The Federal Trade Commission (FTC) is over a century old, and it’s constantly changing the way it approaches the task of protecting consumers from false and misleading advertising and unfair business practices. Social media and online marketing have presented some of the greatest FTC challenges to date. As social media evolves, so too do the requirements surrounding disclosures and endorsements.
In the last three years, several key cases have shaped the way the marketing and influencer communities approach sponsored and native advertising content on their channels and platforms. From video game console manufacturers to entertainment networks, several companies have learned the hard way that the FTC is serious about disclosures and consumer protections.
Here are the four key cases that have shaped the history of FTC violations in the digital and social media marketing landscape.
In 2014, Sony and advertising agency Deutsch LA ran into trouble with the FTC over misleading advertisements and a failure to disclose promotion through individuals on social media. Though much of the complaint focuses on advertisements that overstated and misrepresented the abilities of the device, particularly with regards to cross-platform gaming, remote play, and multiplayer functionalities.
The advertisements suggested that the Vita’s capabilities would be available for a large number of games, including a popular game called Killzone 3, which appeared in advertisements. In reality, though, these features didn’t function the way they’d been depicted in advertisements and were only available for a few games. Killzone 3 was not among them.
FTC complaints for misleading advertisements aren’t new, but this case is significant because it’s one of the few cases involving Twitter specifically, and one of the first cases in which disclosures on social media played a major role. According to the complaint, an assistant account executive at Sony’s advertising agency, Deutsch LA, sent an email to employees asking them to tweet about the PS Vita using the hashtag #GAMECHANGER. The email made no mention of a requirement on the part of employees to disclose their relationship to Deutsch LA or Sony.
An FTC release on the lawsuit filed against Sony reads, “The complaint alleges that Deutsch’s failure to disclose that tweets were from employees of Sony’s ad agency was deceptive.”
Sony eventually settled, agreeing to the FTC’s terms to give buyers $25 in cash or $50 in merchandise credits.
In 2015, multi-channel network (MCN) Machinima was on the receiving end of an FTC complaint about failing to require disclosures from influencers it worked with on several campaigns to promote Microsoft’s Xbox One console ahead of its release. Machinima worked with Microsoft’s advertising agency, Starcom MediaVest Group, for the influencer campaigns and guaranteed upwards of 19 million views on videos created to promote Xbox One and the accompanying launch titles.
Machinima used influencers in its network to carry out the two-phase campaign. First, it paid several popular influencers in its network thousands of dollars and gave them pre-release versions of the Xbox One and games to create endorsement videos. The FTC release on the complaint states that two of these influencers were paid $15,000 and $30,000. Machinima also offered to pay influencers $1 per 1,000 views on videos promoting Xbox One, up to $25,000, according to the release. At no point, though, did Machinima state that influencers were required to disclose that their content was sponsored.
The complaint was settled and required Machinima to implement a more robust system for notifying influencers of disclosure requirements and for the review of content for disclosure compliance.
Lord & Taylor partnered with 50 influencers, along with Nylon Magazine’s website, to promote its Design Lab and a specific paisley dress in 2016. To maximize buzz, Lord & Taylor had the influencers and Nylon post photos of the dress on Instagram on the same day, along with a paid article that ran on Nylon’s website.
The campaign was a huge success. The dress sold out and the content generated as part of the campaign reached nearly 11.5 million users. But, like Deutsch LA and Machinima, Lord & Taylor made no requirement for disclosure. The FTC filed a complaint against Lord & Taylor for misrepresenting the nature of the content and a failure to disclose the nature of the relationship between the influencers, Nylon and Lord & Taylor.
Lord & Taylor settled the case, agreeing to the FTC terms that it was prohibited from misrepresenting the nature of its relationship with influencers and independent endorsers in the future and that it would implement a monitor and review system for disclosure compliance.
Over a year after the campaign, the FTC filed a complaint against Warner Bros. in 2016 for a marketing campaign to promote a video game called Middle Earth: Shadow of Mordor in late 2014. The campaign was straightforward — YouTube influencers were paid to promote the game on their channels and were given a copy of the game. The sponsored content garnered over 5.5 million views, and the video created by popular (if controversial) YouTuber PewDiePie racked up over 3.7 million views.
Though Warner Bros. didn’t make the common mistake of not clearly requiring disclosures at all, it failed to require what the FTC deemed “adequate disclosures,” meaning that they were clear and conspicuous and appeared in close proximity to the sponsored content. Warner Bros. required other information to be placed in the video descriptions, effectively making the disclosures more difficult to find, if they were present at all.
Much like the Machinima case, the Warner Bros. case was settled with the stipulation that Warner Bros. not engage in any deceptive practices in influencer marketing and that it take steps to clearly state disclosure requirements and review content for compliance.