Are sponsored YouTube videos required to notify the view that they have been paid for? In the USA (as well as in the UK) as a general rule, paid-for advertising must be clearly labelled as such, and this extends to YouTube videos. This has been confirmed in the  recent settlement between the US Federal Trade Commission (FTC) and the Machinima Youtube network. But is this the case in South Africa? We think it is.

Background of the FTC decision:

Prior to the release of the Xbox One, Microsoft made a deal with a number of prominent content producers active on the Machinima youtube network.

The network, aimed at producing video game related news and entertainment, has a large reach in the gaming community, and the reviews by its content producers are fairly well respected.

The deal was that Microsoft would pay these producers to promote the upcoming release of the Xbox One, the latest version of their flagship gaming console, and after release, produce positive reviews for the console. It included restrictions about what could and could not be said in these reviews, including banning any degrading or disparaging comments about the console, or any information about the very existence of the deal between Microsoft and the producers.

You might see the issue here already.

The FTC, a body aimed at protecting the rights of consumers in the USA, requires that any advertising of a product or service must be clearly identifiable as such. Consumers must be able to tell whether something is an honest account of an independant reviewer’s opinions, or a paid-for advertisement. This is vital to independant, well-informed purchases. If a paid-for advertisement is not labelled as such, and appears where a consumer wouldn’t normally expect to find paid-for advertising, the consumer could put more weight on it than they would have otherwise. It’s not exactly fraud, but it’s close enough to have warranted the FTC making regulations against it.

And that’s exactly what Microsoft and Machinima did: content producers were paid to give reviews that they may not have given without payment, and didn’t mention this to their viewers. Even if they did, according to the FTC guidelines, the notice would have to be prominent enough for the average consumer to see. Hiding it deep in the small-print wouldn’t be accepted.

Paid-for advertising in SA:

The Machinima settlement is based on US laws, and isn’t binding in South Africa. It does, however, raise some interesting question on how our own law treats online video reviews:

  • Do South African content producers have to notify consumers if their work is paid for?
  • Who are “content producers” in this context?
  • When do / don’t content producers have to issue this notice?
  • What constitutes an acceptable notice?

There are many different rules and bodies governing the various examples possible under these questions. These include:

  • The Advertising Standards Authority, which requires advertisers to create advertisements that are clearly identifiable as such.
  • The Press Code, which requires journalists to be independent in their reporting, and clearly indicate when reports have been funded by outside organisations.
  • The Broadcasting Complaints Commission, which requires broadcasters to report news that is truthful, and opinions that are clearly and truly presented as such.

However, the Consumer Protection Act will be the most important text for South African content producers engaging in paid-for advertising. The regulations listed above are binding only on certain specific groups, like advertisers and affiliated journalists. The CPA applies to a far larger segment of the population. In broad strokes, the CPA requires advertising of products and services to be honest and true, even where someone other than the supplier does the advertising. More specifically, advertisers must clarify any mistaken beliefs that consumers may have about the advertisement. This includes whether or not the advertisement was paid for by the suppliers of the product or service advertised.

How can we help you?

The CPA leaves a lot of questions open to debate. We think that online content producers engaging in paid-for advertising and reviews need to notify consumers of their relationship with their sponsors. We can help you identify whether your content requires notice, and whether or not you are in breach of the various regulations that may apply to your industry or business.