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Investor Alert: Multichannel Networks Have Exposure to Deceptive Advertising Prosecution

March 17, 2016

Music Tech Solutions

We’ve all seen “brand integration” videos on YouTube promoted or produced by multichannel networks such as Maker, Machnima and others.  I’ve been convinced that if these videos were on television, they would violate the “sponsorship identification” or payola rules that require disclosure of consideration paid or exchanged for placement.  (As an aside, David Lowery has raised this issue in the context of “steering agreements” by Clear Channel and Pandora.)

Even so, there’s a straight up false advertising claim that could apply in these cases and the Federal Trade Commission has now prosecuted a claim against Machinima, one of the biggest.  All MCNs and YouTube itself should take note.  (Good thing for YouTube that they have extraordinary political influence at the FTC, but that’s another story.)

The FTC first published the case on September 2, 2015:

A California-based online entertainment network has agreed to settle Federal Trade Commission charges that it…

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