US FTC Unveils Action Against Deceptive AI Claims and Schemes, According to Reuters

By Jody Godoy

WASHINGTON – The U.S. Federal Trade Commission (FTC) has announced actions against five companies for using artificial intelligence in ways considered deceptive and unfair.

Three of the cases involved businesses that claimed to help consumers earn passive income through e-commerce storefronts, which have now suspended operations. The FTC also reached settlements with a company named DoNotPay over its automated legal service claims and with Rytr, an AI writing tool that allegedly offered users a feature to create fake product reviews.

"Using AI tools to trick, mislead, or defraud people is illegal," said FTC Chair Lina M. Khan in a statement. "The FTC’s enforcement actions make clear that there is no AI exemption from existing laws."

DoNotPay will pay $193,000 and provide customers who subscribed to its service from 2021 to 2023 with notice regarding the limitations of its legal feature. The company expressed satisfaction in resolving the issue, which pertained to a service that had been discontinued and was used by only a fraction of its millions of customers.

Meanwhile, Rytr has agreed to cease its review generation services, which the FTC indicated were used by some subscribers to create thousands of reviews with minimal user input, described as "convincing" or "critical."

Neither Rytr nor DoNotPay admitted to any wrongdoing in the settlements. Rytr’s legal representative did not provide immediate comments.

These cases reflect an internal discussion within the FTC on how to regulate AI appropriately. While all five commissioners consented to act against misleading claims regarding AI services, the two Republican commissioners voiced concerns regarding the action against Rytr, indicating it extended beyond the FTC’s authority.