Warner Bros Settles FTC Charges It Failed to Disclose It Paid Online Influencers | Hacker News Reader

Warner Bros Settles FTC Charges It Failed to Disclose It Paid Online Influencers

ftc.gov

137 pointskelukelugames73 comments

>"Instead, according to the complaint, Warner Bros. instructed influencers to place the disclosures in the description box appearing below the video. Because Warner Bros. also required other information to be placed in that box, the vast majority of sponsorship disclosures appeared “below the fold,” visible only if consumers clicked on the “Show More” button in the description box. In addition, when influencers posted YouTube videos on Facebook or Twitter, the posting did not include the “Show More” button, making it even less likely that consumers would see the sponsorship disclosures."

So a disclosure in the notes box below a video is not enough. I wonder what this will mean for the guys from CSGOLotto [0] who are caught up in a seemingly worse controversy of non disclosure and more.

[0] https://www.youtube.com/watch?v=_8fU2QG-lV0

The HN title misquotes the actual FTC site's title. The FTC title says it "failed to adquately disclose", not that it "failed to disclose". Omitting the word adequately changes the meaning substantially. In fact, WB did disclose the payment but it was the manner in which they disclosed it that the FTC objected to -- not the failure to disclose it.

Discloser requires more than posting a footnote in a random small town newspaper readership 12. You must clearly communicate to the recipient and failure to adequately disclose is failure to disclose.

Actually, several laws for notification can be fulfilled by "posting a footnote in a small town newspaper readership 12". Its quite an amazing thing seeing the small things in the local paper of record.

Are you talking about the announcements typically required for public hearings? Because relating such announcements to disclosure is kind of strange. Disclosure is additional information about the message being conveyed, typically relating some bias that the recipient should be aware of before making decisions. Announcements, on the other hand, are precursors to the thing that actually matters, which is the hearing.

I'm talking about more than public hearings, there are many disclosure laws that require using the paper of record for a county or other area.

Given how youtube vids can be embedded in websites, and how they play on mobile devices, I am surprised that the FTC didn't simply demand an in-vid notice, as is expected of disclaimers in TV commercials.

From the FTC announcement:

"The FTC also alleges that Warner Bros. did not instruct the influencers to include sponsorship disclosures clearly and conspicuously in the video itself where consumers were likely to see or hear them."

Note that in-video disclaimers are not enough in the UK, where the regulator (the Advertising Standards Authority) wants consumers to know before they click a link that it's sponsored content.

https://www.asa.org.uk/News-resources/Media-Centre/2015/New-...

https://www.cap.org.uk/Advice-Training-on-the-rules/Advice-O...

>Warner Bros. is barred from failing to make such disclosures in the future

So were they not "barred from failing to make" these mandatory disclosures previously?

I wonder what the world would be like if the laws people had to follow had this same pattern of "You broke the rules? Well your punishment is that you now have to really actually follow the rules next time."

They were barred before - I think this language means next time they are caught, it'll hopefully be much worse.

So a slap on the wrist...

Generally if you violate a previous FTC agreement the results are pretty serious.

A slap on the wrist is appropriate here. There were apparently 5.5 million views of sponsored content. The total value of that commerce is a few thousand dollars in AdSense revenue.

> The total value of that commerce is a few thousand dollars in AdSense revenue

Incorrect. Youtube videos are reportedly from personalities giving an honest opinion. Adsense is advertising. Most people know the difference and if they made a choice to buy the game based on that information they have been defrauded. 5.5 Million * 60 = $330 Million, not a few thousand dollars.

That's not an assumption that you should make unless they explicitly say so.

5.5 million was the number of views, not the number of purchases.

I understand that, it's merely illustrative of the cost of fraud like this. If I buy an ad in the paper that says I can cure cancer for 10k, you go after the 10k not the $100 I paid to place the ad.

Sure, but you don't multiply the 10k by the number of papers sold. You multiply it by the number of people that sent you the money because they saw the ad in the paper.

