Orgs Gone Wild: Esports World Cup Edition

Did the 27 teams that engaged in a ad blitz on social media in May for the Esports World Cup run afoul of marketing guidelines in the US and Europe?

Between May 6 – 13, esports organizations that are part of the Esports World Cup Foundation Club Support Program engaged in an advertising blitz on Twitter, sharing their excitement about being part of the eight-week esports competition funded by a host nation grant from the Saudi Arabian government.

What exactly does the Esports World Cup Club Support Program offer partnered organizations? From the official page (it’s important to note that the number of teams was increased from 28 to 30 following the program’s reveal):

“The EWC Program is available to 28 clubs worldwide: 22 through a direct invitation, and six through an open application. Successful clubs are expected to have an established track record with a long-term strategy in the esports industry, have demonstrated the ability to build teams in one or more esport titles and have the ability to engage with a global fanbase.

“Clubs accepted into the Program that show competitive excellence, draw the most viewership, and generate social engagement leading up to and during the World Cup will be eligible for an annual six-figure payout. This incentive will offer a sustainable opportunity for the Clubs to maximize their participation in the World Cup, based not just on their competitive performance but also on their ability to grow their international esports fanbase.”

While it is probably not against government regulatory marketing and promotional guidelines (in countries throughout the world that enforce them) to gleefully support anything you are excited about as a company or an influencer, it may be another matter altogether if you are actually being incentivized to do so financially.

Thirty teams were accepted into the Esports World Cup Foundation Club Support Program earlier this year: Team Vitality, Karmine Corp, OG Esports, Fnatic, G2 Esports, Team Secret, FaZe Clan, Cloud9, SpaceStation Gaming, NRG Esports, Team SoloMid, 100 Thieves, Gen.G Esports, T1, LOUD, FURIA Esports, Team Liquid, Guild Esports, Tundra Esports, Talon Esports, Weibo Gaming, LGD Gaming, Team Falcons, Twisted Minds, Virtus .pro, Natus Vincere, Ninjas In Pyjamas, KOI, Blacklist International, and Gaimin Gladiators.

In addition to being financially incentivized to secure rosters in games that are a part of the Esports World Cup ecosystem, organizations are also being paid to promote the event ahead of its launch beginning in July, as part of the program. Because there is a financial incentive involved in promoting the event on social media and other platforms, organizations might have an obligation to designate these posts as advertisements. One would also think that the Esports World Cup Foundation (which facilitates the incentive-driven program) would provide guidance on how organizations should inform users that their posts are promotional marketing, or ads.

It is important to note that not all 30 teams participated in what appears to be a coordinated campaign to promote the Esports World Cup in May–100 Thieves, KOI (owned by OverActive Media), and Blacklist International did not take part. We’ve screencapped the posts on X/Twitter from organizations (in the slideshow below) to give you an idea of how they paint a picture of a coordinated marketing campaign, despite not being marked as such.

The Esports Advocate reached out to the Esports World Cup Foundation—and its representatives in Europe and North America—prior to the publication of this story. Firms representing both ESL FACEIT Group and The Esports World Cup Foundation (as well as representatives from EWC directly) either did not respond to multiple requests for comment or declined to comment.

To determine what guidelines are in the jurisdictions where these teams reside, TEA reached out to multiple regional and international regulators and watchdog groups (self-regulating bodies) in charge of overseeing enforcement, including the Federal Trade Commission (U.S.), Competition Bureau of Canada (Canada), European Commission and the European Advertising Standards Alliance (EU), Advertising Standards Authority (UK), and the Netherlands Authority for Consumers & Markets (Netherlands).

It should be noted that Brazil doesn’t currently have a legal framework in place to specifically address online marketing, though there has been a recent push for legislation to deal with things such as misinformation during elections and issues related to cybercrime.

It should also be noted that China and Saudi Arabia are unlikely to have concerns about marketing that is advantageous to their mutual business dealings and/or governments. Chinese guidelines on advertising and marketing are based loosely on the International Chamber of Commerce’s (ICC) Advertising and Marketing Communications Code.

Federal Trade Commission (U.S.)

An FTC representative told TEA that the agency doesn’t comment publicly on specific cases, but did point us to guidelines for marketers and influencers promoting products or services on social media platforms such as X/Twitter, Facebook, and Instagram, among others. The guidelines are written in the spirit of “truth in advertising” but are also enforceable under the FTC Act.

Generally, the FTC guidelines call for “endorsers” (which in this particular scenario are partnered esports organizations) to provide clear and distinct disclosures in online advertising that involve “any financial, employment, personal, or family relationship with a brand” (such as being part of the Esports World Cup Club Support Program).

The FTC advises that endorsers should make disclosures even if they think “their evaluations are unbiased.” These disclosures should be placed somewhere within the endorsement message itself, and for Twitter in particular, a #[brand name partner], #ad, or #sponsored tag is sufficient. A simplified version of these guidelines is available on the FTC website, as are the full FTC guidelines.

These rules also apply to endorsers in other countries when “it’s reasonably foreseeable that the post will affect U.S. consumers.”

