Greetings, readers. First, I know that I’ve been absent for a while, but I have been busy with a new job (hooray for steady paychecks!). Knee-deep in trademark filings and game developer business contracts.
But now I’m back, and it’s time to turn to a new topic: advertising law. Earlier this month, the Federal Trade Commission reached a settlement with Machinima, Inc. regarding videos created as a part of a marketing campaign for the Xbox One. Machinima paid certain video creators, referred to as “influencers,” up to $30,000 to endorse the Xbox One in their videos. Others were paid per view, up to a total of $25,000. Influencers were also given pre-release access to the console and certain games. Now, you might think that there would be nothing wrong (or at least, nothing illegal) with things like that, and you would be right, except that none of the influencers disclosed the money and other perks that they received in exchange for the positive reviews.
The FTC has rules regarding endorsements and what constitutes misleading advertisements. They actually have a good (and pretty easy to read) set of guidelines here, but it more or less boils down to this: anyone who endorses the goods and services of another must disclose any “material connections” between the endorser and the provider. A material connection means “a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement.” That would include, for example, being paid $25,000 to say nice things about Microsoft. But it also includes lesser benefits like a free copy of a game or early access to a new console. i.e. “Of course he’s going to say nice things about the game; he wants to keep getting free stuff.”
These guidelines apply even if the material connections didn’t actually influence your opinion at all. If Nintendo gave you a million dollars to review Super Mario Maker, but you would have called it the best game of the century even if you had gotten nothing at all, you still need to disclose the money. As the guidelines make clear, this applies no matter what medium you’re using to communicate: newspapers, magazines, blogs, YouTube, Facebook, even Twitter (“#ad”). Your “Let’s Play” video could very well end up on the wrong side of the law, if you aren’t careful.
Well, Machinima wasn’t careful. Its influencers didn’t make the necessary disclosures. Nevertheless, Machinima uploaded their videos, anyway, all as part of an advertising deal with Microsoft’s advertising agency (Starcom MediaVest Group). The FTC caught wind of all this, and cracked down on Machinima. So now, under the terms of the settlement with the FTC, Machinima may not upload any video unless the video maker adequately discloses all of its material connections to the viewers. Machinima also must have a system in place to monitor compliance with uploaded videos, and to continue to monitor those videos for continued compliance.
The FTC also investigated Microsoft and Starcom, but ended those inquiries without taking action. Although both Microsoft and Starcom were also responsible for the influencers’ failure to make the required disclosures, the FTC determined that these were “isolated incidents that occurred in spite of, and not in the absence of, policies and procedures designed to prevent such lapses.” So, I guess we can also learn that having a well-written policy in place can be a good defense, even if someone falls down on the job at some point.
The take-away point is, when in doubt, mention the special benefit that you received. I know that it might impact your credibility in the eyes of someone out there, but it sure beats a federal investigation.
As always, this is just legal information, not legal advice, and (unless you hired me recently) I am not your lawyer.
© 2015 Sam Castree, III
now at SamCastree [a.t] crawfordpatents [d.o.t] com!
Disclosure: I have not received anything from anyone to write this article. However, Mario Maker is super-awesome.