The calculation (admittedly a difficult one) should not be based on the amount of AdSense revenue generated, but the revenue generated by the number of people who bought the game based on Youtube_Personality's recommendation. Shadows of Mordor cost $60 at launch. Let's say just 20,000 people went out and bought the game as a result. Suddenly, the value of that fraudulent promotion is $1,200,000.

Shadows of Mordor cost $60 at launch. Let's say just 20,000 people went out and bought the game as a result. Suddenly, the value of that fraudulent promotion is $120,000.

20,000 x 60 = $1,200,000

Missed a zero. Thanks for the correction!

The ad sense revenue implicitly takes into account the degree to which page views translate into sales and revenue.

But with a small fractional multiplier - the ad sense revenue is a measurement of Google's chargeable added value on those sales, not the revenue or profit accrued to the advertiser.

The Commissions position is that the conduct would have been barred previously. With the consent order, WB has essentially lost the ability to claim that the conduct is not barred in any future actions, since it will be a violation of the consent order irrespective if it was a violation of the generally applicable rules or not.

Interestingly we can probably study that as in the US we have two cohorts already. Call it "Outcomes of law enforcement actions compared to net worth; a study of recidivism" or something similar.

So, you mean if people got suspended sentences or probation?

That happens.

Unfortunately this doesn't include what kind of fine WB has to pay, that will come out later. I hope it's stiff. This kind of deception has to cost more than it benefits the company if they are going to be deterred from it.

Unfortunately at the moment this kind of thing is going on constantly, and even when there are disclosures that it's sponsored "reviews" the disclaimers are usually as subtle as possible.

Video games became the biggest entertainment industry in the last 20 years and as a result a lot of greedy people with no moral compass have flooded into it to cash in.

There will be no monetary fine.

> I hope it's stiff.

I doubt it's more than a few million dollars if that. I wonder why the FTC even had to settle for this. Warner was clearly in the wrong. Government agencies are way too quick to settle these days. Sure, a trial would be much harder, but also much more effective in stopping corporate illegal activities in the future. Cheap settlements are just the cost of doing business and I doubt they serve as any deterrent at all.

Typically speaking, a federal regulatory body's enforcement calculus follows this procedure:

1. How big is the target company?

2. How scary are its lawyers?

3. Do we expect the company to put up a fight?

4. Is the fight worth it? (e.g., Are there important precedents at stake? Can we make an example of the company in question?)

Ninety-nine times out of a hundred, the desire to pursue the fight in court fizzles out at Step 4. (And sometimes there's an ancillary Step 4a: "How many other battles are we fighting right now?")

I'm not being glib here; I'm just being cynical, but realistic. This is pretty much how my friends at various agencies have described it to me. It doesn't seem too farfetched, if perhaps a bit simplified.

If only the DEA was so limited in its resources that it had to come to that sort of calculus. We'd have a lot less people who committed victimless crimes in prison.

They do, it's just that most of the people put away for drug crimes don't have deep pockets and good legal council.

Interesting fact, this is the first public reference to Pewdie Pie in an FTC action, but the FTC commissioner referred to him during a keynote speech back in 2015. https://www.ftc.gov/system/files/documents/public_statements...

https://en.wikipedia.org/wiki/Payola

Does anyone know where to report violations like this? I've seen many in the past, and I've tried using the FTC report a violation tool, but none of the categories seem to hit this. Too bad, because crowdsourcing the detection of these violations would make the FTC's job a lot easier!

https://www.ftc.gov/faq/consumer-protection/submit-consumer-...

Understand the FTC gets a ton of complaints, in many cases for things that are much more egregious. I'm not sure what the weights between volume of complaints and detailed documentation of a problem contribute to initiating an investigation.

Unfortunately that link doesn't lead to anything that can be used to submit this type of complaint. The categories are all wrong, and even in the general/catch-all category, the questions don't fit this type of issue.

I realize the FTC gets lots of complaints, and that some issues they deal with are more egregious than this. However, violations of this nature (but related to other products) are potentially very serious and can have repercussions for both violators' customers and competitors.

