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Interactive Counsel

Proclaiming Your (Lack of) Independence: FTC Issues Final Order Against Company for Failing to Disclose Financial Relationship with Reviewers

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Proclaiming Your (Lack of) Independence: FTC Issues Final Order Against Company for Failing to Disclose Financial Relationship with Reviewers

What’s the News?

The Federal Trade Commission’s final order against a video game marketing company for not disclosing that online reviews for games were posted by paid reviewers shows that companies (i) should monitor their paid reviewers and influencers for proper disclosures and (ii) have a compliance system in place to deal with those who do not follow a company’s guidelines.

Background on the Case

The FTC has issued its final order against Machinima, Inc. following a complaint filed in late 2015 that alleged the company failed to disclose that it had paid online endorsers and “influencers.” Arent Fox previously reported on the details of the allegations in prior alert entitled “Paid to Play: FTC Cracks Down on Marketing Company for Deceptive Video Game Endorsements.” 
 
Under the final order, Machinima must ensure that all of its influencers are aware of the obligation to disclose that they have been compensated for endorsements. As part of these requirements, Machinima must implement a compliance system where it monitor its influencers to make sure that the proper disclosures are made. The compliance system must include, at a minimum, an agreement between Machinima and each influencer wherein each influencer must acknowledge in a signed document the requirement to disclose the paid relationship. Machinima must also review and approve each endorsement prior to it being used online. Machinima is also required to conduct a second review on an undisclosed date within 90 days of the endorsement being posted to confirm that the disclosure is still present.     
 
Machinima is also forbidden from paying any influencers who make misrepresentations about their relationship or fail to make the proper disclosures until the proper disclosures are included. Under certain circumstances, Machinima must also suspend its relationship with endorsers who do not comply with the requirements until the violations are remedied.   
 
Should the company violate any provisions of the order, it will be subject to a fine of up to $16,000 per violation.
 
For more information on this case or to discuss the development and implementation of a compliance program, please contact Sarah Bruno or Matthew Mills.

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