FTC Takes Action Against Businesses Using Unproven, Deceptive, and Fraudulent AI Systems

The Federal Trade Commission’s Operation AI Comply is in full swing. The Commission’s new initiative aims to crack down on AI-infused frauds and deceptions to protect consumers from deceptive, inaccurate, and fraudulent AI-powered practices like chatbots, fake online reviews, or false claims of huge earnings. The Commission has taken action against DoNotPay, Ascend Ecom, Ecommerce Empire Builders, Rytr, and the FBA Machine for deceptive uses of AI that harmed consumers.

The Commission filed a complaint against DoNotPay, a company that promised its AI chatbot could provide legal services with the expertise of a human lawyer, for allegedly failing to test whether the chatbot’s output was equal to the level of a human lawyer or hiring any lawyers. The Commission also filed a complaint against Ascend Ecom, which claimed falsely that it could use AI-powered tools to help customers earn thousands of dollars in passive income monthly by opening online storefronts—but consumers allegedly never realized these promised gains. Ecommerce Empire Builders promised its customers that they could generate substantial income from online stores powered by AI—up to $10,000 per month—but these profits allegedly never materialized. Rytr marketed and sold an AI-powered writing assistant that could generate testimonials and reviews, many of which were allegedly false and could deceive potential customers. FBA Machine falsely promised its customers that they could earn income from AI-powered online store fronts, yet its claims were unproven, allegedly costing consumers more than $15.9 million.

These actions and other recent FTC actions highlight the serious harms that unproven AI claims can cause consumers. EPIC supports the Commission’s efforts to use its authorities to protect consumers from harmful AI-powered business practices. EPIC has published two reports, Generating Harms and Generating Harms II, explaining why Generative AI needs strong safeguards like independent audits and assessments that prove the accuracy of businesses’ claims. EPIC has also encouraged the Commission to investigate an AI-powered fraud detection system that claimed to be able to accurately detect fraud—a claim disproven by independent research.