Last week, the Federal Trade Commission (FTC) made public enforcement actions against multiple companies that have relied on artificial intelligence as a way to supercharge deceptive or unfair conduct that harms consumers.
The cases are among the FTC’s new law enforcement sweep called Operation AI Comply.
The cases include actions against a company promoting an AI tool that enabled its customers to create fake reviews, a company claiming to sell “AI Lawyer” services, and multiple companies claiming that they could use AI to help consumers make money through online storefronts.
FTC Chairman Lina M. Khan said, “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 books. By cracking down on unfair or deceptive practices in these markets, FTC is ensuring that honest businesses and innovators can get a fair shot and consumers are being protected.”
The FTC said claims around artificial intelligence have become more prevalent in the marketplace, including frequent promises about the ways AI could enhance consumers’ lives through automation and problem-solving. The cases in the FTC’s sweep show that firms have seized on the hype surrounding AI and are using it to lure consumers into bogus schemes, the agency said, and are providing AI-powered tools that can turbocharge deception.
The Operation AI Comply cases build on a number of recent FTC cases involving claims about artificial intelligence.
Enforcement actions made public include:
DoNotPay
The FTC is taking action against DoNotPay, a company that claimed to offer an AI service that was “the world’s first robot lawyer,” but the product failed to live up to its lofty claims that the service could substitute for the expertise of a human lawyer. According to the FTC’s complaint, DoNotPay promised its service would enable consumers to “sue for assault without a lawyer” and “generate perfectly valid legal documents in no time,” and that the company would “replace the $200-billion-dollar legal industry with artificial intelligence.” The complaint alleges the company did not conduct testing to determine whether its AI chatbot’s output was equal to the level of a human lawyer, and the company itself did not hire or retain any attorneys.
Ascend Ecom
The FTC has filed a lawsuit against an online business opportunity scheme that it alleges has falsely claimed its “cutting edge” AI-powered tools would help consumers quickly earn thousands of dollars a month in passive income by opening online storefronts. According to the complaint, the scheme has defrauded consumers of at least $25 million. According to the FTC’s complaint, the operators of the scheme charge consumers tens of thousands of dollars to start online stores on eCommerce platforms such as Amazon, Walmart, Etsy and TikTok while requiring them to spend tens of thousands more on inventory. Ascend’s advertising content claimed the company was a leader in eCommerce, using proprietary software and artificial intelligence to maximize clients’ business success.
Ecommerce Empire Builders
The FTC has charged a business opportunity scheme with falsely claiming to help consumers build an “AI-powered Ecommerce Empire” by participating in its training programs that can cost almost $2,000 or by buying a “done for you” online storefront for tens of thousands of dollars. The scheme, known as Ecommerce Empire Builders (EEB), claims consumers can make millions of dollars, but the FTC’s complaint alleges that those profits fail to materialize. The complaint alleges that EEB’s CEO, Peter Prusinowski, has used consumers’ money – as much as $35,000 from consumers who buy stores – to enrich himself while failing to deliver on the scheme’s promises of big income by selling goods online. In its marketing, EEB encourages consumers to “Skip the guesswork and start a million-dollar business today” by harnessing the “power of artificial intelligence” and the scheme’s supposed strategies.
Rytr
Since April 2021, Rytr has marketed and sold an AI “writing assistant” service for a number of uses, one of which was specifically “Testimonial & Review” generation. Paid subscribers could generate an unlimited number of detailed consumer reviews based on very limited and generic input. According to the FTC’s complaint, Rytr’s service generated detailed reviews that contained specific, often material details that had no relation to the user’s input, and these reviews almost certainly would be false for the users who copied them and published them online. In many cases, subscribers’ AI-generated reviews featured information that would deceive potential consumers who were using the reviews to make purchasing decisions. The complaint further alleges that at least some of Rytr’s subscribers used the service to produce hundreds, and in some cases tens of thousands, of reviews potentially containing false information. The complaint also alleges that Rytr engaged in an unfair business practice by offering a service that is likely to pollute the marketplace with a glut of fake reviews that would harm both consumers and honest competitors.
