FTC Cracks Down on Deceptive AI Claims
The Federal Trade Commission (FTC) recently took action against several companies for what it deemed as deceptive claims and schemes related to artificial intelligence (AI). This crackdown comes as the FTC aims to protect consumers from fraudulent practices in the AI market.
One of the companies targeted by the FTC was DoNotPay, a legal services firm that marketed its AI service as “the world’s first robot lawyer.” However, the FTC found that DoNotPay failed to deliver on its promise, as it did not test whether its AI chatbot’s output was equivalent to that of a human lawyer. Additionally, the company’s service that checked for federal and state violations on small business websites using only an email address was deemed ineffective by the FTC.
FTC Chairwoman Lina Khan emphasized the importance of holding companies accountable for using AI to deceive consumers. She stated, “Using AI tools to trick, mislead, or defraud people is illegal. The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the book.”
Enforcement Actions and Settlements
In response to the FTC’s charges, DoNotPay agreed to settle by paying $193,000 and informing consumers about the limitations of its law-related features. The company also agreed to refrain from making unsubstantiated claims about its ability to replace professional services.
Apart from DoNotPay, the FTC filed four other enforcement cases against companies engaging in deceptive practices. One such case involved a business opportunity scheme operated by individuals named William Basta and Kenneth Leung, which defrauded consumers of at least $25 million by making false earnings claims related to AI-powered e-commerce opportunities.
The FTC also targeted schemes operated under names like Passive Scaling and FBA Machine, as well as Ecommerce Empire Builders, for misleading consumers with promises of guaranteed income through AI-powered online storefronts. These schemes allegedly cost consumers millions of dollars without delivering on the promised profits.
Regulatory Compliance and Consumer Protection
In addition to these enforcement actions, the FTC addressed concerns related to companies like Rytr, which offered an AI writing assistant that generated deceptive testimonials and reviews. The FTC’s investigation revealed that Rytr’s service produced detailed reviews with false information, potentially misleading consumers who relied on them for purchasing decisions.
As part of a consent order, Rytr agreed to cease offering services that generate consumer reviews or testimonials. This regulatory compliance measure aims to protect consumers from deceptive practices in the AI market and ensure transparency in AI-related services.
Overall, the FTC’s crackdown on deceptive AI claims underscores the importance of holding companies accountable for their actions and protecting consumers from fraudulent schemes. By enforcing regulations and promoting transparency in the AI market, the FTC aims to safeguard consumer interests and promote fair competition among businesses.
