FTC targets AI companies for misleading practices and fines

The U.S. Federal Trade Commission (FTC) has launched "Operation AI Comply," targeting five companies accused of misleading consumers through the use of artificial intelligence. 

According to the FTC, these firms used AI in deceptive or unfair ways that negatively impacted consumers. 

FTC Chair Lina Khan emphasised that there is no "AI exemption" from existing laws, stating, “Using AI tools to trick, mislead, or defraud people is illegal."

One of the companies under scrutiny, DoNotPay, claimed to offer the "world’s first robot lawyer" but failed to meet its promises. 

The FTC alleged that DoNotPay misled consumers by claiming it could generate legal documents and provide valid legal services, though it lacked proper testing and legal counsel. 

The company agreed to a $193,000 settlement and will now inform consumers of its service limitations.

Another firm, Ascend Ecom, was accused of operating a fraudulent business that promised AI could help users generate passive income. 

The FTC claimed Ascend Ecom defrauded consumers out of $25 million through this scheme. 

Additionally, Ecommerce Empire Builders (EEB) was charged with falsely claiming that its AI-powered e-commerce platform would lead to substantial earnings, though the promised results never materialised.

Rytr, an AI writing assistant company, was also targeted for generating misleading consumer reviews that contributed to the spread of false information. 

A proposed settlement aims to prevent Rytr from continuing such practices.

Lastly, the FTC filed a lawsuit against the FBA Machine in June, accusing it of defrauding consumers of more than $15.9 million through promises of guaranteed income via AI-powered online stores. 

This case remains active and is currently being pursued by the FTC.