Public relations agency Reverb communications, hired by iPhone game developers to promote their App Store offerings, has reached a settlement with the FTC over accusations that company employees posted positive reviews for the games the company was hired to promote. The FTC levied charges against Reverb for violating rules that require the sellers of products and those posting information about the products online to disclose any connection they might have.

The FTC first began looking into practices of "stealth marketing," which seeks to build product buzz via blogs, social media, and word of mouth by quietly paying "ordinary" people to promote the product, in late 2006. Eventually the FTC imposed new rules in 2009 that require anyone writing about products and services online to disclose any financial connection with the sellers, including "payment in kind" of free products or other gifts. These rules also apply to public relations and advertising agencies hired by the seller.

"Companies, including public relations firms involved in online marketing, need to abide by long-held principles of truth in advertising," said the director of FTC's Division of Advertising Practices, Mary Engle, in a statement. "Advertisers should not pass themselves off as ordinary consumers touting a product, and endorsers should make it clear when they have financial connections to sellers."

An FTC investigation revealed that paid employees of Reverb were posting positive reviews of games on the App Store "using account names that gave readers the impression the reviews were written by disinterested consumers." Those reviews did not reveal the fact that Reverb received a commission—often a direct percentage of sales of the games in question—from the game developers, and positive reviews can often mean a big increase in sales on the App Store.

The settlement requires Reverb to remove any reviews or other endorsements for its clients' products that do not disclose the company's connection to the sellers. Reverb is also barred from "misrepresenting that the user or endorser is an independent, ordinary consumer" in the future. The FTC can levy fines of up to $11,000 per alleged rule violation, so the settlement appears to be nothing more than a slap on the wrist. When the new rules were revealed last year, the FTC said it would focus on issuing warnings, using fines as a last resort against repeat offenders.

Reverb agreed to the settlement terms, though the company maintains that it disagrees completely with the FTC's allegations and admits to no wrongdoing. "During discussions with the FTC, it became apparent that we would never agree on the facts of the situation," Reverb said in a statement released to MTV Multiplayer. "Rather than continuing to spend time and money arguing, and laying off employees to fight what we believed was a frivolous matter, we settled this case and ended the discussion."

While paid advertising masquerading as legitimate editorial content is a real problem, the FTC's disclosure rules have drawn some criticism. The Interactive Advertising Bureau suggested last year that the rules were unfair, since they place tighter restrictions on online outlets than traditional print media. The group also suggested that the rules raise First Amendment issues.

Those criticisms aside, the question remains—how would consumers feel knowing that the review for an iPhone game they just read was paid for by a marketing company? Since knowing that fact can make a material difference in whether the review is trusted, and therefore may form the basis for a purchase, consumers have a right to know.

Still, Reverb's potentially unfair influence on App Store buyers may not be that great. As MTV Multiplayer pointed out, only those that have downloaded a game from the App Store can review it, so it would take serious effort and a lot of paid reviewers to influence its overall rating. If a game is truly awful or truly amazing, the ratings will reflect that fact.