FTC Announces Five Cases Involving Deceptive AI Practices

On September 25, 2024, the Federal Trade Commission (FTC) announced its Operation AI Comply, aimed at AI-related fraud and deception, along with actions against several companies. This initiative focuses the FTC’s authority to regulate fraudulent and deceptive practices on AI, such as chatbots making false legal advice claims, AI-generated fake online reviews, and misleading earnings claims from AI-driven business schemes. The FTC emphasizes the importance of consumer vigilance, advising verification of information from automated tools and careful scrutiny of business opportunities involving AI. The FTC pursued legal actions against five entities such practices: 

• DoNotPay: The FTC alleged that DoNotPay falsely claimed that its chatbot could act as a "robot lawyer" to substitute for the expertise of a human lawyer and produce "iron clad" legal documents. DoNotPay agreed to a Consent Agreement that would prohibit the company from making similar claims without evidence, provide notification to customers about the limitations of its service, and pay $193,000. 

• Rytr: Rytr allegedly sold an AI tool that enables the creation of fake online reviews on a large scale by generating “Testimonial & Review” content. Rytr’s users posted tens of thousands of potentially false reviews for various products, that could deceive unknowing consumers Ryter agreed to a Consent Order, which would prevent Rytr from “advertising, promoting, marketing, or selling any service dedicated to – or promoted as – generating consumer reviews or testimonials.” 

• Ascend Ecom: Ascend allegedly mislead people with claims that AI tools would provide them with thousands of dollars per month in passive income, defrauding them of at least $25 million, and failing to honor a “guaranteed buyback.”  enticing them to invest in their business opportunities. The FTC filed a lawsuit in the U.S. District Court for the Central District of California. 

• Ecommerce Empire Builders: Similar to Ascend, Ecommerce Empire Builders allegedly made false claims that it would train consumers to build an “AI-powered Ecommerce Empire” and after consumers found out their stores weren’t profitable, Ecommerce Empire Builders resisted providing refunds. The FTC filed a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. 

• FBA Machine: FBA Machine also allegedly made false promises of guaranteed income through AI-powered storefronts. The company’s operator allegedly conducted a similar scheme previously under the name Passive Scaling and reused the marketing materials with additional “AI-powered” language. The company promised that it was “risk-free” and guaranteed to refund its customers’ initial investments, but ultimately cost them more than $15.9 million. The FTC filed a lawsuit in the U.S. District Court for the District of New Jersey. 

• Artificial Intelligence & Machine Learning
• Technology