The Federal Trade Commission (“FTC”) – a governmental agency tasked with promoting consumer protection, and eliminating and preventing anticompetitive business practices – has approved a final order requiring Warner Bros. Home Entertainment to disclose payments made to online influencers to post endorsement videos.
Under the terms of the original complaint – which was initially slated for settlement in July 2016 and centered on a late-2014 Warner Bros. online marketing campaign designed to generate buzz within the gaming community for the new release of Middle Earth: Shadow of Mordor – Warner “deceived consumers during a marketing campaign for Middle Earth: Shadow of Mordor.” The entertainment giant came under fire for failing to disclose that it had paid online “influencers” hundreds to tens of thousands of dollars to put “positive gameplay videos on YouTube” and other social media channels. According to the FTC, the endorsements videos from those influencers – whom Warner Bros. gave free advance release versions of the game, with instructions on how to promote that game and to not disclose bugs or glitches – were viewed more than 5.5 million times.
The FTC also alleged in its initial complaint that 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, thereby misleading consumers by suggesting that the gameplay videos of Shadow of Mordor reflected the independent or objective views of the influencers.
Under the terms of the agreement, which will serve to settle the FTC’s charges against Warner Bros, the company is prohibited from misrepresenting that any gameplay videos disseminated as part of any future marketing campaigns 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.
Finally, while the settlement at hand does not have a monetary component (likely because it is the FTC’s first action against Warner Bros.), it 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. (Here is a guide on how to properly disclose sponsored posts).
The FTC confirmed that the settlement comes after a public comment period was concluded; the majority of the 19 public comments centered on consumers actually having been misled as to the nature of the influencers’ endorsements, resulting in their purchase of the video game at issue. The FTC vote approving the final order and responses to the public commenters was 3-0.
The initial complaint and subsequent settlement coincide with an uptick in celebrities and other influencers peddling brand messages on their personal social media accounts, often without explicit disclosure. According to Michael Ostheimer, a deputy in the FTC’s Ad Practices Division, the agency will be ramping up its efforts to identify and rectify instances of misleading endorsements, including putting the onus on the advertisers to make sure that influencers comply. This means more cases like the one against Warner Bros.
* The case is In the Matter of Warner Bros. Home Entertainment Inc., File No. 152-3034.