Can you link to an example?

I'm the founder of an edtech startup, so that's the area where I have the most experience. There are many teacher/bloggers who have blogs where they talk about edtech tools they like. They give the appearance—both to readers, and to companies—that they're blogging/tweeting/etc. about things because they think they are effective tools for learning.

The blogs have intake forms for requesting a product review OR requesting sponsored content, but the auto-emailed response is just a rate card. Following up to ask about product reviews (and even mentioning having won major relevant awards, which indicate a review-worthy product) leads to more rate card responses. In some cases, it's pretty clear that all of the posts are bought and paid for by companies.

Some bloggers have no disclaimers to this effect (and other teachers who read the site would have no idea that sponsored content exists, since they just read the "reviews" and don't look at the pages that refer to sponsorship). Other bloggers have a generic disclaimer, at the very bottom of a sidebar (which extends so far vertically past the primary content, no one ever sees it) that says that some content is paid for. But rare is the case where the blogger actually says "This post was paid for" and "This post was not paid for"—which is precisely what teachers and parents who read the site would want to know.

I'd rather not provide links to offending sites, since I'm not anon here and don't want teacher bloggers to hate me and my company. I realize they don't make much money and need to supplement where they can (my mother and wife are educators), but there are more transparent/legal ways to do this.

This is true in every niche as far as I know. I am convinced that the vast majority of blogs that show up in search results are paid content mills and otherwise engaged in SEO operations, like paid link rings.

Based on conversations with other founders who have worked in various industries, I have had this suspicion as well. Some founders have no problem participating in the system ("it was like this with magazines—you bought advertising and then the wrote an article about you"), but others share my view and are trying to grow via different paths. Would be very interested in others' thoughts on what's worked for them!

This is how the business of online promotion works. I had a first-in-its-niche company that was copied by spammers and seriously outcompeted with this kind of under-the-table promotion, which I had, to that point, refused to perform myself. And my company hurt substantially because of it (though it was ultimately destroyed by a legal threat from a Fortune 100); went from the only provider to third or fourth place, despite indisputable superiority to the spammy, pump-and-dump competitors.

The reality of online promotion is that if you want to win, you have to play the game. That means paying for placement in link rings and astroturfing hard. It means ignoring official advice from all platform providers as disinformation. Critical to the survival of any company is amassing a large multi-million dollar war chest before a lawsuit comes knocking, because the lawyers will be taking their pound of flesh, especially if you're going against a corporate bully that is more than happy to spend tens of millions of dollars just to teach you that they're not to be defied by the peons. Doesn't matter what the law actually says, only big companies can afford to fight.

This all being the case, I seriously doubt the FTC will make a real dent in undisclosed promotion, no matter how aggressive they get. Undisclosed promotion probably makes up 30% of the content on the web.

This case is likely as simple as FTC going after WB mostly because they knew they could get some good revenue out of them.

Would be interested in talking further about your experience—contact info is in my profile.

> It means ignoring official advice from all platform providers as disinformation.

This is a painful and revealing comment, and your post certainly isn't the only place I've seen it. The standard wisdom is that advice from platforms is either meaningless, or a guide to exactly how far you can go down their "not recommended" paths without catching a ban.

I'm not sure that there's any decent answer to this; all the evidence suggests that for some markets dishonesty and misleading promotion are the best possible tactics. What good are corporate ethics if the first person to act unethically will outperform all honest competitors?

you're spot on here, have some relevant experience, I tried to stay above board and not 'cheat' but quickly changed my tune as our competitors started eating us. Don't think the FTC knows how deep this rabbit hole goes. It's play dirty or die 100%.

I've been burned by this when shopping for hardware. Virtually all reviews of new stuff are basically ads.

Since there appears to be no financial penalty attached to the consent order, I don't think your revenue contention holds water.

Does anyone really trust online game reviews? Game media is corrupt to the bone and the first thing I think when I see a positive review is that it was bought. Besides, the culture of game media is often far, far away from true gamer culture. That's why I often just watch raw gameplay footage, then I can make up my mind myself. I think this is a non-issue.

