The Federal Trade Commission has deemed certain YouTube videos lauding the Xbox One near the beginning of the its launch as deceptive marketing. YouTube network Machinima has agreed to a settlement. At the time, Microsoft through its advertising agency, Starcom, gave Machinima tens of thousands of dollars to create videos advertising the Xbox One and its launch titles.
According to the FTC’s official complaint (view here), Machinima paid various YouTubers to create positive content in line with its deal with Starcom. This is perfectly legitimate, but an issue arose, because these YouTubers “failed to adequately disclose” that they had been paid for these endorsements. The complaint names two such YouTubers in the complaint receiving $15,000 and $30,000 respectively as compensation for two video reviews.
The FTC’s Bureau of Consumer Protection director explained in a statement, “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.” Machinima also made an offer to a larger group of YouTubers to pay $1 for every 1,000 video views up to $25,000. Again, without requiring disclosure of the compensation.
In the settlement agreement, Machinima agrees to ensure that in the future, they will “clearly disclose when they have been compensated in exchange for their endorsements.” It was determined by the FTC that Microsoft bears no responsibility for the incident. “While Microsoft and Starcom both were responsible for the influencers’ failure to disclose their material connection to the companies, staff considered the fact that these appeared to be isolated incidents that occurred in spite of, and not in absence of, policies and procedures designed to prevent such lapses. The companies also quickly required Machinima to remedy the situation after they learned that Machinima was paying influencers without making the necessary disclosures.”
Microsoft has released a statement saying, “We are pleased that the FTC recognized Microsoft has vigorous compliance processes and procedures for sponsored campaigns.”