FTC Crackdown on Companies Using AI Includes ‘Robot Lawyer,’ Content Generator

As its authority is routinely questioned, the Federal Trade Commission has filed complaints against five companies it said use artificial intelligence (AI) to “supercharge deceptive or unfair conduct.”

“Using AI tools to trick, mislead, or defraud people is illegal,” said FTC Chair Lina M. Khan, in a Sept. 25 statement. “The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books. By cracking down on unfair or deceptive practices in these markets, FTC is ensuring that honest businesses and innovators can get a fair shot and consumers are being protected.”

AI claims have become more prevalent, the FTC said, and the five cases announced Wednesday “show that firms have seized on the hype surrounding AI and are using it to lure consumers into bogus schemes.”

Among the companies the FTC is taking action against is “robot lawyer” DoNotPay, which has been highlighted in the national media for its AI-supported ability to help people with legal services such as appeals of parking tickets or bank fees. However, according to the FTC, DoNotPay “did not conduct testing to determine whether its AI chatbot’s output was equal to the level of a human lawyer, and that the company itself did not hire or retain any attorneys.”

DoNotPay has agreed to pay $193,000 to settle the FTC’s charges. The company will also provide a notice to consumers, telling them that the law-related services offered by DoNotPay are limited.

The vote among FTC commissioners to issue the complaint against DoNotPay was 5-0, as it was for three other cases. But the vote was split 3-2 on the prospect of a complaint against Rytr, an AI-powered content generator. The FTC focused in on Rytr’s ability to generate consumer reviews.

“In many cases, subscribers’ AI-generated reviews featured information that would deceive potential consumers who were using the reviews to make purchasing decisions,” FTC said. “The complaint further alleges that at least some of Rytr’s subscribers used the service to produce hundreds, and in some cases tens of thousands, of reviews potentially containing false information.”

Commissioners Melissa Holyoak and Andrew Ferguson voted against the complaint, against Rytr. In a separate statement, the duo said the commission failed to demonstrate the harm Rytr’s services had on consumers, and they disagreed with the FTC’s allegation that Rytr’s services provided consumers no legitimate benefits.

The complaint “suggests to all cutting-edge technology developers that an otherwise neutral product used inappropriately can lead to liability—even where, like here, the developer neither deceived nor caused injury to a consumer,” Holyoak wrote.

Other companies targeted in what the FTC dubbed “Operation AI Comply,” were Ascend Ecom, Ecommerce Empire Builders, and FBA Machine.

The FTC said Ascend Ecom allegedly defrauded consumers of at least $25 million. With AI tools, Ascend Ecom allegedly allowed consumers to open online storefronts to earn income. Until a federal judge looks at the case, operations have been temporary halted, as they have for Ecommerce Empire Builders. This company, the FTC said, allegedly promised consumers they could make million of dollars selling goods online with the help of AI.

FBA Machine was another company that promised consumers income by using online storefronts, FTC said. It cost consumers nearly $16 million, the FTC alleged. Operations here have stopped until the case is looked at by a federal judge.