FTC crackdown on companies using AI includes ‘Robot Lawyer’, Content Generator

With its authority routinely questioned, the Federal Trade Commission has filed complaints against five companies it says use artificial intelligence (AI) to “supercharge deceptive or unfair behavior.”

“Using AI tools to trick, mislead, or deceive people is illegal,” FTC Chairwoman Lina M. Khan said in a Sept. 25 statement. “The FTC’s enforcement actions make it clear that there is no AI exemption from the laws on the books. By cracking down on unfair or deceptive practices in these markets, the FTC ensures that honest and innovative businesses can get a fair chance and that consumers are protected.”

AI claims have become more widespread, the FTC said, and the five cases announced Wednesday “demonstrate that firms have taken advantage of the hype surrounding AI and are using it to lure consumers into bogus schemes.”

Among the companies the FTC is taking action against is “robot lawyer” DoNotPay, which has been highlighted in the national media for its AI-backed ability to help people with legal services such as appeals for parking tickets or bank charges . However, according to the FTC, DoNotPay “conducted no tests to determine whether the output of its AI chatbot was equal to the level of a human attorney, and the company itself did not hire or retain any attorneys.”

DoNotPay agreed to pay $193,000 to settle the FTC charges. The company will also provide a notice to consumers telling them that the legal services provided by DoNotPay are limited.

The FTC commissioners’ vote to issue the complaint against DoNotPay was 5-0, as it was for three other cases. But the vote was split 3-2 on the prospect of a complaint against Rytr, an AI-powered content generator. The FTC focused on Rytr’s ability to generate consumer reviews.

“In many cases, AI-generated subscriber reviews presented information that would mislead potential consumers who used the reviews to make purchasing decisions,” the FTC said. “The complaint further alleges that at least some of Rytr’s subscribers have used the service to produce hundreds and in some cases tens of thousands of reviews that may contain false information.”

Commissioners Melissa Holyoak and Andrew Ferguson voted against the complaint, against Rytr. In a separate statement, the two said the commission failed to prove harm Rytr’s services had on consumers and disagreed with the FTC’s contention that Rytr’s services did not provide consumers with any legitimate benefits.

The complaint “suggests to all developers of cutting-edge technology that a neutral product used improperly can result in liability — even where, as here, the developer neither deceived nor harmed a consumer,” Holyoak wrote.

Other companies targeted in what the FTC called “Operation AI Comply” were Ascend Ecom, Ecommerce Empire Builders and FBA Machine.

The FTC said Ascend Ecom allegedly defrauded consumers of at least $25 million. With AI tools, Ascend Ecom would have allowed consumers to open online storefronts to earn income. Until a federal judge reviews the case, operations have been temporarily halted, as they did for Ecommerce Empire Builders. This company, the FTC said, allegedly promised consumers it could make millions of dollars by selling goods online with the help of AI.

FBA Machine was another company that promised consumers revenue through the use of online storefronts, the FTC said. It cost consumers nearly $16 million, the FTC claimed. Operations here have halted while the case is reviewed by a federal judge.

TOPICS
InsurTech Data-driven artificial intelligence