United States: The FTC Cast Its "Shadow" Over Warner Bros., Reminding Advertisers To Disclose Connections With Influencers

Last Updated: August 2 2016
Article by John B. Greenberg, Carleen B. Griffith and Krista C. McCormack

Last week, the Federal Trade Commission (FTC) settled an enforcement action against Warner Bros. Home Entertainment Inc. ("Warner Bros.") regarding an advertising campaign for its video game Middle Earth: Shadow of Mordor, in which YouTube "influencers" were paid to post gameplay videos and give the game favorable reviews. The campaign allegedly constituted unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act, for falsely claiming that the influencers' reviews were independent and deceptively failing to disclose material connections between Warner Bros. and its endorsers. This action is yet another reminder that advertisers intending to use influencers to endorse their products need to clearly disclose these relationships.

For its late-2014 Shadow of Mordor campaign, Warner Bros., through its advertising agency Plaid Social Labs, enlisted YouTube personalities to develop and post gameplay videos on YouTube and other social media, in which they were required to portray the game positively. One of these videos, posted by YouTube sensation PewDiePie, was viewed more than 3.7 million times. According to the FTC, Warner Bros. paid these online influencers up to tens of thousands of dollars, gave each of them a free copy of Shadow of Mordor from which to make and post these videos, and required that they avoid disclosing any bugs or glitches in the game.

In an apparent effort to comply with the FTC Act and the FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising, which require clear and conspicuous disclosure of any material connection between a company and any influencer or endorser promoting its products, Warner Bros. instructed its influencers to include in the description box appearing below the video on YouTube, disclosures that the videos were sponsored. The FTC took issue with this, noting that the disclosures should have been in the videos themselves, where users would be likely to see or hear them, as opposed to in the description box, often "below the fold" where users would have had to click "Show More" to see them and would have not seen them at all on the social media posts sharing the video. The FTC also noted that, in some instances, the disclosures omitted that the influencer was paid, stating only that the influencer received a free game.

Pursuant to the settlement, Warner Bros. will be prohibited from misrepresenting that gameplay videos posted as part of an advertising campaign are independent or impartial. The settlement also requires clear and conspicuous disclosure of any material connections between Warner Bros. and influencers promoting its products. Warner Bros. must ensure compliance with this settlement by educating influencers on sponsorship disclosures, monitoring them for compliance, and potentially terminating or withholding payment from influencers or ad agencies for noncompliance.

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