The FTC does not have the authority to file lawsuits in court to challenge other governments (in this case Saudi Arabia), but in countries where the U.S. has a cooperation agreement, it does have the power to file suits against companies in other jurisdictions:

“The FTC cooperates on investigations and enforcement with competition, consumer protection, and privacy agencies around the world to halt deceptive, unfair, and anticompetitive business practices that affect U.S. consumers.” 

Going by these guidelines, all of the posts from May did not contain any messaging from these partnered teams that are in a financial relationship with the Esports World Cup Foundation, meaning that all 30 partnered teams who posted messages in English were targeting an international audience that included the United States citizens. We’ll leave the actual interpretation of the law and its application to legal experts.

Advertising Standards Authority (UK)

The Advertising Standards Authority (ASA) is the UK regulator of note when it comes to enforcing the law related to marketing and advertising online, on broadcast TV/streaming platforms, in print, and more. The ASA works in cooperation with its sister organization the Committee of Advertising Practice (CAP) to enforce UK rules and guidelines on advertising, and in extreme cases of non-compliance, works with Trading Standards, which investigates complaints and sometimes prosecutes offenders in court who it deems have broken the law. The ASA derives its authority through a contract with a government regulator, The Office of Communications (OfCom), but its funding is provided by UK companies that are part of its association.

A spokesperson for the ASA told TEA that they “can’t comment definitively on whether an ad breaks our rules without going through our formal processes,” adding that “our rules make it clear that ads need to be identifiable as ads, including on social media. One way of doing this is through the use of a clear disclosure label, such as ‘#ad’, which informs people when they’re engaging with advertising. However, content produced on a business or brand’s own page may not require an additional disclosure label, as it’s likely clear to the public, given the context of where the content appears, that they’re engaging with advertising about a product or service. That said, ultimately each case would need to be judged on an individual basis.”

For an easy-to-read guide on influencer marketing guidelines check out an “Influencers’ guide to making clear that ads are ads” or this official guidance from the ASA.

The Competition Bureau of the Canadian Government

A spokesperson for the Canadian government regulator the Competition Bureau told TEA that “it would be inappropriate for the Bureau to speculate or comment on whether these social media posts raise concerns under the Competition Act. The Bureau must conduct a thorough and complete examination of the facts before reaching any conclusion as to whether the Competition Act has been contravened.”

The spokesperson did provide some context on what the rules are for influencers in Canada, under the Competition Act:

“Under the Competition Act, it is against the law to advertise or market something in a way that is false or misleading. The Act applies to influencer marketing just as it would to traditional forms of advertising. Influencers have to clearly disclose the relationships they have with the business, product or service they promote that have the potential to affect how consumers evaluate their independence.

“There is a relationship if the influencer receives money or commissions, free products or services, discounts, free trips or tickets to events, or has a business or family connection with the brand, among other things.

“We encourage anyone who suspects an individual or a business of engaging in misleading advertising or deceptive marketing practices to file a complaint via our online form.”

European Advertising Standards Alliance (EASA)

The European Advertising Standards Alliance (EASA) did not respond to a request for comment, as of this writing. The EASA is a self-regulating body that provides best practices/guidelines for marketing in European countries and provides a “Cross-Border Complaints system” that fields complaints to 28 self-regulatory organizations (SRO) in 26 European countries. The organization believes in the “general principles of legal, decent, honest and truthful and socially responsible marketing communications,” and many of its guidelines are informed by the International Chamber of Commerce’s (ICC) Advertising and Marketing Communications Code.

Relevant to the topic at hand is Section 7 of the Advertising and Marketing Communications Code (PDF):

“Marketing communications should be clearly distinguishable as such, whatever their form and whatever the medium used. When an advertisement, including so-called “native advertising”, appears in a medium containing news or editorial matter, it should be so presented that it is readily recognisable as an advertisement and where appropriate, labeled as such. The true commercial purpose of marketing communications should be transparent and not misrepresent their true commercial purpose. Hence, a communication promoting the sale of a product should not be disguised as, for example, market research, consumer surveys, user-generated content, private blogs, private postings on social media or independent reviews.”

The EASA provides guidance for those engaging in marketing—based on their country of origin within Europe–on how to properly disclose advertising on this page, though it is unlikely that the European organizations in the Esports World Cup Club Support Program visited it prior to deploying their post on X/Twitter. The organization also has a complaint form here.

European Commission

A spokesperson for the European Commission focused on the accountability of “Large Online Platforms and Online Search Engines” under the Digital Services Act (DSA) when asked about advertisements on Twitter about the Esports World Cup:

“It is important to mention that the Digital Services Act (DSA) makes designated Very Large Online Platforms and Online Search Engines accountable for ensuring transparency and respecting their obligations under the DSA.

“More so under the DSA, an ‘advertisement’ means information designed to promote the message of a legal or natural person, irrespective of whether to achieve commercial or non-commercial purposes, and presented by an online platform on its online interface against remuneration specifically for promoting that information. Hence, under the DSA, advertisements mean ‘paid advertisements’ or ‘paid promotion’ by platforms on behalf of companies or natural persons.

