Last week, the Federal Trade Commission (the “FTC” or “Commission”) announced that it has reached a settlement with Warner Bros. Home Entertainment Inc. (“Warner Bros.”) over charges of deceptive advertising in connection with alleged paid YouTuber endorsements for a Warner Bros. video game.

Why did the FTC target Warner Bros. paid product endorsements?

Warner Bros.’ Video Game and Related YouTuber Endorsements

In 2014, Warner Bros. purportedly hired Plaid Social Labs, LLC (“Plaid Social”) to coordinate a YouTube influencer (“YouTuber”) endorsement campaign around the release of its video game – Middle Earth: Shadow of Mordor.

According to FTC records, Plaid Social provided a pre-release version of the video game, and payments ranging from hundreds to tens of thousands of dollars each, to an undisclosed number of YouTubers who had earned reputations as video game enthusiasts, including infamous Swedish YouTuber “PewDiePie.” The Commission alleges that the subject YouTubers were contractually obligated to post videos promoting the game, and required to share the videos on their respective Facebook and Twitter accounts.

Approximately thirty gameplay videos (viewed over 5.5 million times) were posted as a result of Warner Bros.’ YouTuber endorsement campaign.

FTC Investigation and Administrative Complaint

After conducting an internal investigation into the foregoing matter, the FTC filed a complaint against Warner Bros.

Although Plaid Social’s YouTuber endorsement contracts provided that each video’s “[d]escription box will include FTC disclaimer disclosing that the post is sponsored,” Warner Bros. and Plaid Social purportedly did not require YouTubers to place a sponsorship disclosure “above the fold” in the description box, or in the videos themselves. The Commission alleged that such limited disclosures were inadequate and, therefore, amounted to deceptive advertising because consumers were unlikely to learn that the subject videos were paid promotions.

On July 11, 2016, the FTC announced that it has settled its deceptive advertising claims against Warner Bros. Under the terms of the Commission’s Decision and Order, for a period of twenty years, Warner Bros. and its officers/employees must (among other things):

  • refrain from misrepresenting that an individual providing a paid endorsement is an independent user or ordinary consumer;
  • include clear, conspicuous and “unavoidable” disclosures in YouTube videos and other media of all material connections between Warner Bros. and its endorsers;
  • advise each endorser in writing of his or her responsibility to disclose the endorser’s material connection to Warner Bros.;
  • withhold payment to YouTubers and other paid endorsers who fail to make necessary disclosures; and
  • submit reports to the FTC of Warner Bros.’ compliance with the foregoing.

Does Your YouTuber Endorsement Campaign Comply with FTC Regulations?

In recent years, the Commission has aggressively investigated paid social media endorsement campaigns. As the above-referenced case illustrates, sellers and advertisers engaged in YouTuber endorsement campaigns – even those making good faith efforts to comply with FTC regulations – are at risk of regulatory action and other adverse legal consequences. As such, businesses operating in the social media space should always speak with an experienced attorney before commencing a marketing campaign involving paid product endorsements.