America’s Federal Trade Commission has settled charges against gaming and media streaming website Machinima Inc., which was under investigation for deceptive practices.

Machinima was found to have violated the FTC Act in relation to an Xbox One advertising campaign the company ran when the system launched in late 2013.

The campaign in question consisted of two phases.

In the first, Machinima instructed five of its YouTube personalities to create positive videos for the Xbox One. In these videos, each personality had to discuss two or three Xbox One features they were looking forward to, and also outline what they enjoyed in launch title Ryse: Son of Rome.

However, they could not disclose that they were being paid for the positive comments.

Adam Dalhberg (SkyVSGaming) was paid US$15,000 for his two videos, and Tom Cassell (TheSyndicateProject) received US$30,000 for his.

In a second phase of the campaign, Machinima offered any of its YouTubers US$1 for every 1,000 views their promotional Xbox One videos received, up to a total of $25,000. Again, negative remarks about Xbox One and its launch titles were forbidden, and once again the fact that the positive coverage was paid for was confidential.

According to the FTC, 300 videos were created for the program, generating more than 30 million views collectively.

In its judgement, the FTC called the videos “false and misleading”.

“When people see a product touted online, they have a right to know whether they’re looking at an authentic opinion or a paid marketing pitch,” said Jessica Rich, Director of the Bureau of Consumer Protection. “That’s true whether the endorsement appears in a video or any other media.”

Machinima won’t be fined for its breach of the FTC Act, but it will be if it violates the settlement agreement, which prohibits it from running deceptive ads and requires its YouTubers to clearly disclose when they have been compensated for endorsements.

No action will be taken by the FTC against Microsoft and its advertising agency for the campaign, Starcom MediaVest Group.

"[W]hile Microsoft and Starcom both were responsible for the influencers' failure to disclose their material connection to the companies, Commission staff considered the fact that these appeared to be isolated incidents that occurred in spite of, and not in the absence of, policies and procedures designed to prevent such lapses," the FTC said.

"The companies also quickly required Machinima to remedy the situation after they learned that Machinima was paying influencers without making the necessary disclosures."