The FTC is focusing enforcement efforts on the use of artificial intelligence in Operation AI Compliance | Robinson+Cole Data Privacy + Security Specialist

The Federal Trade Commission (FTC) has initiated a new “enforcement action called Operation AI Comply.” The operation shows that the FTC is serious about protecting consumers from companies that use artificial intelligence (AI) tools and services to “deceive, mislead or defraud people.” Such conduct is “illegal” and in announcing its first five enforcement actions against companies that allegedly used AI to defraud consumers, the FTC said its “enforcement actions make clear that there is no AI exception to current law. By cracking down on unfair or deceptive practices in these markets, the FTC ensures honest businesses and innovators have a fair chance and consumers are protected.”

The five companies targeted by the FTC in its initial attack were DoNotPay, Ascend Ecom, Ecommerce Empire Builders, Rytr and FBA Machine.

DoNotPay “promised that its service would enable consumers to “sue assault claims without a lawyer” and “generate completely valid legal documents in the blink of an eye,” and that the company would “replace the $200 billion legal industry with artificial intelligence.” The FTC claims that “the company did not conduct testing to determine whether the AI ​​chatbot’s performance was equal to that of a human lawyer and that the company itself did not hire or retain any lawyers.” DoNotPay agreed to pay a $193,000 fine, notify consumers who subscribed to the services about the limitations of the services it offers and prohibit the company from “making claims about its ability to replace any professional service without evidence to support it.”

The FTC filed a lawsuit against Ascend Ecom, which the FTC said falsely claimed it used artificial intelligence-based tools to “help consumers quickly earn thousands of dollars a month in passive income by opening online storefronts.” According to the FTC complaint, “the scheme defrauded consumers of at least $25 million.” The case against Ascend Ecom is ongoing.

The FTC alleges that Ecommerce Empire Builders falsely claimed that it “helps consumers build an ‘AI-powered e-commerce empire’ by participating in its training programs, which can cost nearly $2,000, or by purchasing a ‘ready-for-you’ site.” shop for tens of thousands of dollars. The program, known as Ecommerce Empire Builders (EEB), claims that consumers can potentially earn millions of dollars, but the complaint filed by the FTC alleges that these profits will not materialize.”

According to the FTC’s complaint, EEB’s CEO used consumers’ money “to enrich himself by failing to deliver on the program’s promises of large revenues from selling goods online. In its marketing efforts, EEB encourages consumers to “skip the guesswork and start a million-dollar business today by leveraging the ‘power of artificial intelligence’ and the program’s purported strategies.” Despite promises made to consumers that they could earn $10,000 per month, consumers complained that they made little or no money and that “the company resisted providing consumers with refunds, either refusing to refund their money or providing only a partial refund.” The FTC successfully obtained a temporary restraining order against EEB, and legal proceedings are ongoing.

The FTC also filed a complaint against Rytr, which markets and sells AI-generated writing assistant services for testimonials and reviews. Consumers can subscribe to the service and use it to generate consumer reviews. In its complaint against Rytr, the FTC maintains that the reviews generated “would almost certainly be false to users who copied and posted them online. In many cases, AI-generated subscriber reviews contained information that could mislead potential consumers who made purchasing decisions based on them. The complaint further alleged that at least some Rytr subscribers used the service to write hundreds, and in some cases tens of thousands, of reviews that may have contained false information. The complaint alleged that Rytr violated the FTC Act by “providing subscribers with a means to generate false and deceptive written content for consumer reviews” and that Rytr “engaged in an unfair business practice by offering a service that could pollute the market with an excess of fake reviews that would harm both consumers and fair competition.”

The FTC also successfully obtained a temporary restraining order against FBA Machine, alleging that it “falsely promised consumers that they would earn a guaranteed income through online shopping sites using artificial intelligence software.” According to the FTC, the scheme, which operates under the names Passive Scaling and FBA Machine, costs consumers more than $15.9 million based on deceptive earnings claims that rarely, if ever, materialize. The program assured consumers that they could earn over $100,000 per month and that the company was “risk-free.” “falsely guaranteed refunds to consumers who did not recoup their initial investments, ranging in amounts ranging from tens to hundreds of thousands of dollars.” (EM1) These cases show that the FTC is focusing on companies that tout the use of artificial intelligence to defraud consumers. It also shows how fraudsters are using the hype around AI to deceive consumers and how important it is for consumers to be aware of new schemes using new technologies such as AI.

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