FTC Slaps Machinima on the Wrist for Its Paid Endorsements
YouTube gaming network Machinima has settled with the Federal Trade Commission after an investigation into undisclosed paid endorsements, the FTC said today.
Earlier this year, the FTC issued a complaint against Machinima, saying that it had failed to disclose financial incentives regarding video content uploaded by its member channels, in violation of the Federal Trade Commission Act. Microsoft, through an outside agency, paid Machinima to produce positive videos about the Xbox One game machine, and many of the YouTube stars who accepted the deal failed to properly disclose that they were producing paid, sponsored content, not independent analysis.
The incident in question happened in late 2013, following the launch of the Xbox One. According to the FTC’s complaint, a number of YouTube channels (it names two, SkyVSGaming and The Syndicate Project, in the complaint itself) were commissioned by Machinima to produce videos featuring the Xbox One launch title Ryse: Son of Rome in a way that “[showcased] Microsoft in a positive light.”
The FTC said that two of the YouTube video creators were paid $15,000 and $30,000 each for their videos. This money came from a deal made between Machinima and the marketing firm StarCom MediaVest Group, Inc., acting on Microsoft’s behalf. In all, it said that 300 videos were uploaded by Machinima’s affiliates, or “Influencers,” through November and December 2013, generating more than 300 million views, speaking favorably of Microsoft without disclosing the company’s financial involvement.
In a statement emailed to WIRED today, Machinima attempted to distance its current management from the promotion, noting that it occurred just prior to a “change of management in March 2014.”
“Machinima is actively and deeply committed to ensuring transparency with all of its social influencer campaigns,” it said.
The terms of the ruling seem like something of a slap on the wrist, if that. Machinima is due to pay no fines for this incident, although it could be fined “up to $16,000″ for any such incident in the future. Not a very big fine when it’s able to pay out $30,000 for a popular video.
Microsoft, too, seems to have gotten off scot-free. In a letter to Microsoft and StarCom’s legal counsel, the FTC writes that while “as the advertiser, Microsoft bears responsibility for the influencers’ failure to disclose such material connections,” it have decided to take no action against Microsoft or StarCom.
“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,” the FTC says.
“We are pleased that the FTC recognized Microsoft has vigorous compliance processes and procedures for sponsored campaigns,” Microsoft said in an emailed statement.