FTC turns screws on Payola search

Federal regulators in the US have determined that several Internet-search engines are not properly informing Internet consumers when certain advertisers pay for a prominent placement in search results - which can give them a competitive "eyeball" advantage, unfair or otherwise.

The Federal Trade Commission (FTC) is asking companies that maintain search engine sites to review their respective Websites to ensure that "any paid ranking search results are distinguished from non-paid results with clear and conspicuous disclosures". The FTC also made a similar recommendation for search engine service providers that offer "paid inclusion", a similar feature in which search engines freely mingle paid-listings with search results that are not paid.

Paid search results are an increasingly common form of advertising on the Internet. However it is still unclear to many Internet consumers whether the search results they get are promotions or gathered through more objective means such as automatic indexing technologies. A survey by the advocacy group Consumers Union found that 60% of Internet users were oblivious to the fact that certain search engines received fees to feature some Websites more prominently.

The recommendations can be seen as a delayed reaction to a complaint that was filed in July 2001 by a Portland, Oregon-based consumer-advocacy group called Commercial Alert, which asked the FTC to investigate whether several search sites were engaging in unfair or deceptive practices. The search sites under the spotlight included: AOL Time Warner Inc, Microsoft Corp, Ask Jeeves Inc's Direct Hit Technologies, iWon Inc, CMGI Inc's AltaVista Co, LookSmart (LOOK) Ltd, and Terra Lycos SA.

While the FTC's recommendations do not carry any legal compliance requirement, it can be seen as a first step towards cleaning up some of the dubious practices being followed by search engine firms by pushing them to delineate paid listings from search results.

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