FTC enforcement actions against deceptive AI claims and schemes

In a recent announcement, the FTC outlined multiple cases targeting businesses that allegedly misled consumers by promoting AI-driven services that did not deliver on their promises. DoNotPay, which had marketed itself as “the world’s first robot lawyer,” faced scrutiny for failing to substantiate claims about its AI’s ability to replace human legal services. The FTC’s complaint indicated that the company misrepresented its service’s effectiveness, leading to a settlement that includes a financial penalty and mandated consumer disclosures. The enforcement actions also extend to other schemes that exploited the AI narrative to defraud consumers, demonstrating a broader crackdown on deceptive practices in the tech industry.

Key Cases

• DoNotPay: The FTC found that DoNotPay’s claims about its AI service were misleading, particularly regarding its ability to assist with legal matters without human oversight. The company agreed to pay $193,000 and will be prohibited from making unsupported claims about its services in the future.

• Ascend Ecom and Related Schemes: The FTC filed lawsuits against business opportunity ventures that falsely claimed consumers could achieve significant profits through AI-powered e-commerce businesses. These schemes reportedly defrauded consumers of millions by promoting unrealistic earnings potential.

• Rytr: This company, which sold an AI writing assistant, was accused of generating misleading testimonials and reviews that could deceive consumers. Rytr has agreed to a settlement that restricts its practices regarding consumer reviews.

These enforcement actions underscore the FTC’s stance that there is no exemption for AI-related claims from existing consumer protection laws, reinforcing the need for transparency and accountability in the burgeoning field of artificial intelligence.