Lord & Taylor has reached a settlement with the Federal Trade Commission over charges that the retailer didn’t make clear that it paid for an article in a fashion magazine promoting its clothing collection. Lord & Taylor was also accused of not properly disclosing that it compensated social media influencers as part of a marketing campaign.

According to the FTC’s complaint, Lord & Taylor launched a social media campaign in March 2015 to promote its Design Lab collection, a private label clothing line aimed at women ages 18 to 35 years old. The campaign included native advertising editorials in online fashion magazines and posts from social media fashion influencers, which focused in particular on the collection’s Paisley Asymmetrical Dress.

As part of the campaign, fashion magazine Nylon posted a photo of the dress along with a Lord & Taylor-edited caption on its Instagram account and ran an article about the Design Lab collection online. The Instagram post and article, however, didn't indicate that they were paid advertisements from Lord & Taylor.

The settlement prohibits Lord & Taylor from misrepresenting that its paid commercial advertising is from an independent or objective source and prohibits the retailer from misrepresenting that an endorser is an independent consumer.

“Lord & Taylor needs to be straight with consumers in its online marketing campaigns,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in a statement. “Consumers have the right to know when they’re looking at paid advertising.”

The Lord & Taylor dispute represents the first case on native advertising that the FTC has brought forward since releasing guidelines in December that are designed to make sure consumers aren’t misled into thinking native ads are editorial content. Native advertising, also known as sponsored content, is designed to mimic a website’s editorial look and feel. It is a fast-growing area of the advertising market as brands seek new formats that consumers are more likely to engage with than banner ads.

Publishers ranging from digital media outlets like BuzzFeed to major newspapers like the New York Times and The Wall Street Journal all accept payment to run sponsored articles that relate to an advertiser’s products and services.

While publishers should make sure the native advertising that appears on their websites is in line with the FTC’s guidelines, “the advertiser ultimately is responsible,” said advertising attorney Ronald Urbach, chairman of Davis & Gilbert LLP. “They need to ensure their processes and systems are in place and that what needs to get done gets done.”

Mr. Urbach noted that the Lord & Taylor scenario is a “good example of the rise and extensive use of integrated campaigns” from marketers. The retailer’s use of native advertising and influencer posts isn't uncommon.

“The use of native advertising is going to be more not less, and therefore the potential for cases for the FTC is more not less,” he added.

The FTC mandates that endorsers of a product must disclose if they’re connected in some way to the manufacturer of that product.

According to the FTC’s complaint, Lord & Taylor gifted its Paisley Asymmetrical Dress to 50 fashion influencers who were paid $1,000 to $4,000 to post on Instagram a photo of themselves wearing the dress. While the contracts required the influencers to mention Lord & Taylor’s Instagram account and the hashtag #DesignLab in the photo caption, they weren't required to disclose in their posts that they had been compensated. Overall, the Design Lab Instagram campaign reached 11.4 million users and resulted in 328,000 brand engagements, the FTC’s complaint said. The dress sold out.

“Lord & Taylor is deeply committed to our customers and we never sought to deceive them in any way, nor would we ever,” the company said in a statement. “In the FTC’s consent order announced today, there is no finding of wrongdoing whatsoever.”

“A year ago, when it came to our attention that there were potential issues with how the influencers posted about a dress in this campaign, we took immediate action with the social media agencies that were supporting us on it to ensure that clear disclosures were made. We cooperated fully with the FTC’s inquiry into the marketing of this dress and have of course agreed to uphold the current version of the guidelines,” the company said.

Write to Nathalie Tadena at nathalie.tadena@wsj.com