FTC announces tough action against ‘misleading AI’ companies

The Federal Trade Commission is taking action against companies it believes have used artificial intelligence to deceive the public.

The agency on Wednesday described five measures it had taken against companies it said were involved in various forms of “misleading or unfair conduct that harms consumers.”

The alleged schemes included promoting an AI tool that allowed customers to create fake reviews, promoting an AI lawyer that could not match the services of real lawyers, and breaking promises regarding AI-powered e-commerce businesses.

The agency said it would take action against the companies as part of its new police operation, “Operation AI Comply.”

“Using AI tools to trick, deceive, or defraud people is illegal,” FTC Chair Lina M. Khan said in a statement. “The FTC’s enforcement actions make clear that there is no exception to existing laws for AI.”

One of the companies highlighted by the FTC, DoNotPay, claimed to offer an AI service that was touted as the “world’s first robot lawyer.” The company said its service allows customers to “sue personal injury claims without a lawyer” and quickly create legal documents using AI.

The company’s website says it uses artificial intelligence “to help consumers fight big companies and solve their problems, like disputing parking tickets, appealing bank charges or stopping robocallers.”

“The goal of DoNotPay is to create a level playing field and make legal information and self-help accessible to all,” the website states.

The subscription service costs $36 every two months, with cheaper rates for older subscribers, the website says.

The FTC stated that DoNotPay’s service did not live up to its claims, writing in a complaint against the company that it “did not conduct any testing to determine whether the performance of its AI chatbot was equivalent to that of a human attorney and that the company itself did not hire or employ attorneys.”

A company spokeswoman said in a statement Wednesday that DoNotPay “worked constructively with the FTC to settle this case and fully resolve these issues without admitting liability.”

“The complaint relates to the use of services by several hundred customers several years ago (out of millions of people) who have long since stopped using those services,” the spokeswoman said.

The FTC also filed a complaint against an online company that offers AI-powered writing assistance. Rytr violated the FTC Act by allowing its subscribers to create misleading and false written content for consumer reviews, the agency said.

The company, which offers three different subscriptions up to $24.16 per month, could not immediately be reached for comment.

The FTC has issued a proposed order to the company that would prohibit the company from marketing or selling services that generate or promote customer reviews or testimonials.

The federal agency also cracked down on several programs that allegedly claimed to use AI to help consumers make money. According to the FTC, Ascend Ecom allegedly promised that its AI-powered tools would help consumers quickly earn thousands of dollars per month in passive income by opening online stores.

The FTC alleges that consumers were defrauded of at least $25 million by the scheme. Ascend Ecom’s website and Facebook page have apparently been removed.

“The complaint states that while Ascend promises consumers it will open stores that generate five-figure monthly sales by the second year, the promised profits never materialize for almost all consumers,” the FTC said. “Consumers are left with empty bank accounts and high credit card bills.”

Ascend allegedly pressured consumers to delete or change negative reviews and “illegally threatened” to withhold a supposedly guaranteed buyback from those who did not comply, the press release said.

Another alleged scheme, called “Ecommerce Empire Builders,” falsely gave consumers hope that they could build an AI-powered e-commerce empire by taking a training program costing around $2,000 or having an online store costing tens of thousands of dollars “built for you,” the FTC said.

The federal agency said the company’s CEO allegedly used consumers’ money to “enrich himself without keeping the scheme’s promises of generating high revenues through the online sale of goods.”

Ecommerce Empire Builders was not immediately available for comment.

Khan, the FTC chairman, said that by pursuing companies that use unfair or deceptive AI tools, the FTC is “ensuring that honest companies and innovators get a fair chance and consumers are protected.”