June 30th, 2002
FTC Seeks Disclosure of Ad Fees Related to Online Search Results
By Nick Wingfield and Nicholas Kulish
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
that 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. The companies that
operate the sites include 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 commision.
But instead of a formal approach, "we’d rather get there more quickly and
voluntarily," Mr. Beales said.
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, editorial teams and automatic
indexing technologies that scour the Web. A survey by the advocacy group Consumers
Union found that 60% of Internet users weren’t aware that certain search engines
received fees to feature some sites more prominently.
Representatives 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."