FTC and Machinima Reach Agreement Regarding Deceptive Advertising

Who is Machinima?

Machinima is a gaming and media streaming network founded in January 2000. It is geared towards gamers, creators, and fans and has over 12 millionYouTube subscribers. The network hosts thousands of YouTube videos over many channels including: Realm Games, ETC News, Inside Gaming, and more. Additionally, Machinima has notoriety through many social media platforms as well as Android and Apple’s iOS. The various channels and platforms Machinima operates focus on providing news, previews, and reviews of video games and even include live event coverage.

What was the Issue?

In September 2015 the Federal Trade Commission (FTC) charged that Machinima engaged in “deceptive advertising.” Apparently, the network paid some of its YouTube channels upwards of $30,000 to produce videos endorsing Microsoft’s Xbox One System. It was not illegal for Machinima to pay for such endorsements; however, its failure to disclose the advertisements was. Without proper disclosure, it appeared that the endorsers were offering their objective opinions on the system, while in reality they were being paid to make those representations. Further, it was discovered that Machinima may have explicitly told the video makers not to reveal that they had received payment in order to maintain the illusion of unbiased reviews.

What Does the FTC’s Order Say?

The order, drawn up by Secretary of the Commission Donald S. Clark, requires Machinima to not misrepresent an “Influencer Campaign” as an endorsement made by an independent user or ordinary consumer of the product. By “Influencer Campaign” the Secretary is referring to any advertisement or promotion for which Machinima engages an Endorser (a.k.a. an Influencer) to publish an endorsement for compensation. Further, Machinima must clearly and prominently disclose any “material connection” between the Endorser and the advertiser of a product. Material connection means any relationship that could affect credibility of the endorsement.

Machinima is responsible for monitoring and reviewing the representations made by its Endorsers to ensure they are complying with the order. Findings from the monitoring must be contained in reports that thoroughly show the results. Further, Machinima must, for five years after the publishing of an endorsement, maintain the records in order for the FTC to perform an inspection of the documents to ensure compliance. The order is set to terminate twenty years from the most recent violation of the order, which, as of now, is March 16, 2036.

The way the order is set up, Machinima is not currently liable for any monetary fines, but according to Polygon, is “subject to a penalty of up to $16,000” for violations. This is not the only example of deceptive advertising on the internet and the FTC is making a push for action. One of the leading issues is a form of advertising that has been coined: native advertising. A native advertisement is one that blends in with the other content on a webpage or platform, which blurs the lines for consumers as to whether they are viewing content or an advertisement. This is not illegal per se, but the FTC and other agencies are working to ensure that proper disclosure is presented alongside these advertisements to protect consumers.

As online advertisers become more sophisticated it is becoming tougher to know when you are watching an honest, objective review or an advertisement. While the government is taking action to help draw lines it is important for us, as consumers, to stay vigilant and take steps to ensure we are viewing authentic content.

For more information about internet protection contact Revision Legal’s team of experienced internet attorneys through the form on this page or call 855-473-8474.

Image courtesy of Flickr user Draxtor Despres