FTC raps Machinima for paying YouTubers to plug Xbox One

Video network agrees to settlement in pay-for-praise case

The US Federal Trade Commission (FTC) has struck a settlement with video network Machinima over allegations that influential YouTube broadcasters were improperly paid to endorse Microsoft's Xbox One.

The FTC said the settlement [PDF] will forbid Machinima from running videos without properly disclosing when the broadcaster has been compensated for endorsing a product.

"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 FTC consumer protection bureau head Jessica Rich. "That's true whether the endorsement appears in a video or any other media."

The UK has made a similar push for clear labeling on paid video endorsements.

Machinima had been accused of paying "influential" YouTube video creators to mention Microsoft's Xbox One console in their videos without disclosing that they would be paid. The pay received was based on the number of views their videos received.

The videos were aired as part of an advertising campaign for Microsoft and its advertising agency, Starcom Mediavest Group. The FTC determined that neither Microsoft or Starcom would be subject to the complaint, which was instead made against Machinima.

"The failures to disclose here appear to be isolated incidents that occurred in spite of, and not in the absence of, policies and procedures designed to prevent such lapses," the FTC said [PDF].

"Microsoft had a robust compliance program in place when the Xbox One campaign was launched, including specific legal and marketing guidelines concerning the FTC's Endorsement Guides."

Under the terms of the settlement, Machinima will be required for the next 30 years to clearly disclose when a video includes paid endorsements. The company will also be required to set up policies to ensure proper labeling and disclosure of paid endorsements and, for the next five years, maintain all documents related to the settlement available to the FTC.

The settlement includes no acknowledgment of any wrongdoing. ®

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