Machinima inc has reached a settlement with the Federal Trade Commission over an advertising campaign to promote the Xbox One. Machinima is one of the major producers of gaming media, and they have a vast multi-channel network which pays thousands of dollars to Youtubers to publish content under the Machinima brand.
Machinima took part in an advertising campaign, which was managed by Microsoft’s advertising agency, Starcom MediaVest Group. During the campaign, several YouTubers were given early access to the Xbox One and some games on the platform, and were paid by Machinima to upload endorsement videos promoting it. According to the FTC report, Machinima paid out tens of thousands of dollars for these videos. The key point in all of this which got Machinima into trouble, was that it did not require the YouTubers to disclose that their videos were a paid endorsement. Jessica Rich, Director of the Bureau of Consumer Protection, stated, “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.”
Under the settlement, Machinma is prohibited from misrepresenting paid endorsements as independent opinions in any future campaigns. Machinima is also forbidden from compensating any YouTuber who does not make the required disclosures. Machinima must also follow up within 90 days of the start of a campaign to make sure that disclosures are still being made. This settlement is not yet final, it will be open for public comment until October 2, when the FTC will make its final decision on whether to accept this settlement. Comments can be submitted here.
The FTC also investigated Microsoft and Starcom regarding this incident, but decided not to take any action against them. The FTC considered this to be an isolated incident which occurred in spite of policies which both companies had in place to prevent it. The FTC also considered the fact that both companies took swift action to make Machinima issue disclosures when they learned what had happened.
Is this settlement adequate to deal with Machinima’s wrongdoing? Leave your comments below.