FTC Calls Out Sony -- and Deutsch LA -- for Deceptive Advertising

First Time FTC Has Charged An Agency Or Company Regarding Twitter Behavior

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Credit: Sony
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The Federal Trade Commission doesn't think that Sony's claims that its PlayStation Vita handheld device was game changing, was game-changing at all.

Sony Computer Entertainment America has agreed to settle Federal Trade Commission charges that it deceived consumers with false advertising claims about the "game changing" technological features of Vita during its U.S. launch campaign in late 2011 and early 2012. The commission also targeted ad agency Deutsch, Los Angeles, for both its traditional advertising and a social-media effort. In fact, the FTC said this is the first its charged any agency or company with deceptive conduct related to Twitter posts.

According to a FTC statement, Sony claimed that the handheld console would revolutionize gaming mobility by enabling consumers to play their PlayStation 3 games via "remote play," and that they could engage in "cross platform" play by starting a game on a PS3 and then continuing it on the Vita, right where they left off. The FTC alleged that each of these claims was misleading.

But the FTC went farther. In a separate action, it stated that Deutsch Los Angeles, the agency handling the Vita launch, "knew or should have known that the advertisements it produced contained misleading claims about the console's cross-platform and 3G capabilities."

It also said that Deutsch LA "misled consumers by urging its employees to create awareness and excitement about the PS Vita on Twitter, without instructing employees to disclose their connection to the advertising agency or its then-client Sony," said a FTC press release.

The agency used the #gamechanger hashtag in its ads to direct consumers to Twitter to talk about Vita. But, "about a month before the gaming console was launched, one of Deutsch LA's assistant account executives sent a company-wide email to staff asking them to help with the ad campaign by posting comments about the PS Vita on Twitter and using the same '#gamechanger' hashtag," according to the complaint.

The participating employees, however, did not clearly state that they worked for Sony's agency. In other words, the FTC said, agency employees could be mistaken for regular consumers.

"Deutsch LA is pleased to have concluded negotiations with the FTC regarding 2012 advertising for the Sony Vita," said the agency in a statement. "In the proposed Order, Deutsch LA, Inc. did not admit to any violation of the law and sought to resolve all open issues to avoid protracted legal proceedings. Deutsch LA appreciates the FTC¹s staff¹s cooperation in bringing this matter to resolution."

In all, the proposed settlement orders prohibit both Sony and Deutsch LA from making similar claims in the future when promoting the features or capabilities of handheld gaming consoles. The proposed order against Deutsch LA also bars it from "misrepresenting that an endorser of any game console product or video game product is an independent user or ordinary consumer of the product." In addition, the proposed order requires Deutsch LA to disclose a material connection between any endorser of a game console product or video game product and Deutsch LA. These requirements are in line with the FTC's Endorsement Guides, said the FTC.

As part of its settlement with the FTC, Sony will provide consumers who bought a Vita before June 1, 2012, either a $25 cash or credit refund, or a $50 merchandise voucher for select video games or services. Sony will provide notice via email to consumers who are eligible for the voucher after the settlement is finalized by the FTC.

Though it's rare for the FTC to file a complaint against an ad agency, this isn't the first time. For example, back in 2002, the FTC filed a complaint stating that Wonder Bread and its ad agency Campbell Mithun made unsubstantiated claims that Wonder Bread's "added calcium could improve children's brain function and memory were unsubstantiated and violated federal law."