Google, Yahoo and Bing warned by FTC over advert labelling

Search engines told to clearly mark paid-for results to enable consumers to distinguish between them and 'natural' results.

US search engines, including Google and Yahoo, have been warned by the FTC to clearly label paid-for search results. Photograph: 

Alamy The Federal Trade Commission has written to search engines operating in the US warning them to "clearly and prominently" distinguish advertising from "natural" search results, saying that over the past decade it has seen companies beginning to mix the two.

The letter (PDF) has been sent to the three largest US search engines – Google, Yahoo and Microsoft's Bing - and also to AOL, Blekko, DuckDuckGo and 17 other specialist search engines for shopping, travel, and local business which display adverts to users.

The FTC, set up to protect US consumers' interests, does not name any search engine company in particular as having breached its rules. But it warns the companies that "consumers ordinarily expect that natural search results are included and ranked based on relevance to a search query, not based on payment from a third party. Including or ranking a search result in whole or in part based on payment is a form of advertising. To avoid the potential for deception, consumers should be able to easily distinguish a natural search result from advertising that a search engine delivers."

It says in the past year, the tendency for search engines to put adverts immediately above "natural" results – as Google and others do – has led more than half of users not to recognise them as adverts. In a survey, nearly half of searchers said the background shading for adverts was white – exactly the opposite of the correct answer, where paid ads above "natural" results are distinguished on almost all search engines by having a non-white background shading. Paid adverts on the right of natural search results have a white background on Google, Bing and Yahoo.

The FTC also says that general search engines which offer specialised services such as news, images, local business or shopping where companies pay to appear should make it clear that they are effectively advertising – and that failing to label them as such would constitute "deceptive practice".

According to the research company eMarketer, Google is the US's most-used search engine, and raked in 73.8% of the $17.3bn (£11.3bn) that was spent on search advertising in 2012 – leaving just $4.5bn for rivals, most of which would have been taken by Yahoo and Bing.

Last year, Google shifted its Shopping search so that it only includes paid listings. The Shopping listings are presented on a panel with a white background – the same as "natural" search results – and with grey text saying "sponsored" at the top right. Above that is a light-shaded panel with a paid ad.

Google said in a statement to the Reuters news agency that clear labelling and disclosure of paid search were important and "we've always strived to do that as our products have evolved."

The FTC in January completed a two-year examination of Google's behaviour in the presentation of search results to see whether it was unfairly favouring its own products such as Maps, YouTube and Shopping. It decided there was no basis to act.