FTC Announces Crackdown on Deceptive AI Claims, Schemes

The U.S. Federal Trade Commission announced actions against five companies on Wednesday that it said used artificial intelligence in deceptive and unfair ways.

Three of the cases suspended operations at businesses that purported to help consumers generate passive income by opening e-commerce storefronts. The FTC also settled with a company called DoNotPay over its claim to provide automated legal services, and with Rytr, an AI writing tool that the agency said offered a feature that allows users to generate fake product reviews.

“Using AI tools to trick, mislead, 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 AI exemption from the laws on the books.”

DoNotPay agreed to pay $193,000 and give customers who subscribed to its service between 2021 and 2023 notice about the limitations of its legal feature.

Rytr agreed to stop providing review generation services, which the FTC said some subscribers used to generate thousands of reviews through a tool to make “convincing” or “critical” posts with scant user input.

Rytr and DoNotPay did not admit wrongdoing in the settlements. Their attorneys did not immediately respond to requests for comment.

The two cases illustrated internal debate within the FTC about how the regulator should approach AI. While all five commissioners agreed it should take action against false claims about AI services, the two Republican commissioners criticized the action against Rytr.

(Reporting by Doina Chiacu; Editing by David Ljunggren and Aurora Ellis)