FTC settles with gaming website over 'deceptive' Microsoft Xbox videos

FTC settles with gaming website over 'deceptive' Microsoft Xbox videos
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The Federal Trade Commission is settling charges of deceptive advertising against a company that partnered with Microsoft to promote its Xbox One video game console.

The agency accused Machinima Inc., a gaming website, of engaging in deceptive practices by paying people to produce endorsement videos, which were meant to look like authentic user reviews, for the Xbox One and some games.

The company was not fined, but it will be required to disclose when gamers have been paid to endorse products. The FTC dropped its investigation into Microsoft and its ad agency.

The FTC said Microsoft was “responsible” for the lack of disclosure but that the deception seemed to be an isolated incident on Microsoft’s part.

Machinima is a popular site in the gaming community that hosts numerous YouTube channels featuring live streams of video game play. Individual players can amass huge followings.

Microsoft’s ad agency hired Machinima in 2013 to have some of its top users endorse the Xbox One in a series of videos that were guaranteed to be watched at least 19 million times. Machinima paid some of its players to create a series of two-minute videos, with requirements that Microsoft products be showcased in a positive light.

In total, about 300 videos were produced. The original videos did not disclose that gamers were being paid for their endorsement.

“When people see a product touted online, they have a right to know whether they’re looking at an authentic opinion or a paid marketing pitch,” said the FTC’s consumer protection director Jessica Rich.

News of the deceptive endorsements leaked last year and caused a stir on some tech websites. At the time, Microsoft denied being aware of any individual contracts that Machinima made with its gamers. It later asked all the videos to be tagged with disclaimers.

The FTC bars deceptive acts or practices, and has produced specific guidelines for the use of endorsements in advertising. It notes that people should “clearly and conspicuously” disclose what they receive in exchange for an endorsement.

In fact, the FTC outlines a specific example about endorsements of video game consoles: If a video game blogger were to receive a free console to review, the blogger must clearly note that fact in any review or endorsement, according to the FTC guidelines.