The FTC is taking action against five companies using artificial intelligence unfairly

The Federal Trade Commission is cracking down on companies that use it artificial intelligence to harm consumers, through law enforcement action it was called Operation AI Comply.

On Wednesday, the agency unveiled five law enforcement actions against companies it says are using artificial intelligence in deceptive ways. This includes three e-commerce companies where consumers invested money in online storefronts that generated little or no revenue and some resulted in credit card debt. These five cases follow several other recent FTC actions against companies that use artificial intelligence in an exploitative or unfair manner, including another online retail company called Automakers AI, which reached a settlement with the FTC in February.

The three e-commerce companies involved in this action made frequent claims in their marketing efforts about how artificial intelligence would maximize profits for consumers’ online shopping sites.

“The cases included in this action show that companies have caught on to the AI ​​hype and are using it to lure consumers into fake programs,” the press release reads.

At the same time, the hype around artificial intelligence is decreasing concerns around its darker side in financial services, from its use in creating synthetic identities Down deepfakes that could compromise biometric payments and questions about whether this is the case The potential to expand lending to disadvantaged people comes at the expense of accuracy. The bill introduced to the US Senate on Tuesday addresses discrimination in AI algorithms.

Three e-commerce companies involved in Operation AI Comply allegedly forfeited the opportunity for consumers to earn thousands or tens of thousands of dollars by paying them similar amounts to open online stores or take training. They allegedly withheld refunds when consumers complained or threatened them with legal action for writing negative reviews. The cases against each of them are still pending and will be decided in federal court.

For example, one company named in the action, Ascend Ecom, allegedly defrauded consumers of more than $25 million by charging them fees to open online stores on e-commerce platforms such as Amazon and Etsy. The company claimed it would generate five-figure monthly revenue thanks to Ascend’s AI-powered tools to “maximize… business success.”

“In fact, none of Ascend’s customers achieve the reported revenues,” reads the FTC complaint filed on September 9. “Most lose their entire investment and some end up with burdensome credit card debt. Multiple online stores that Ascend, created and managed for its customers on Amazon and Walmart, were suspended and ultimately terminated by Amazon and Walmart for policy violations.”

Ecommerce company Empire Builders charged consumers thousands of dollars for a training program or a fully installed “AI-powered” online storefront that it claimed would bring in $10,000 per month. In fact, consumers have found that their online stores are making little or no money and are having difficulty getting a full refund from EEB.

The third was called Passive Scaling, before customer complaints and lawsuits prompted a rebranding to FBA Machine in 2023. It also promoted online storefronts on e-commerce platforms such as Amazon and Walmart, where consumers had to invest tens of thousands of dollars to get a fully run shop with the promise of making thousands in the form of passive income. In the case of FBA Machine, it claimed to use artificial intelligence to price products and maximize profits.

“In reality, the promised profits never materialize, and consumers are left with depleted bank accounts and high credit card bills,” the complaint says.

E-commerce companies targeted by Operation AI Comply did not immediately respond to a request for comment.

“The FTC’s enforcement actions make clear that there is no AI exception to the regulations on the books,” FTC Chair Lina Khan said in a press release.