“FTC’s AI Crackdown” on Allegedly “Overhyped” Claims About AI

Image: Holley Robinson, EDRM.

[EDRM Editor’s Note: The opinions and positions are those of Michael Berman.]

A recent post by Tonya Riley, Cassandre Coyer, and Justin Wise discusses FTC’s AI Crackdown Pushes Boundaries of Its Oversight Power (1) (bloomberglaw.com)(Sept. 27, 2024).

The article reports that the FTC’s “Operation AI Comply” involves an enforcement action targeted at five companies.

The Federal Trade Commission’s actions against companies it said were deceiving customers about the value of their AI tools exemplifies the agency’s efforts to rein in overhyped claims about the technology while also raising questions about its ability to stretch its enforcement powers.
Tonya Riley, Cassandre Coyer & Justin Wise, FTC’s AI Crackdown Pushes Boundaries of Its Oversight Power, Bloomberg Law (Sept. 27, 2024).

Id. In one instance, “DoNotPay, which offers customers AI-powered legal services, settled with the agency for $193,000 over claims it misled users about how well its AI could replace a real lawyer.” Id.

While the FTC has so far primarily targeted scam companies with its enforcement sweep, attorneys say all companies should be assessing what claims they make about AI products.
Tonya Riley, Cassandre Coyer & Justin Wise, FTC’s AI Crackdown Pushes Boundaries of Its Oversight Power, Bloomberg Law (Sept. 27, 2024).

The blog explains that:

The FTC’s enforcement actions weren’t surprising to those following the agency, multiple attorneys said, pointing to numerous public statements regarding AI. In 2023, Chair Lina Khan joined other agency leaders in affirming they would use existing laws to rein in AI harms, a refrain they have continued to repeat.
Tonya Riley, Cassandre Coyer & Justin Wise, FTC’s AI Crackdown Pushes Boundaries of Its Oversight Power, Bloomberg Law (Sept. 27, 2024).

For example, “the commission launched an inquiry into how companies are using advanced algorithms and AI in their pricing decisions…. In February 2023, in light of the sudden public outburst of generative AI developments, the agency issued a business blog post warning companies to keep their ‘AI claims in check.’… The agency followed up with another blog post earlier this year warning companies against quietly changing their terms of service to collect more training data.” Id. (emphasis added).

The Bloomberg article suggests that: “While the FTC has so far primarily targeted scam companies with its enforcement sweep, attorneys say all companies should be assessing what claims they make about AI products.” Id.

Assisted by GAI and LLM Technologies per EDRM GAI and LLM Policy.

Author

Michael D. Berman

Mike is the owner of E-Discovery, LLC, and of counsel at Rifkin Weiner Livingston LLC, in Baltimore. He concentrates on commercial litigation and offers mediation services. He was the primary editor of Electronically Stored Information in Maryland Courts (Md. State Bar Ass’n. 2020), and he co-edited M. Berman, C. Barton, and P. Grimm, eds., Managing E-Discovery and ESI: From Pre-Litigation Through Trial (ABA 2011), and J. Baron, R. Losey, and M. Berman, eds., Perspectives on Predictive Coding (ABA 2016). Mike has litigated a number of cases in the trial and appellate courts in Maryland. He is an Adjunct Professor at the University of Baltimore School of Law where he co-teaches a three-credit discovery workshop that focuses on e-discovery. He has lectured at the Maryland Judicial College and he chaired the Bar committee that drafted the proposed ESI Principles for the District of Maryland. He is a past: co-chair of the Federal District Court Committee of the Maryland State and Federal Bar Associations; chair of the Litigation Section Council, Maryland State Bar Association; and, co-chair of the American Bar Association Litigation Section Book Publishing Board. He graduated from the University of Maryland School of Law and is also an Army veteran. He is admitted to the Maryland bar. The opinions expressed in this blog are not necessarily those of Rifkin Weiner Livingston LLC.
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