U.S. Warns Web Sites to Label Sponsorships
The F.T.C. said that an investigation had turned up some questionable practices and that it would send letters to the search engine companies "outlining the need for clear and conspicuous disclosures of paid placement, and in some instances paid inclusion, so that businesses may avoid possible future commission action."

The letters will go to AltaVista, AOL Time Warner, iWon.com, Looksmart, Microsoft, Terra Lycos and Direct Hit, now a part of Teoma.

Paid ads tied to search engine queries have been one of the few bright spots in an otherwise dismal online advertising market. Many search engines have joined forces with ad placement services like Overture Services Inc. or developed their own paid listings programs. The ads are often similar in appearance to regular search results and are sometimes labeled as "sponsored links" or, more vaguely, "featured listings." Even the standard search results on sites using information from companies like Inktomi may include paid listings, although this is often not disclosed.
http://www.nytimes.com/2002/07/02/technology/02SEAR.html