Machinima settles deceptive advertising complaint brought by FTC

Machinima, the video gaming YouTube network, has settled a Federal Trade Commission complaint that it did not disclose that its broadcasters were paid to make enthusiastic endorsements of the Xbox One during that console's 2013 launch.

The settlement does not involve any monetary penalties, but rather an order, to wbich Machinima agrees, that "prohibits Machinima from misrepresenting in any influencer campaign that the endorser is an independent user of the product or service being promoted." In other words, if its broadcasters are paid to say a thing, they or Machinima must declare that.

In September, the FTC filed a complaint against Machinima, alleging that it had paid YouTubers up to $30,000 to say complimentary things about the Xbox One. The finely detailed arrangements, which included talking points, suggested video clips and a warning not to say anything disparaging about the Xbox One or its launch titles, were kept secret. Machinima's affiliates were contractually obligated never to disclose them.

Microsoft was not cited for any wrongdoing.

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Because of the nature of the complaint, the FTC was unable to levy a fine. However, with this order in place, any violation now is subject to a penalty of up to $16,000.

In September, an FTC spokesman said the Machinima case is the first to address deceptive advertising by YouTube creators.

Under Machinima's program, five "influencers" were paid to produce and publish two video reviews each, under explicit instructions about the content of the reviews. These reviews were examined and approved by Microsoft and its advertising buyer, Starcom, before publication. The FTC said one YouTuber was paid $15,000 for two videos and another was given $30,000.

Another arrangement paid other "influencers" $1 for every 1,000 views their Xbox One-positive videos generated, with a cap of $25,000. These "influencers" signed contracts that prohibited them from disclosing any detail of the arrangement.

Machinima's YouTubers uploaded more than 300 praiseworthy videos of the Xbox One between the console's Nov. 22, 2013 launch and the end of the year.