“Consumers have the right to know if reviewers are providing their own opinions or paid sales pitches,”

I think consumers should start to learn to think for themselves and stop relying on the state, bans and fines.

> I think consumers should start to learn to think for themselves and stop relying on the state, bans and fines.

An idealist viewpoint, and perhaps a correct one. But in practice I support government rules against intentional misleading of audiences for the same reason I support government rules against lying about ingredients in food.

Okay, lying about what's inside a can of food is nothing short of fraud, that is, not fulfilling your contractual obligation to the buyer properly, even worse if it's intentionally. I don't want to abolish contracts, that would be ridiculous.

However, what goes on between a game company and PewDiePie, in monetary but also in other terms, is their private matter. I don't see a reason why it should be illegal to pay PewDiePie to be enthusiastic about the game when it's actually garbage. No contract was violated here. PewDiePie is not an authority on this game and what he says matters not for any purchase contract. So people who are mislead by him are fools themselves for relying on random internet stuff.

> I don't see a reason why it should be illegal to pay PewDiePie to be enthusiastic about the game when it's actually garbage.

That's totally legal. What's illegal is for them to not disclose the payment.

>"I think consumers should start to learn to think for themselves and stop relying on the state, bans and fines."

I see both sides. The reality is that these games are advertised not for us, but for the new generation of kids. Not sure if 8 year olds are being victimized by this or not, but I'd say its a possibility.

8 year olds should be protected by their thoughtful parents in these matters.

I routinely tell my son "I dunno, that kinda looks like it sucks. Lets wait and see"

lol.

So, it's all the parents fault. Look, companies advertise because it works, banning deceptive advertising is a good idea with minimal downsides.

I think consumers should start to learn to think for themselves and stop relying on the state, bans and fines.

Absolutely, it's best to assume any who cares enough to do a review is biased in some way. Then it's just a matter of selecting reviewers who have a track record of honesty, and similar tastes as yourself.

> Does anyone really trust online game reviews?

It depends on what you mean by "trust", and "game reviews".

I have varying levels of trust for different individuals, which you can factor into how much you take what they're saying at face value.

I don't think the concept of a game review is particularly helpful: they are all subjective opinion pieces. They could be essays (game reviews), rants or opinion pieces (what TB does say), raw gameplay (lets plays) or live interactive exploration of the title (Twitch).

You can combine those various streams, along with "lesser" (read "easier") user generated content like Reddit threads and what-not, to help you come to some kind of conclusion before a purchase.

> the first thing I think when I see a positive review is that it was bought

I feel for you, that can't be a nice way to think about things. I'm not sure where you're getting that kind of cynicism from honestly, but if the issue is as widespread as you say I feel like there is a pretty good expose in that.

> Besides, the culture of game media is often far, far away from true gamer culture.

That's a really odd statement. I'm not sure what "true gamer culture" is, but there is a good chance I come from a completely different country to you, have a completely different background and life experiences to you. Except I play video games. I'm not sure declaring some "true gamerness" test and segregating people who fit your expectations and those that don't is particularly healthy.

I think especially these days many people play games, to varying levels, on varying platforms. Games are not holy relics to be cherished by the anointed few, they are pieces of culture to be enjoyed (or not I suppose, if they're junk) by everyone.

> I think consumers should start to learn to think for themselves and stop relying on the state, bans and fines.

I'm not sure those are mutually exclusive ideas. People should think for themselves, obviously. But since basically every opinion you've ever had is based on the media you read / experienced it in, trying to push media toward being a cultural experience and not an advertisement is important too.

Especially in a world where everyone is hyper critical and distrustful of media (especially media that contains opinions they don't agree with), it's a boon to promote yourself as a game reviewer / critic / lets player who is not corrupted by the almighty dollar.

> I'm not sure declaring some "true gamerness" test and segregating people who fit your expectations and those that don't is particularly healthy.

