The Federal Trade Commission (FTC) recently announced Operation AI Comply, an enforcement sweep targeting a diverse swathe of organizations that offer deceptive artificial intelligence (AI) products or use AI products in ways that harm consumers. The campaign demonstrates that the FTC is following through on past promises to crack down on deceptive AI and offers insight into the types of conduct that may attract the agency’s scrutiny. The announcement observes: “The cases included in this sweep show that firms have seized on the hype surrounding AI and are using it to lure consumers into bogus schemes, and are also providing AI powered tools that can turbocharge deception.”

Although the actions target a broad spectrum of businesses and conduct, the common thread is the use of AI technology — or misleading representations about AI technology — to deceive consumers. The FTC enforcement actions include:

• Rytr: This FTC enforcement action involved an AI writing assistant program. Among the product’s advertised features was the capability to bulk generate consumer reviews based on a generic prompt. The complaint alleged that the tool generates reviews with material details that had no bearing in the user prompt and which were likely to be false in relation to the products to which they were applied. It was also alleged that some users of the product had used the program to generate tens of thousands of potentially misleading reviews (although as a dissenting commissioner observed, there is no allegation that these reviews were actually published). The order comes on the heels of the FTC’s final rule barring fake reviews. In its announcement of the new rule, the FTC highlighted the dangers of “AI-generated fake reviews.” Under the settlement, the publisher of the AI program would be restricted from advertising, promoting, marketing, or selling any service dedicated to, or promoted as, generating consumer reviews or testimonials.
• DoNotPay: The FTC initiated an action against a company offering what it promoted as “the world’s first robot lawyer.” According to the complaint, the company claimed that its products would enable its customers to “sue for assault without a lawyer” and “generate perfectly valid legal documents in no time,” but the company failed to test whether the AI outputs passed legal muster and did not engage any lawyers to review its outputs. The company also offered a service to automatically scan a business’s website for a litany of federal and state violations, but this feature also failed to live up to its lofty promises. Under the terms of its settlement with the FTC, the company will pay a $193,000 fee and provide a consumer notice of the limitations of its service.
• Ascend Ecom, Ecommerce Empire Builders and FBA Machine: The FTC also filed suit against three schemes that purported to use AI technologies to allow customers to earn passive income by using AI to generate and operate online storefronts. These businesses were alleged to charge users thousands of dollars to open markets on ecommerce site and thousands more on inventory. These schemes almost never resulted in the windfall returns it promised customers. A complaint against one such scheme, Ascend Ecom,  notes that the scheme coerced customers to delete or amend negative reviews. Under the orders, a temporary injunction bars the continuance of the schemes, which have been put under the control of a court-appointed receiver. The cases against each of the schemes are ongoing and will be decided by federal courts.

Takeaways

Advances in the capabilities and accessibility of AI have led to the wide adoption of tools powered by AI. Businesses that develop and use AI technologies alike should take note of several key points from the FTC’s recent enforcement sweep:

• The FTC is using its Section 5 powers to monitor and enforce actions against AI practices it deems to be unfair or deceptive. The recently announced actions under Operation AI Comply follows a busy period of enforcement, with the FTC settling AI-related claims involving e-commerce, vocational training tools, AI-powered content moderation, facial recognition technologies, and genetic and ancestry tests.
• Businesses should ensure that their AI products and services deliver on their advertised promises. Claims regarding the capabilities of AI to provide benefits to consumers should be validated and documented. It may be necessary to conduct audits of AI products to ensure they meet advertised capabilities and to obtain legal review of these products.
• Companies should assess consumer review mechanisms to ensure that they only host authentic and accurate customer feedback. Practices that coerce consumers into contributing positive feedback or that otherwise manipulate customer reviews should be avoided.
• Companies should also continue to monitor FTC enforcement and stay informed about updates and changes in AI laws and regulations.