Ever sit through one of your favorite YouTubers videos and wind up saying, “damn, that felt like a commercial.” In a world where we all skip over commercials whether on the Internet or on television, endorsements have taken over. There is a simple reason to explain why your favorite YouTube star did an unboxing of branded merchandise or a cat lady on Instagram posted an image of her cat with a Nine Lives bag = MONEY.
However, there are very specific rules to product placement, endorsements and disclosure of such; rules that most people don’t follow and that could cost them dearly. The Federal Trade Commission (“FTC”) has cracked down on some of these infractions and with more paid endorsements not being disclosed we are in for way more to come. And…we are only talking about U.S. rules here.
What Does the Law Say about Endorsements, Geek Attorney?
The governing law regarding paid promotions on YouTube is the FTC Act with the Lanham Act sneaking in there for false advertising purposes. First, I’ll go over the disclosure requirements as explained by the FTC themselves. The short answer to everyone’s question is “YES,” you need to disclose. If you are being paid to promote a product, or are being paid to review a product (like a video game), it is REQUIRED that you disclose your relationship with person/company paying you to review the game or how you received it. Now the requirements for disclosure, per 16 CFR Part 255 (FTC Guidelines), is that the disclosure must be “clear and conspicuous.” This just means that it can’t be hidden in some way and generally shouldn’t be made at the end of a video. Disclosures made at the end of a video are likely to be missed by consumers, for obvious reasons, and are therefore may not be considered “conspicuous.” The FTC issues administrative complaints when it has reason to believe that a company has violated the law, and that such a proceeding would be in the public interest. Violation of an FTC final consent order may result in a mandatory injunction or civil penalty of up to $16,000 per violation.
While not as probable, the Lanham Act claim holds that not disclosing pertinent information may be false or misleading. Damages could include disgorgement of profits, damages and attorneys’ fees for an individual that has been damaged by such misleading statements.
What about Awful Product Placement Like in Every Michael Bay Movie, Lawyer Know-It-All?
Go ahead and count all the trademarks and logos that pop up in a Transformers movie. That would require you having to sit through those awful movies so just watch this video. Those trademarks and logos do not just show up by accident; companies have paid money for them to be seen.
An interesting tidbit: product placement is not promotion. If you strategically place products in your videos, this falls under FCC regulation (not FTC). But, the FCC disclosure requirements are less strict than that of the FTC for disclosure of paid promotions. So something in the background or something that you don’t interact with and don’t praise for being the best product ever does not require disclosure.
The FTC Really Doesn’t Go After People and Stop Worrying Me, Lawyer Idiot!
Think I am just making this stuff up to scare you, ever heard of a small YouTuber named PewDiePie?? In July 2016 entertainment giant Warner Bros settled similar FTC charges that it had deceived consumers by failing to adequately disclose paid promotion of various video games, including Middle Earth: Shadow of Mordor. The FTC also alleged that in some cases the influencers’ videos were contractually subject to pre-approval by Warner Bros. This ad campaign generated more than 5.5 million pageviews, in large part because of the participation of YouTube let’s play megastar, PewDiePie.
In September 2015 the FTC filed a complaint against video gaming YouTube network Machinima, alleging that the company had failed to disclose up to $70,000 in paid advertisements to the public. Specifically, Machinima was accused of paying prominent YouTube stars to enthusiastically endorse the Xbox One and certain video games during the console’s 2013 launch. Ultimately, Machinima settled their dispute with the FTC, agreeing to a March 2016 order stating that the company would never again “in any Influencer Campaign misrepresent, in any manner, expressly or by implication, that an Endorser of such product is an independent user or ordinary consumer of the product or service.” While Machinima may have been one of the first companies to notoriously incur the wrath of the FTC for failure to disclose paid advertising on YouTube, they were far from the last.
Help Me Avoid Getting in Trouble, Lawyer Friend!
Try to stick to just product placement. The FCC requirements for product placement are that the “broadcaster” (statute was directed at radio and TV, but can be imported to YouTube) “fully and fairly disclose the true identity” of the source of the sponsorship. Further, the FCC also has an exception to the disclosure requirement, per the FCC: “when both the identity of the sponsor and the fact of sponsorship of a commercial product or service is obvious,” there need not be a disclosure. Think Keemstar putting G-Fuel stuff all over his set. There is a clear and obvious connection between Keem and a commercial product, therefore disclosure of their sponsorship of his videos or any connection between the company and him is not required
Doing an unboxing of items and saying how amazing they are or talking about a new lipstick and how it does wonders is an endorsement. So you must disclose them and this is what to do: put it at the BEGINNING of your video, if it’s text make it legible and clear, and if it’s audio make it clear and easily heard. There isn’t a particular set of words that the FTC prescribes, just making your relationship to the sponsor or originator of the goods you’re promoting is sufficient. Drop the endorsement in the description of the video to make it further clear, but don’t ONLY do this as it is not conspicuous.
The reason YouTubers should heed this advice is simple: it’s the law. If you violate the FTC Act you and the company giving you products to promote will be liable for false advertising and on the hook for potential fines and jail time. What’s worse is that you and the company giving you the products may also be civilly liable for false advertising under the Lanham Act and liable for damages and attorneys’ fees. Better to be safe than sorry!
In response to the maelstrom that is disclosure law, YouTube has recently rolled out its “paid promotion disclosure feature.” This feature adds a “disclosure” to your videos in the form of a 10-second text that says “includes paid promotion.” Is this enough? More than likely, yes. As long as the text is clear, legible, and indicates that the video includes a product endorsement, you should be fine.*
*I would like to formally disclose the help, but not endorsement, of intern, Martin Passante and associate, Ma’idah Lashani in helping to put this article together.