This is exactly the problem with GamerGate. They think all games and game media are made specifically for them.

Not sure if you're serious or trolling here. As true gamer culture I describe people with a real appreciation for games (should be obvious). People who actually play and enjoy games (or create and mod them). Not people who are faking it for money, not people who are trying to push agendas onto gamers, just plain old gamers. And trust me, these are surprisingly rare in game media. You can call it unhealthy, the truth is often unhealthy. You can choose to remain ignorant about it, and patronize people like me. The fact is: Go out and ask kids, go and ask the people who play the most. They don't give a damn about game media and they are not involved in it at all. They just play their games.

> Not sure if you're serious or trolling here.

I'm completely serious. I genuinely don't understand how you can pick some arbitrary rules and decide that the "other people" are not "true xyzers" and thus are invalid.

> As true gamer culture I describe people with a real appreciation for games (should be obvious). People who actually play and enjoy games (or create and mod them).

Great, I know lots of those people! I'm one of those people! Honestly, I don't really know anyone who doesn't enjoy games (who plays them that is).

> Not people who are faking it for money,

Great! Imagine if there were laws to make sure those people had to disclose when, why and how they were making money associated with games!

> not people who are trying to push agendas onto gamers

I'm trying really hard not to project the rest of the internet on to you, because I don't know you, and I'm sure you're a lovely person. It sounds though, like you're upset with certain "social" complaints that some people have had with games lately, i.e. being upset about women being over sexualised in games, or what not.

With that in mind: I agree with a reasonable amount of that commentary. Does that make me not a "true" gamer? What is your yardstick here? More importantly, why does your opinion on who a "true gamer" is matter?

> And trust me, these are surprisingly rare in game media

I don't see it. And I don't see how you can see it either honestly. I feel like if the entire games media scene was bought and paid for by game companies someone would have actually written about it. This stuff generally gets reported on pretty well when it happens (see: Jeff Gerstman being fired for giving a low score to Kayne & Lynch, the Warner Bros issue we're talking about right now, etc). There are always people looking to expose something to make a name for themselves, and if anything like this actually existed someone would have done just that. And no, I don't count KIA / whatever ramblings.

It sounds more like a bunch of people are saying things you don't agree with, and so you've decided they aren't "true gamers" so you can brush off what they're saying without having to really think about it.

> You can call it unhealthy, the truth is often unhealthy. You can choose to remain ignorant about it, and patronize people like me. The fact is: Go out and ask kids, go and ask the people who play the most. They don't give a damn about game media and they are not involved in it at all. They just play their games.

I'm not "choosing to remain ignorant", I'm disagreeing with you and what you're saying. Hopefully politely, apologies if it's not coming off that way.

It sounds though, like you're upset with certain "social" complaints that some people have had with games lately, i.e. being upset about women being over sexualised in games, or what not.

If you mean with "social" anti-social complaints like hating and bullying white males [0] and the like, then yes! I oppose everything that resembles stuff like that all day every day and do not consider anyone who does not condemn this a true gamer. Because what they do is no longer about games, they just use game media as a vessel to spread their poison into the fun-loving gamer community.

Great! Imagine if there were laws to make sure those people had to disclose when, why and how they were making money associated with games!

No, I don't want to solve everything with laws. I don't want to be babysat by the state. The community should just shun the the dishonest people, foster a positive culture of honesty and build proper review facilities. We don't need the state for that. In fact, I'd argue we need anything but the state for this.

Oh, yeah, totally, how did you know? I have many tiny little boxes with labels in my brain, and every time someone says something I don't like, I put them into one and lock it firmly shut so I never have to think about it again. I have no shred of intellectual integrity inside me and thrive on ignorance. Me making a distinction between true gamers and those who have hijacked some of its media for hateful messages is a manifestation of my hate for reality.

[0] http://www.gamasutra.com/view/news/224400/Gamers_dont_have_t...

