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

More and 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) has 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. Specifically, the complaint alleges that Warner Bros. failed to adequately disclose that it paid online “influencers” thousands of dollars 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 new 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, during the campaign, 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, generating millions of views. The sponsored videos were viewed more than 5.5 million times.

Warner Bros. paid each influencer from hundreds to tens of thousands of dollars, gave them a free advance-release version of the game, and told them how to promote it. The FTC contends that Warner Bros. required the influencers to promote the game in a positive way, have a strong call-to-action to click the link to ultimately purchase the game, not to disclose any bugs or glitches they found 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. did not instruct the influencers to include sponsorship disclosures clearly and conspicuously in the video itself where consumers were likely to see or hear them. Instead, Warner Bros. advised influencers to place the disclosures in the description box appearing below the video. Because Warner Bros. also required other information to be placed in that box, the vast majority of sponsorship disclosures were not conspicuous and appeared “below the fold,” visible only if consumers clicked on the “Show More” button in the description box. Additionally, when influencers posted YouTube videos on Facebook or Twitter, such posts did not include the “Show More” button, making it even less likely that consumers would see the sponsorship disclosures.

Under a proposed FTC order, Warner Bros. is barred from failing to make such disclosures in the future and cannot misrepresent that sponsored content, including gameplay videos, are the objective, independent opinions of video game enthusiasts or influencers. The proposed order settling the FTC’s charges prohibits Warner Bros. from misrepresenting that any gameplay videos disseminated as part of a marketing campaign are independent opinions or the experiences of impartial video game enthusiasts. Further, it requires the company to clearly and conspicuously 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.

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.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.