The Federal Trade Commission (FTC) recently initiated a law enforcement sweep, Operation AI Comply, against multiple companies that the FTC alleges have "relied on artificial intelligence as a way to supercharge deceptive or unfair conduct that harms consumers."
The sweep targets a range of AI related services and schemes, from "the world's first robot lawyer" [which my colleague, Kristen Niven blogged about HERE and HERE], to false earnings claims, to using AI to generate fake reviews. According to FTC Chair Khan, "Using AI tools to trick, mislead, or defraud people is illegal... [and] there is no AI exemption from the laws on the books."
As AI becomes more ubiquitous, so too have the promises that it can revolutionize businesses and improve lives. Unfortunately, as the FTC's sweep reveals, many companies can't back up what they've promised to consumers.
Among the companies included in the sweep:
DoNotPay: Promoted as "the world's
first robot lawyer," this service promised to help consumers
file lawsuits or generate legal documents, but the FTC alleges that
the company's AI lacked the expertise of a human lawyer,
leaving customers with inaccurate legal advice. The FTC announced
that "DoNotPay has agreed to a proposed Commission order settling the charges
against it. The settlement would require it to pay $193,000,
provide a notice to consumers who subscribed to the service between
2021 and 2023 warning them about the limitations of law-related
features on the service. The proposed order also will prohibit the
company from making claims about its ability to substitute for any
professional service without evidence to back it up."
Rytr: This case involved an AI service that could
quickly generate an unlimited number of detailed and
genuine-sounding reviews with minimal user input, thus generating
reviews that bore no relation to a real consumer's experience,
and could deceive readers relying on the reviews for actual
consumer experience and information. The proposed order settling the Commission's
complaint is, according to the FTC, "designed to prevent Rytr
from engaging in similar illegal conduct in the future [and] would
bar the company from advertising, promoting, marketing, or selling
any service dedicated to – or promoted as – generating
consumer reviews or testimonials."
Ascend Ecom: The FTC also brought suit against an
online business opportunity scheme that allegedly claimed it could
make consumers rich "using proprietary software and artificial
intelligence." Consumers allegedly paid the scheme operators
between $30,000 and $80,000 to start a shop on Amazon, Walmart and
other ecommerce platforms, as well as thousands more in store
inventory, with the promise they would soon earn thousands of
dollars a month in passive income from the technology-driven store.
Instead, the FTC alleges, "the promised gains never
materialize, and consumers are left with depleted bank accounts and
hefty credit card bills."
The Operation AI Comply cases highlight the Commission's
growing scrutiny of AI-related claims and services. As FTC
Commissioner Holyoak said recently at the National Advertising
Division Conference: "As the nation's consumer protection
and competition agency, the Commission is—and should
be— at the forefront of addressing AI-related harms, whether
they manifest as antitrust violations, deception, fraud, or some
other form of substantial injury to consumers that the Commission
has legal authority to address." We should therefore expect to
see more activity in this space from the FTC as the technology
proliferates.
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.