July 21, 2016

Game Reset: Warner Bros. Settlement Reminds Legal Departments to Further Influence Their Company’s Agreements with Endorsers and Other Influencers

Seller Beware: Consumer Protection Insights for Industry

Earlier this month, Warner Bros. Home Entertainment, Inc. settled Federal Trade Commission charges for deceptive marketing practices stemming from a 2014 online "influencer" campaign for its video game Middle Earth: Shadow of Mordor. According to the FTC's complaint, Warner Bros. paid YouTube influencers to post positive gameplay videos on YouTube and other social media platforms without ensuring that the influencers adequately disclosed their material connection to the company. As a result, the FTC took the position that the company's marketing campaign violated the FTC Act because it insinuated that sponsored, positive gameplay videos posted on YouTube by gaming enthusiasts were objective and independent assessments of the video game, when they were not.

The Warner Bros. settlement highlights the importance of consumer product companies ensuring that all agreements governing the promotion of company products are reviewed by attorneys who are familiar with the FTC's concerns about native advertising. In the Warner Bros. matter, the Company hired Plaid Social Labs, LLC to coordinate a "YouTube Influencer Campaign" to help generate interest for the Shadow of Mordor game. Plaid Social Labs contracted with influencers, tasking them with creating YouTube videos reviewing the game and then, subsequently, promoting the videos on other social medial platforms. Per the agreements, the influencers were required to disclose that the videos were sponsored, but they were instructed to place the disclosure in the description box below the gameplay videos. (According to the complaint, this requirement often resulted in the influencer placing the disclosure in a place that could only be seen if a viewer clicked on a "Show More" button.) The agreements also required the influencer's reviews to be positive, prohibiting the influencer from showing any bugs or glitches in the game or communicating any negative sentiment about Warner Bros., its affiliates or the game.

The FTC took the position that the resulting videos were in essence "sponsored advertisements" and thus "misled consumers by suggesting that the gameplay videos of Shadow of Mordor reflected the independent or objective views of the influencers" when they did not. The FTC also took the position that Warner Bros., due to improper instruction and monitoring of the YouTube influencers, failed to adequately disclose that the gamers were compensated for their positive reviews.

This settlement is a helpful reminder of the importance of marketing and legal departments taking a collaborative approach when developing marketing campaigns that include special attention to the FTC's enforcement priorities related to native advertising. It is no longer prudent for a company to rely on a third party marketing company or media consultant to handle digital media campaigns. Instead, to mitigate risk, the strategy must include a legal review focused on ensuring that the relationship between the company and potential influencers does not develop unexpected legal obligations for the company.

© Arnold & Porter Kaye Scholer LLP 2016 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.


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