Undisclosed Advertising on YouTube – A Potential Pitfall for Games Brands

The American Federal Trade Commission recently took action against an “influencer marketing” campaign that involved sponsored gameplay videos. PewDiePie, who produced one of the videos, refutes the allegations that their paid character was inadequately disclosed. In Germany, too, labelling regulations for advertising and product placement are strict, and violations can lead to sanctions not just against Let’s Players, but also the brands they advertise.

These regulations apply to all online content including YouTube, Twitch, Instagram and other social media platforms. While enforcement is scarce at the moment, the topic increasingly comes into focus of German authorities.

The German State Broadcasting Treaty (RStV) states that “advertising and teleshopping must easily be recognizable as such and distinguishable from editorial content.” Similar provisions can also be found in other media-related laws, most notably the Telemedia Act (TMG) and the Act against Unfair Competition (UWG). On a European level, surreptitious commercial communication in audiovisual media services is prohibited by the AVMS directive (art. 9 sect. 1 lit a).

When is disclosure required?

Simply put, adequate disclosure is required when

1. a video highlights a product or service in a promotional manner or
2. marketing measures have influenced the editorial work for a video.

Especially the editorial influence is a vague criterion which often leads to uncertainties. In practice, it requires case-by-case decisions. A very successful YouTuber might not be influenced in his game reviews by one free review copy of a game – but for small channels, this can be different. The mere possibility to review a game can already have an influence on its editorial decisions, thus necessitating labelling. As a rule of thumb: If granting an advantage changes the decision whether or how reporting is done, disclosure is required.

What is advertising or sponsoring?

German law differentiates between direct advertising, surreptitious advertising, sponsoring and product placement.

Advertising means any form of announcement whether in return for payment or for similar consideration in order to promote the sale of goods or services. Reviews of self-purchased games or hardware do not qualify as ads – regardless of how positive they are. But: Offering products as a gift can be seen as a “similar consideration”, thus making the video an ad.

Surreptitious advertising is any representation intended to serve as advertising and not disclosed as such, thus misleading the public as to its nature. This reproach can be made especially to videos that focus on products that were offered free of charge and present them in a promotional manner. Marketing campaigns should exercise caution!

Sponsoring is any contribution made to finance a programme with the intention of promoting the image of the sponsor. The sponsor may not be involved in the production of the programme itself. This includes title sponsoring, where the name of a programme is linked to the name of a sponsor.

Product Placement means any inclusion of or reference to a product, a service, name or trade mark in return for payment that is disclosed as such. Products or services with a value of more than EUR 1,000 are also considered product placement when supplied free of charge. Depending on the format and the presentation, supplies with lesser value can constitute admissible production aids.

On condition that they are shown in a non-promotional manner, supplier notices at the end of a video or in the info box are also not regarded as product placement. This includes supplied clothes as well as production equipment, e.g. cameras, editing software etc.

Practical implementation

German authorities have published a FAQ on advertising in social media. According to these guidelines, disclosure is considered adequate when

• an overlay “advertisement” is shown every time the product is presented or
• the notice “sponsored by (Product XY)” is shown as an overlay at the beginning of the video, if it is also pointed out verbally.

Pure commercials have to show a permanent notice “Commercial” or “Promotional Video”. In our opinion, it is sufficient if the title of the video make the commercial character clear.

For product placements, adequate disclosure is also mandatory, e.g. by displaying the line “Supported by product placement” at the beginning and end of the video. Mere production aids do not require disclosure.

If a video lacks adequate disclosure, this is considered illegal surreptitious advertising.

Consequences in case of violation

At the moment, German authorities mainly point out that violations can lead to a loss of credibility. However, they also have the possibility to impose fines and take other actions.

A lack of disclosure also constitutes a fair trade violation. Competitors and watchdog groups can take action against such practices, including cease and desist letters and court injunctions.