There is basically one game-review site I really trust, Giantbomb.com. The site was created after Jeff Gerstmann was fired from GameSpot for giving a bad review to a game whose advertising was all over the site at the time[1].

I don't know how impartial they really are, but one of my favorite parts of the site are their Quick Looks. It's just a couple of people playing a game and talking about it. It feels like it gives me a good representation of what to expect from a game.

1. https://en.wikipedia.org/wiki/Jeff_Gerstmann#Termination_fro...

A lot of gamers aren't using game reviews from these major outlets to help decide to buy a game or not. These reviews are mostly used to validate an existing purchase or compare to someone else's favorite game. [1] Much like fandango star ratings virtually no one gets an actual bad review.

1. http://fivethirtyeight.com/features/fandango-movies-ratings/

One of the problems with allowing undisclosed paid reviews is that it eats away at trust in reviews - as you put it, "the first thing I think when I see a positive review is that it was bought". It doesn't matter how honest a reviewer is, no-one will trust them. Also, watching gameplay footage wouldn't have saved you here - the only people who could post gameplay footage were paid promoters whose contracts required them not to show any glitches or anything else that showed the game in a negative light.

Are the receivers of the money liable for any penalties? Seems like they should be equally liable, if not more so.

This seems like an overreach of the government's power more than anything. And if anyone is to blame, it seems like the responsibility should be on the Youtube creator to do the disclosure and not Warner Bros(so they should fine "PewDiePie" rather than Warner Bros), since they ultimately broadcast the noncompliant material.

It seems like this happens in the newspapers all the time. I'm actually unfamiliar with the FTCA. I reread pg's essay[1] and I guess the main difference with sponsored content in the newspapers is that the reporters don't directly benefit from the sponsored content. I don't know - there's an awful lot of sponsored content on news sites nowadays, and I always imagined the reporters did it for the money.

Is it actually illegal to take money to publish sponsored content in a newspaper without providing a notice of this?

[1] http://www.paulgraham.com/submarine.html

I think that an important part of it is that WB controlled where the disclosure had to be (below the fold in the notes section). Because of that, it's WB fault, not the YouTube creator.

Settlements aren't overreach , an actual court ruling would be

The federal government has a long history of strong arming into compliance

Point taken. From the wording below, it appears that it didn't even begin to get to court, so maybe 'settlement' is the wrong word too. It sounds like all they really did was issue a complaint, which WB agreed to listen to.

--------------

The Commission vote to issue the administrative complaint and to accept the proposed consent agreement was 3-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly.

The agreement will be subject to public comment for 30 days, beginning today and continuing through August 10, 2016, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit comments electronically by following the instructions in the “Invitation to Comment” part of the “Supplementary Information” section of the Federal Register notice.

> From the wording below, it appears that it didn't even begin to get to court, so maybe 'settlement' is the wrong word too. It sounds like all they really did was issue a complaint, which WB agreed to listen to.

A "complaint" in this sense is a formal charge ("complaint" is used in the same sense in court cases, a charging document is a "complaint"). An administrative complaint, if not settled, is heard before one of the FTC's administrative law judges, from which appeal can be taken to the commission, from which appeal can be taken to the federal courts.

The rule isn't that it's illegal to take money. The rule is that “unfair or deceptive acts or practices” are illegal with respect to advertising. Obviously that's a very broad stroke, so there are guidelines[1] put out by the FTC which give examples of what is considered fair and what's deceptive. In particular the disclosure should be part of the ad, not located somewhere else that a party might not have access to (e.g. YouTube videos are often embedded. You won't see the description box in that case, and will have no indication that you're watching paid content.) It's WB's product; they're the one's who needed to make sure their paid ads were compliant. Kjellberg/PewDiePie is based in Sweden, so the FTC guidelines don't concern him except insofar as he's doing commerce in the US.

[1] https://www.ftc.gov/system/files/documents/plain-language/bu...

> Kjellberg/PewDiePie is based in Sweden, so the FTC guidelines don't concern him except insofar as he's doing commerce in the US

FWIW he resides in Brighton, England.

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