Can’t Lie About Your AI: The FTC’s Most Recent Case with AI Allegations

The FTC is not holding its breath on whether Congress will enact AI legislation. Instead, as we have previously reported, the FTC is relying on its own toolkit and has warned businesses that false or unsubstantiated claims related to AI could run afoul of the FTC Act.

A recent example came earlier this month, in a lawsuit the FTC filed against Automators, Inc., three principals, and several related entities. The FTC alleged that the defendants made baseless claims that consumers could make significant income by investing in ecommerce stores – promising ​“4k-6k consistently monthly net profits,” soliciting false endorsements, and touting non-existent venture capital backing. In fact, the FTC alleged, most consumers didn’t make the promised earnings or even recoup their investments. According to the complaint, defendants took in at least $22 million from consumers in connection with these unlawful practices.

Among their false and unsubstantiated claims, says the FTC, defendants said they used AI tools to maximize revenues, offered an ​“artificial intelligence-integrated” business opportunity to help consumers find top-selling products to sell, and promoted an AI-powered coaching program. As part of the coaching program, consumers were told to use Chatgpt to write customer service scripts and heard claims like:

• “We’ve recently discovered how to use AI tools for our 1 on 1 Amazon coaching program, helping students achieve over 10,000/month in sales!”
• “That is how you make $6000 net profit and that is how you find a product in 5 minutes using AI, Grabbly, Priceblink.”

Atop at least one of Defendants’ advertisements was a claim in bold that read:

Soon after the FTC filed its case, a federal court granted the agency’s request for a temporary restraining order (TRO) with a hearing for preliminary injunction set for mid-September. Among other things, the TRO prohibits the company from misrepresenting that its products ​“will use Artificial Intelligence (AI) machine-learning to maximize revenues.”

Big takeaway: While the AI claims were only part of the alleged deception here, this case shows that AI deception is gaining steam, and that the FTC is unafraid of calling it out. Although some aspects of AI are uncharted territory, ensuring that claims are truthful and substantiated is a trail already blazed.