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Warner Bros. Settles FTC Charges It Failed to Adequately Disclose Payments to Online Influencers

9 Aug, 2016 By: Adam Z. Solomon


More brands are paying online “influencers” to engage with, positively review, and market their products. However, a recent federal action reiterates the importance of clearly disclosing the sponsored nature of such content.

The Federal Trade Commission (FTC) reached a settlement with Warner Bros. Home Entertainment Inc. with respect to charges that the company deceived consumers during a marketing campaign for the video game Middle Earth: Shadow of Mordor. The complaint alleges that Warner Bros. failed to adequately disclose that it paid online “influencers” to post positive gameplay videos on YouTube and social media.

The FTC’s complaint arises out of a late-2014 Warner Bros. online marketing campaign designed to generate buzz within the gaming community for the release of the aforementioned video game. The game debuted in September 2014 for the PlayStation 3 and in November 2014 for the Xbox 360.

According to the complaint, Warner Bros., through its advertising agency Plaid Social Labs LLC, engaged online influencers to develop sponsored gameplay videos and post them on YouTube. Warner Bros. also instructed influencers to promote the videos on Twitter and Facebook. The sponsored videos were viewed more than 5.5 million times.

Warner Bros. paid influencers from hundreds to tens of thousands of dollars, gave them a free advance-release game, and told them how to promote it. On a couple of occasions, the YouTube influencers disclosed only that they had been given early access to the game, not that they had also been paid. The FTC contends that Warner Bros. required the influencers to positively promote the game, post the video with a strong call-to-action to purchase the game, not disclose any bugs or glitches, and not communicate negative sentiment about Warner Bros.

While the videos were sponsored content — essentially ads for Shadow of Mordor — the FTC alleges that Warner Bros. failed to require the paid influencers to adequately disclose this fact. Warner Bros. advised influencers to place the disclosures in the description box appearing below the video, instead of in the video itself where consumers were likely to see or hear them. Because Warner Bros. also mandated that other information be placed in that box, the vast majority of sponsorship disclosures appeared “below the fold,” visible only if consumers clicked on the “Show More” button.

Warner Bros. also required “one Facebook post or one Tweet by Influencer in support of Video.” When influencers posted YouTube videos on Facebook or Twitter, some posts did not include the “Show More” button, making it even less likely that consumers would see the sponsorship disclosures. The YouTube description box after clicking “Show More” is shown below:

The proposed order settling the FTC’s charges prohibits Warner Bros. from misrepresenting that gameplay videos disseminated as part of a marketing campaign are independent opinions or the experiences of impartial video game enthusiasts. It also requires the company to appropriately disclose any material connection between Warner Bros. and any influencer or endorser promoting its products. Lastly, the proposed order specifies the minimum steps that Warner Bros., or any entity it hires to conduct an influencer campaign, must take to ensure that future campaigns comply with the terms of the order. These steps include educating influencers regarding sponsorship disclosures, monitoring sponsored influencer videos for compliance, and — under certain circumstances — terminating or withholding payment from influencers or ad agencies for non-compliance.

This proposed settlement serves as a reminder that companies must remember to disclose material connections clearly and conspicuously. Advertisers should carefully consider how consumers will view specific ads, always reviewing and scrutinizing what others are doing on your behalf. Although this order is only binding on Warner Bros., it sets a standard by which other companies may measure and assess their compliance in handling paid influencer scenarios.

Adam Z. Solomon is a partner at Michelman & Robinson LLP, a national law firm with offices in California, Chicago, and New York. He represents clients in all aspects of advertising, digital marketing, promotions, and compliance. He can be reached at (212) 730-7700 or asolomon@mrllp.com.


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