Two well-known social media influencers have reached a tentative agreement with the Federal Trade Commission over charges that they deceptively endorsed gambling site CSGOLotto – and paid others to do so – without disclosing that they owned the company itself.
CSGOLotto owners Trevor "TmarTn" Martin and Thomas "Syndicate" Cassel agreed to a deal in which they promise to report all of their activity to the FTC and disclose connections with endorsers. While the deal doesn't require the two to admit any culpability nor does it include a fine, future infractions could cost more than $40,000 per violation, according to an FTC spokesperson who spoke with Glixel about the case.
Under the FTC Act, according to the spokesperson, the commission typically can't assess civil penalties on the first violation. Today's consent agreement will be subject to public comment until October 10th, at which point the commission will decide whether to make the order final. Once the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $40,654.
"Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts," FTC Acting Chairman Maureen Ohlhausen, said in a prepared statement. "This action, the FTC’s first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions."
Each violation of such an order may result in a civil penalty of up to $40,654.
Martin and Cassell started CSGOLotto, Inc and its website in late 2015, according to the FTC. CSGO, or Counter-Strike: Global Offensive, is a free-to-play, first-person shooter created and run by Valve. The game occasionally gives away random chests to players at the end of a round of play. These chests, which need to be opened with a key purchased from Valve, contain a collectable virtual item called a skin, which can change the look of different weapons. Skins can be traded on Valve's Steam online game service or bought and sold for real money. CSGOLotto allowed players to gamble with those skins, which could later be sold on Valve, essentially making the skins a sort of casino chip.
According to the FTC complaint, company president Martin and vice president Cassell posted videos of themselves on YouTube showing themselves winning skins on the site and telling others to gamble there. The videos they created were viewed nearly 6 million times, according to the FTC, but they never adequately disclosed their connection to CSGOLotto. The FTC adds that the two also ran an "influencer program" which paid other gaming influencers between $2,500 and $55,000 to promote the CSGOLotto site to their own social media circles, and prohibited them from saying anything negative about the site.
The settlement brings with it potential fines for breaking the FTC guidelines and detailed rules on record-keeping and compliance the company must follow. It also puts the company under increased scrutiny by the FTC's enforcement division, which monitors defendants compliance with such orders.
"The goal of the FTC isn't to be a punitive or draconian agency."
"The goal of the FTC isn't to be a punitive or draconian agency," FTC spokesman Mitchell J. Katz says. "We are here to educate consumers about new markets."
This latest enforcement ties in neatly with that goal as the latest step in a series of warnings and enforcements around the topic of influencers and marketing dating back to 2009. In 2015, the FTC updated its guidelines around the subject, and did so again this week. The update includes 20 new questions and answers digging into further details about the rules.
This is the first time the FTC has reached a settlement with individuals on the subject of truth in advertising and influencers. Prior to this, the FTC has sent out letters warning influencers and brands of potential problems.
The FTC also recently sent out 21 more warning letters to influencers who had been contacted previously with educational letters in April. The FTC declined to release the names of the influencers contacted, but Glixel has filed a federal records request seeking those names.