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."
Nick Wingfield and Nicholas Kulish, The Wall Street Journal. June 28, 2002
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