FTC settles with Machinima in Xbox One deceptive advertising case

If you saw a video from a YouTube gamer praising the Xbox One during its launch in 2013, that could have been the result of a marketing campaign that failed to disclose itself upfront to customers. The Federal Trade Commission has now entered into a settlement with the company in charge of that campaign, Machinima, claiming that it engaged in deceptive conduct.

The FTC said:

"In the first phase of the marketing campaign, a small group of influencers were given access to pre-release versions of the Xbox One console and video games in order to produce and upload two endorsement videos each. According to the FTC, Machinima paid two of these endorsers $15,000 and $30,000 for producing You Tube videos that garnered 250,000 and 730,000 views, respectively. In a separate phase of the marketing program, Machinima promised to pay a larger group of influencers $1 for every 1,000 video views, up to a total of $25,000. Machinima did not require any of the influencers to disclose they were being paid for their endorsement."

Under the terms of the settlement, Machinima is now prohibited from engaging in similar conduct in the future, and they must make sure that any YouTube "influencers" clearly disclose they are being compensated for endorsements by the company. Microsoft was also investigated as part of this report, but the FTC said today that while it was "responsible for the influencers' failure to disclose their material connection" it added that this particular situation appears to be an isolated incident and has closed its case against Microsoft.

Source: FTC

  • didn't Nintendo do something like that with wii Posted via the Windows Central App for Android On W10
  • *mind control eyes* nooo they didn't...
  • LOL
  • hahahahaha
  • Where's the video?
  • So if any employee of any company says "I like product X" where X is a product of the company they are an employee of then that is a paid advertisement and if that relationship is not disclosed then it is a FTC violation? And since when do you need to tell people that is a commercial? Sounds more like it a violation of free speech rights than a problem with false advertising.
  • but they question ultimately comes down to whether they are endorsing because they like the product or because they are getting paid to
  • And why does that matter if they like the product or not? Do you think that actors and actresses on TV commercials only use Tide, Speed Stick, Crest, etc? Is there a disclaimer that runs at the bottom of each commercial that says something like "Even though this person is saying that they like Ruffles brand potato chips, we are required by the FTC to tell you that they really prefer Pringles"? All ads are completely made up, and the people are paid to say something positive about something, and maybe something negative against another product. And why should the government have any control over that? Yes, you need advertising rules to stop things like "If you take Centrum vitamins you will lose 20 pounds, be able to lift 50 pounds more, and run two marathons without breaking a sweat - with only one pill!" but to disallow people taking money and saying "I like Prego spagetti sauce" is government controlling speech.
  • If you are getting paid to endorse a product but you pass it off as if it's just regular content on your website/podcast/TV Show and as if these endorsements were just your genuine feelings about a product you have to let the audience know you are being paid to say these things. When you see an ad on TV and someone is endorsing a product or service you will see an asterisk at the bottom of the screen that says *Paid Endorser.
  • You see "Paid Endorser" for lawyer commercials, "get the money owed to you". But have you ever seen one of those disclaimers in a Hot Pocket commercial? I can understand the lawyer commercials, where someone is giving legal advice. I think we should see disclaimers on commercials for medicines - I don't recall ever seeing one in a Viagra commercial. But for saying that they like Xbox needs a disclaimer? This is government controlling speech, deciding what a person can and cannot say what they want, even if paid. I remember there being a web site that someone would post only positive comments about PS, negative comments about Wii and Xbox. This went on for years. And then one day he slipped up and in a screenshot you could see his @sony.com email and was outed as a Sony employee. Should he have been fined and punished by the FTC? He was being paid and didn't disclose his affiliation. Should you, I, and everyone else be required post which company we work for every time we write a comment, under threat of law, because you may be posting comments about a product made by a company you are paid by?
  • No we shouldn't be forced to do that but if you are getting paid by your employer and also endorse their products you can't be considered neutral anymore. Therefore praising the products or services offered by your employer can be considered advertisements.
  • So we are supposed to be on the honor system and everyone can be trusted to follow the rules, because you should not need to post your employer's name and not say anything negative about other products and positive about products your company makes. You are contradicting yourself, you are saying that we need to have a disclaimer, but a disclaimer is not necessary and what you say is an advertisement. You telling me there is not one Microsoft employee here that saying positive things, not one Google, Apple, Oracle, etc. employee saying negative things about Microsoft products? I have a bridge to sell you.
