Is Microsoft breaking the law with its secret Xbox stealth marketing campaign?

A stealth marketing campaign in which Microsoft is paying for Xbox One endorsements on YouTube may bring Microsoft more than a spate of bad publicity -- it could also violate Federal Trade Commission guidelines about misleading product endorsements. I've got details, including a look at the FTC regulations

Ars Technica reports that Microsoft has signed a secret deal with the Machinima video games network in which Microsoft will pay people to post YouTube videos of games being played on the Xbox -- as long as they "not say anything negative or disparaging about Machinima, Xbox One, or any of its games." The agreement also stipulates that the agreement has to be kept a secret. In the deal, Microsoft will pay people an extra $3 per thousand video views above Machinima's normal payments.

You can read all the details here. Here's the most interesting part of the agreement:

2. "You may not say anything negative or disparaging about Machinima, Xbox One or any of its Games in your Campaign Video;

3. "You must feature at least thirty seconds (:30) of gameplay/footage of any Xbox One game within the first 2 minutes of Campaign Video

4. "You must verbally mention that you are playing the game shown on the Xbox One console."

The agreement also calls for those who participate in it to keep mum about its existence:

"You agree to keep confidential at all times all matters relating to this Agreement, including, without limitation, the Promotional Requirements, and the CPM Compensation, listed above."

The campaign may fall afoul of FTC guidelines designed to let people know when endorsements are being paid for. The guidelines, as you might imagine, are fairly complicated. Where the Microsoft campaign might fall into trouble is the section regarding "Disclosure of material connections." (Part 255.5 of section 5 of the the FTC Act for those who care about such things.) That section says in part that

"When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement...such connection must be fully disclosed."

The FTC gives several examples to clarify the guidelines about "disclosure of material connections." Two of them sound as if this agreement could violate FTC guidelines. In one example of a violation, the FTC cites a video game blogger who writes a positive review about a video game, after having been provided the video game for free by the manufacturer. In another example of a violation, a young man is part of a "street team" in which he is given a point every time he says something positive about an advertiser's product. He can then exchange those points for prizes. About this example, the FTC says:

"These incentives would materially affect the weight or credibility of the team member's endorsement. They should be clearly and conspicuously disclosed, and the advertiser should take steps to ensure that these disclosures are being provided."

This last example seems the most relevant, and it makes the Microsoft deal seem to violate the FTC guidelines. Microsoft denies any violation. But whether or not the agreement violates the guidelines, it's still wrong. When people see YouTube content not associated with an advertiser, they don't expect it to be influenced by an advertiser. Microsoft's paying people to post videos of Xbox One games and not say anything negative about the Xbox One is clearly undue influence. The FTC should investigate and Microsoft should abandon the promotion and any others like it.

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