FTC sues AI companies over deceptive claims

The Federal Trade Commission announced a crackdown Wednesday on five artificial intelligence companies accused of defrauding customers.

FTC Chair Lina Khan said the companies in question use deceptive language to scam customers out of thousands of dollars. 

“Using AI tools to trick, mislead or defraud people is illegal,” said Ms. Khan. “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.”

Three of the businesses targeted by AI Comply, a new law enforcement sweep, promised to generate passive income for customers by opening up online storefronts with the help of AI. According to the FTC complaints, FBA Machine, Ecommerce Empire Builders and Ascend Ecom have defrauded millions of dollars from customers and rarely delivered on promises. 

Additionally, the FTC action targets DoNotPay, an AI company claiming to have the world’s first robot lawyer. Through the power of its AI tools, DoNotPay said customers could sue for assault without paying for a human lawyer. According to the complaint, the company never conducted testing to determine if its robot lawyer’s output was equal to a human lawyer and didn’t retain any lawyers on staff. 

The FTC also issued a legal complaint against Rytr, an AI company that sold a writing assistant capable of producing fake customer reviews for businesses. The FTC said some of Rytr’s customers used its services to generate thousands of misleading or false reviews that would deceive potential customers. 

Wednesday’s legal action emphasizes the proactive nature of the FTC under Ms. Khan’s leadership. In the past year, the agency has started numerous investigations into AI companies accused of misleading customers and has issued guidance on how companies must use the technology.