FTC Targets AI Misuse: Crackdown on Companies Misleading Consumers with AI

The fight against AI misuse and safety is getting stricter in the United States. The US Federal Trade Commission (FTC) has brought enforcement actions against several companies for using AI to mislead consumers.

One of these companies claimed to offer an AI-powered lawyer. The FTC said this crackdown action aims to ensure fair business competition, safe practices, and the protection of consumers.

FTC Takes a Stand: Ensuring AI Companies Play by the Same Rules

On September 25, the FTC announced the start of Operation AI Comply," part of a broader effort to enforce laws more strictly. The commission targets five companies that have used AI in deceptive or harmful ways to consumers.

FTC Chair Lina Khansaid, Using AI tools to trick or deceive people is illegal." She emphasized that AI does not have unique rules and that there are no exceptions to legal regulations. AI companies must follow the same laws as everyone else.

The FTC is acting against unfair or dishonest market practices, which helps to protect consumers from harm. It will also ensure that honest businesses and creators have a fair chance to succeed.

With Operation AI Comply," the FTC announced five actions against guilty companies. This action applies to companies using the hype around AI in deceptive and unfair ways.

The FTC targeted DONOTPay, which claimed to be the world's first robot lawyer." However, the FTC argued that the company did not provide legal services.

DONOTPay claimed it could help people sue for assault without involving a lawyer and quickly create valid legal documents.

However, the FTC said the company failed to meet up with those claims. It added that DONOTPay did not check if its AI worked well as a real lawyer. The watchdog also pointed out that the company never hired or consulted with actual legal experts.

Also, DONOTPay claimed it could scan small business websites for legal issues just by using an email. However, the FTC labeled this service as ineffective.

To resolve the issue, DONOTPay agreed to settle for $193,000 and inform customers about the limits of their services.

FTC Targets Ascend Ecom and Others for Deceptive AI Practices, Protecting Consumers from Multi-Million Dollar Scams

The FTC also went after Ascend Ecom, a company accused of running a fake online business scheme. Ascend Ecom claimed their AI could help people make massive passive income. Yet, they ended up scamming customers of over $25 million.

The Federal Trade Commission discovered another company, E-commerce Empire Builders (EEB). It charged the company with lying to customers, whom it promised to help start successful online businesses using AI. According to the regulator, EEB never fulfilled these promises, and many customers complained.

The fourth company the FTC targeted was Rytr. This firm allegedly marketed an AI writing assistant that created fake consumer reviews, adding false information to the marketplace. If the proposed settlement goes through, Rytr will no longer be allowed to offer these services.

Similarly, the FTC clamped down on a company called the FBA Machine. This company promised people guaranteed income through AI-powered online stores. The company reportedly cost consumers over $15.9 million in losses. In June, the FTC filed a lawsuit against FBA Machine, which is still ongoing.

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