FTC finalizes settlement with Warner Bros. over use of ‘online influencers’

December 16, 2016

Warner Bros company flags are seen at the MIPTV, the International Television Programs Market, in CannesThe Federal Trade Commission has approved a final order resolving charges that Warner Bros. Home Entertainment deceived consumers by failing to adequately disclose that it paid so-called online influencers to herald a “Lord of the Rings”-based video game.

The company settled the FTC’s claims by agreeing to not engage in the same conduct in the future. It does not have to pay any fines or penalties.

The FTC alleged Warner Bros. paid influencers thousands of dollars to post positive gameplay videos for “Middle Earth: Shadow of Mordor” on YouTube and other social media sites without properly disclosing the arrangements.

‘YouTube influencer campaign’

According to the FTC’s complaint, Warner Bros. hired advertising agency Plaid Social Labs LLC in 2014 to coordinate a “YouTube influencer campaign” for “Shadow of Mordor.”

Plaid Social allegedly hired online influencers to post positive gameplay videos on YouTube and hype the videos on Twitter and Facebook. The influencers also were instructed not to disclose any bugs or glitches they discovered in the game, the FTC said.

In exchange, the online influencers received free access to a pre-release version of the game and cash payments that ranged from hundreds to tens of thousands of dollars, the complaint alleged.

During the course of the campaign, the sponsored videos generated more than 5.5 million views, according to the complaint.

Though Warner Bros. sponsored the content, it failed to require the paid influencers to “clearly and conspicuously” disclose this fact, the FTC said.

Instead, through Plaid Social, it instructed influencers to place the disclosures in a description box that typically appeared underneath the part of the webpage where consumers viewed the videos, the complaint said.

Also, the vast majority of YouTube influencers placed their sponsorship disclosures “below the fold,” meaning that consumers had to click on a button and scroll down before they could see the full disclosure, the FTC said.

The agency further alleged that in some cases, the influencers disclosed only that they had received pre-release versions of the game but did not reveal that Warner Bros. had paid them to promote it.

The complaint alleged Warner Bros.’ conduct constituted unfair or deceptive practices under Section 5(a) of the Federal Trade Commission Act, 15 U.S.C.A. § 45.

Final consent order

Warner Bros. in July agreed to a proposed consent order resolving the allegations. The FTC approved the final order Nov. 21 following a public comment period.

Under the terms of the final consent order, Warner Bros. is required to ensure that any person or entity it hires to conduct an influencer campaign clearly and conspicuously discloses any compensation arrangement.

The company also must terminate or withhold compensation for those who fail to comply with its requirements under the order.

Earlier actions

The case is the latest in a series of FTC actions involving online influencers.

In May department store chain Lord & Taylor resolved the agency’s allegations that it paid “fashion influencers” between $1,000 and $4,000 each to post pictures of its private-label dresses on Instagram without disclosing the arrangements.

In March gaming-focused YouTube network Machinima Inc. settled similar claims involving Microsoft’s Xbox One game system. The company allegedly paid five influencers between $15,000 and $30,000 each.

Warner Bros. acquired Machinima in November.

In the Matter of Warner Bros. Home Entertainment Inc., No. 152-3034, final consent order issued (F.T.C. Nov. 21, 2016).

FTC News Release, FTC Approves Final Order Requiring Warner Bros. to Disclose Payments to Online Influencers, 2016 WL 6833325 (Nov. 21, 2016).