FTC Announces First Fines For Undisclosed 'Pay To Promote' On Social Media


FTC Announces First Fines For Undisclosed 'Pay To Promote' On Social Media

The Federal Trade Commission (FTC) announced this week that one of the largest online networks for computer gamers and creators engaged in deceptive advertising by paying people to say good things about Xbox One.

In a released statement the FTC said some YouTubers were paid $30,000 by marketing network Machinima to sing Xbox One's praises, as part of a 2013 secret advertising campaign agreement with Microsoft.

The agreement, which involved YouTubers contractually being blocked from any form of criticism of Xbox One, included supplying them with suggested video cuts and talking points.

The commission has "asked"  Machinima to stop using other similar "deceptive conduct" and to require any future endorsers to clearly reveal when they have been paid to endorse products. Machinima has agreed to the requests.

Under its mandate the FTC can not seek civil fines without a court order in place, although according to it spokesman Jay Mayfield,  if an order was in place and broken at a later date, a civil penalty of $16,000 can be imposed.

Mayfield said the Machinima case is the first time the FTC has issued orders over deceptive YouTube advertising by YouTube creators.

Director of the Bureau of Consumer Protection Jessica Rich  said ."When people see a product touted online, they have a right to know whether they're looking at an authentic opinion or a paid marketing pitch. That's true whether the endorsement appears in a video or any other media."

Neither of  Xbox One partners, Microsoft and Starcom were cited by the FTC for wrongdoings, and Microsoft was even sent a letter somewhat praising them for their involvement.

It read:

The failures to disclose here appear to be isolated incidents that occurred in spite of, and not in the absence of, policies and procedures designed to prevent such lapses. Microsoft had a robust compliance program in place when the Xbox One campaign was launched, including specific legal and marketing guidelines concerning the FTC's Endorsement Guides, 16 C.P.R. Part 255, and relevant training made available to employees, vendors and Starcom personnel. Since the Xbox One campaign, Microsoft and Starcom have adopted additional safeguards regarding sponsored endorsements, and they have committed to, among other steps, specifically requiring their employees to monitor influencer campaigns conducted by subcontractors in the future. In addition, Microsoft and Starcom took swift action to require that Machinima insert disclosures into the campaign videos once they learned that Machinima had paid the influencer and that no disclosures had been made.

Microsoft and Machinima have yet to comment on the FTC's actions.

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