“As far as transparency obligations on advertisements, as defined by the DSA, platforms have to ensure to make users aware they are seeing a paid ad, as well as basic information about the advertising that is presented to them, such as why they are seeing the advertisement and on whose behalf the advertisement is presented. Furthermore, providers of very large online platforms and of very large online search engines must take additional measures to ensure advertising transparency. The DSA requires them to maintain a publicly accessible repository that contains all significant information related to an advertisement for a minimum duration of one year subsequent to its final display. The online platforms are obliged to give users the functionality to declare that their own content contains commercial communication.”

TEA reached out to other watchdog groups and government agencies in countries where Esports World Cup Club Support Program member teams reside, but many (besides those mentioned above) did not respond to our requests for comment.

Leonid Shmatenko, a senior associate at Eversheds Sutherland (and the founder and CEO of Esports Legal News), is an attorney experienced in esports, data protection, and influencer marketing. He provided us the following additional information on German and Swiss law as it relates to online marketing:

German Jurisprudence

In Germany, influencer marketing, such as the one described above, is governed by strict laws that require advertisements to be easily recognizable as such. According to Section 8 para. 3 1st sentence of the Medienstaatsvertrag (MStV) [State Treaty on Media], advertisements must be distinguishable from editorial content. If a post is an advertisement, it must be labeled accordingly. This rule is reinforced by Section 5a para. 6 of the German Competition Act, which states that failing to disclose the commercial intent of a business action, unless it is obvious from the circumstances, is considered misleading and can influence consumers’ decisions.

The Federal Court of Justice (BGH) made significant rulings in September 2021 (Judgments of 9 September 2021, Case, nos. I ZR 90/20, I ZR 125/20, I ZR 126/20) regarding influencer posts. In cases involving the Verband Sozialer Wettbewerb and Cathy Hummels, the BGH ruled that posts featuring self-purchased products linked to external sites do not need to be marked as advertisements if the commercial intent is clear from the context. This is particularly applicable to well-known influencers with a large following. However, if influencers are paid for their posts, these must be labeled as advertisements.

Further clarifications came from the BGH in January 2022 (Judgment of 13 January 2022, Case nos. I ZR 9/21, I ZR 35/21), focusing on products and services provided for free to influencers. The court ruled that posts about such items must be explicitly marked as advertisements. According to the BGH, any form of compensation, including free products, constitutes a commercial benefit under Section 2 para. 2 No. 7 MStV, thus requiring disclosure. This ruling ensures transparency and protects consumers from being misled by seemingly unbiased posts.

Situation in Switzerland

In Switzerland, there is no specific law targeting influencer marketing. Instead, the Federal Act against Unfair Competition (UWG) and the “Principles of Fairness in Commercial Communication” (GS-SLK) of the Swiss Fair Trading Commission apply. The purpose of the UWG is to ensure fair and undistorted competition in the interest of all parties (Art. 1 UWG). According to Art. 2 UWG, all unfair and unlawful competitive practices are covered, defined by the federal court as actions intended to influence competitive relations objectively. This includes traditional advertising forms and internet activities, making the UWG applicable to influencer marketing since these advertising posts aim to influence market dynamics, enhance participants’ market position, profit financially, and gain more recognition. It is clear that labeling can be omitted if the commercial nature is evident.

However, determining when this is the case requires individual assessment, leading to some degree of legal uncertainty. While Art. 2 UWG and Principle B.15 GS-SLK do not mandate a general labeling requirement, they do imply the need to disclose commercial communications. If a paid partnership is not transparently disclosed and the commercial intent is not obvious, the influencer’s actions may be deemed unlawful under the UWG.

In Switzerland, there are also no judicial rulings specifically addressing influencer marketing issues, but several decisions by the Swiss Fair Trading Commission (SLK) provide some guidance. Two notable cases involved Roger Federer and influencer Xenia Tchoumitcheva. Both cases centered on complaints from the Swiss Consumer Protection Association, which argued that the posts constituted covert advertising. In Federer’s case, a video post without advertising labels was challenged, but the SLK concluded that his followers could clearly recognize the commercial nature of his posts due to his celebrity status. Similarly, in Tchoumitcheva’s case, a photo post with tap tags marking jewelry brands was scrutinized. The SLK noted that her verified Instagram account indicated commercial activity, making the commercial intent of her posts evident. Consequently, both complaints were dismissed.

The SLK’s role in initially handling complaints is beneficial given the absence of clear judicial precedent. The SLK rulings show a preference for recognizing the commercial nature of posts based on context rather than enforcing strict labeling requirements. This approach aligns with the recent German Federal Court of Justice decisions, indicating a trend towards emphasizing the discernibility of commercial content over explicit labeling mandates. This tendency helps address the lack of legal clarity and the potential severity of judicial consequences in the Swiss context.

Editor’s Note: If it was not already apparent, Leonid Shmatenko contributed to this article, specifically on the German and Swiss law section of this story. In addition, it is important to note that we pursued this story because of this YouTube video.