FTC Targets State Efforts To Prevent AI Discrimination In Health

Some states wish to enact rules preventing discrimination by artificial intelligence (AI) systems in healthcare delivery and insurance underwriting. However, the Federal Trade Commission (FTC) opposes these rules and wants AI systems to warn users before following those rules. In a recent draft policy statement, the FTC characterized those rules in violation of Section 5 of the FTC Act regarding deceptive practices.

The federal agency says that enacting rules to steer AI outputs, even to comply with state laws, violates federal law. According to the FTC, the only way to avert potential deception that runs afoul of the Act is to provide users with truthful representations of the AI system’s purpose. In other words, instead of representing to users that they aim to produce as accurate outputs as possible, AI companies must include adequate disclaimers or qualifications to avoid making material misrepresentations about their products. The FTC deems compliance with ideologically-based state rules without these warnings as a “hidden agenda” designed to “subvert(ed) consumers’ objectives” and therefore deceptive as to the quality of the AI system’s outputs. Furthermore, the FTC states that disclaimers about ideologically-based AI results are only adequate if they are clear and conspicuous, rather than “buried in terms of service.”

The FTC’s position on this issue may force employers, benefits advisors, healthcare providers, and AI companies to navigate between complying with discrimination laws and avoiding practices the FTC considers deceptive or objectionable. Efforts to avoid “algorithmic discrimination” have resulted in rules and laws in various states, such as Colorado, which restrict AI outputs. These efforts are at odds with the national AI framework issued by President Donald Trump earlier this year, which states “AI technologies should not be used to silence or censor lawful expression or dissent.”

The policy draft also addresses disparate impact discrimination in employment. The agency considers disparate impact litigation to hinder businesses’ ability to make beneficial employment decisions. The agency blames the disparate impact theory of discrimination for “potentially crippling legal liability” that businesses face and imperiling the effectiveness of civil rights laws.

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