Machinima today agreed to settle FTC charges of “deceptive advertising” for their involvement in an Xbox One promotional campaign. According to a public release, the entertainment company is charged with paying YouTube endorsers for strictly positive Xbox One videos without disclosing the financial partnership.
Microsoft’s advertising agency, Starcom MediaVest Group, led the marketing campaign, while Machinima guarunteed high view endorsement videos. Machinima provided a small group of “influencers” with pre-release Xbox One consoles and video games, and paid for two endorsement videos from each party. Payments varied from lump sums to per-view compensation. Two specific YouTube endorsers were compensated $15,000 and $30,000, while others were paid $1 per 1,000 views, up to $25,000.
“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,” said Jessica Rich, Director of the Bureau of Consumer Protection. “That’s true whether the endorsement appears in a video or any other media.”
The settlement requires Machinima disclose connections between endorsers and advertisers, and prohibits Machinima from paying any endorser who does not disclose this partnership. The company is also barred from any misrepresentation of paid endorsements as personal, unbiased opinions.
With the charges winding down, Microsoft offered a statement on the FTC’s ruling. “We are pleased that the FTC recognized Microsoft has vigorous compliance processes and procedures for sponsored campaigns,” responded a Microsoft spokesperson.
While Starcom and Machinima are facing the music, Microsoft themselves are not held accountable. According to the FTC, the incident was isolated and was carried out against the company’s policies. The statement also notes that Microsoft quickly demanded Machinima take remedying actions following the discovery of these undisclosed partnerships.
The FTC has accepted Machinima’s settlement, and the order will be open to public opinion for 30 days. Concerned individuals can submit comments electronically, and after Oct. 2, the Commission will decide whether or not to finalize the deal.