  • Commercials are commercials, it's in the name. We know we are being advertised to, so it does not need a disclaimer. However other media like TV shows, movies, and YouTube videos are required to state when they are paid to use or promote products because advertising is not their up-front primary purpose. Look at any TV show that has been paid by Apple to use their products; you will see "Consideration from Apple" in their credits. Same goes for any other product placement.
  • Like how many people think that this is horrible, wonder how many think that what Google does, and keeps getting away with by manipulating ad results, is perfectly fine. Oh, we already know because we have been told here many times - it is OK because it is Google's service and they can do what they want with it.
  • TL;DR
    No, they shouldn't have to do that on every commercial because they are obviously commercials. When the commercial goes out of its way to not look like a commercial, then they have to put somewhere that it is a commercial by disclosing the person was reimbursed for their participation
    .As per the earlier example a Hot Pocket commercial is clearly an advertisement. The person in it is an actor or actress, they are not going on record as themselves endorsing the product. They are simply a part of the advertisement and an employee of the ADVERTISING agency at that point. An actual employee is not allowed to give their own gliwing review of a product on their own without permission from the company and without the company disclosing that they are an employee paid to represent the company.
    Now when my personality, "WPN00b" goes on record saying I'm reviewing the product, I should disclose that I was also paid in order to review the product in a positive light. That way, viewers know to take it with a grain of salt, I MAY be glossing over negative aspects of the product because I, my online or on-air personality, am being paid to.
    If I was a nameless "faceless" entity already identified as part of the Hot-Pocket commercial then it's clear.to consumers that I may be biased. In the way this was done, that was not clear. It came across as a non-biased review of the product when it was not.
    You see the same when looking through a magazine and there is a scientific sounding report on a weight loss pill or something. They have "ADVERTISEMENT" across the top of each page so that you know it is not unbiased. Anything they say in the "article" is possibly biased towards the product.
  • The courts have interpreted US laws with regards to free speech to not hold companies to a standard of total truth and accuracy only for speech which is non-promotional... Generally if it's "speech" (a political position of the company for example) it's protected... If it's advertising it is not... Companies are generally prohibited from lying in a way that materially misrepresents their product... Since this was basically advertising and it was done deceptively a very strong argument could be made that it crossed the line. Personally it doesn't bother me much because the views expressed by the "reviewers" were certainly in line with the experience of a great number of Xbox one users... But they definitely should have disclosed their connection.
  • I can see it from both sides, but I must say I absolutely love the Xbox one. So if I were to do a video for money, even though I love the Xbox one, people wouldn't believe me as much if I said I was paid. Then again that might not always be the case so I understand the restrictions to a point, but I hope they don't take it too far.
  • Difference being the venue... It would be obvious to a normal person that an ad is just that... A paid advertisement. This was most likely done with INTENT to deceive and the deception was probably successful
  • This is a ridiculous decision, Microsoft is 'responsible for the influencers failure to disclose their material connection', but they get away with not even a slap on the wrist. As usual the big fish escapes punishment while the FTC goes after the little guys.
  • Yeah. I agree it's a ridiculous decision. Though personally I feel in that situation Microsoft should have been permanently banned from trading (I.E. The company shut down). That would then set a precedent that you don't get to false advertise and get away with it.
  • There was nothing false in the advertising. It was simply not disclosed that the advertising was paid for by Microsoft.  The Xbox One is a great product and no consumers were harmed.
  • No, the big fish did not escape.  The big fish being the advertisers on your television and radio.  These big fish have paid off your politicians to leave them alone.  Something Microsoft apparently didn't do.
  • Seems fair.
  • Influencers, endorsers and producers. You mean actors, sponsors and producers?
  • Nice to see that the FTC has time to take on deceptieve advertising.  Now how about taking on the deceptive television comercials?  What?  You can't do that because the lobiests give you too much money?  Reminds me of Russia.
  • Samsung got hammered for doing this with their phones.