

"The fact that not all sites, particularly vertical/specialized search sites, follow current guidelines indicates that it's time for a fresh look at the guidelines, perhaps starting with a workshop or industry-wide conversation about the issues," the group said.

Paid placement allows an advertiser to pay for higher ranking or prominence on a results page, relative to a keyword search. But the practice drew the FTC's interest in 2001 after a complaint that search engines routinely misled consumers by promoting paid links as "recommended" or "featured" sites.

After a nearly year-long investigation into the issue, the FTC sent letters to search-engine companies in 2002 outlining the need for clear disclosure of paid listings on their sites.

SEMPCO's letter to the FTC:

October 15, 2012

Jon Leibowitz, Chairman, Federal Trade Commission 600 Pennsylvania Avenue, NW Washington, DC 20580

Dear Chairman Leibowitz:

We understand that the FTC's Consumer Protection Bureau is now looking closely at the issue of search labeling transparency and is strongly considering a formal review of compliance with the 2002 guidelines for search engine disclosure concerning paid advertisement appearances in search results, as well as a possible revision of the guidelines. SEMPO believes that this review and revision would be positive steps to take, and not merely in light of recent media coverage of this subject.

Should the FTC undertake such a review, in addition to signifying the understanding that recent extreme antitrust claims against Google search practices lack merit, it would also be taken to mean that the FTC perceives the benefits of taking a broader, industry-wide approach to search labeling and transparency - a positive position.

As we have publicly stated previously, the search function is not a government-run utility, established by law and thus subject to bureaucratic oversight, but a service provided to consumers and businesses by private companies, which have set up their operations using their own principles, proprietary technologies and algorithms. We feel strongly, for a host of reasons, that regulating individual companies' search algorithms is undesirable.

Nonetheless, we believe that a level playing field should be ensured for search as a whole - both for the protection of consumers and in furtherance of fair competition within the search industry. Consumers and search engines are both better off when consumers have full transparency about why they are seeing which results on search websites. If the present FTC guidelines on paid placements are being widely flouted, or if certain industry segments - such as vertical search sites - harbor particular practices that mislead consumers, result in fraud, or offer unfair competitive advantage to their commercial customers, the public and the business community deserve to know. And they also deserve to have steps taken to protect them in future.

The 2002 search engine disclosure guidelines were helpful, but the world has changed since then. Updated guidelines would eliminate the need for more prescriptive regulation of search website results, which we believe could be harmful. The fact that not all sites, particularly vertical/specialized search sites, follow current guidelines indicates that it's time for a fresh look at the guidelines, perhaps starting with a workshop or industry-wide conversation about the issues.

Here is where we believe we can offer assistance. SEMPO stands in a unique position. Our membership includes the leaders and experts in the Search Engine/Search Marketing industry, with all the knowledge that they possess, yet as a non-profit association we function collectively as an unbiased third party, working from the principles of fairness and equity. Our leadership team and membership community are already assisting the U.S. government: for example, we are currently working with the Department of Labor on the classification of job roles. We also compiled and submitted thoughtful and informative communications to the Senate and the House of Representatives concerning the proposed SOPA/PIPA legislation, and we mobilized others to do the same.

Therefore, we respectfully suggest that we could provide valuable insight and background to the Consumer Protection Bureau, both on the topic of a search engine guideline compliance review, and in presenting considerations for the transparency policy development process that might result after such a review.

SEMPO would be eager to contribute to any conversations or workshops on these topics. If tapping our expertise would be useful to you, please contact Chris Boggs [email and phone omitted] to discuss further how we might help.

Signed:

Mike Grehan, President / Chris Boggs, Chairman / Rob Garner, Vice President / Mike Corak, Treasurer

cc: David Vladeck, Director, Bureau of Consumer Protection Laura Sullivan, Advertising Practices Deborah Matties, Attorney Advisor to Chairman Jon Leibowitz Chris Renner, Attorney Advisor to Chairman Jon Leibowitz Chuck Harwood, Deputy Director, Bureau of Consumer Protection

 

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