FTC Warns Against Misleading AI Claims, Takes Legal Action

According to Odaily, the U.S. Federal Trade Commission (FTC) has issued a warning to businesses about the severe consequences of misleading consumers by exaggerating the capabilities of artificial intelligence. On Tuesday, the FTC announced legal action against five companies accused of using AI hype to offer deceptive services to consumers. FTC Chair Lina Khan stated, 'Using AI tools to deceive, mislead, or cheat people is illegal. The FTC's enforcement actions make it clear that AI is subject to the law.' The companies named by the FTC include DoNotPay, which offers AI-powered legal services, and Ascend Ecom, which promotes AI tools claiming to help consumers quickly earn passive income. Other companies involved are Ecommerce Empire Builders, which charges at least $2,000 to help consumers build an 'AI-driven e-commerce empire,' and Rytr, a free generative AI writing platform accused of generating fake customer reviews to 'pollute the market.' Another company, FBA Machine (formerly Passive Scaling), promised consumers they could run 'seven-figure' businesses, claiming monthly incomes exceeding $100,000. The FTC alleges that this deceptive income claim resulted in consumer losses exceeding $15.9 million. A federal judge has issued temporary restraining orders against Ascend Ecom, Ecommerce Empire Builders, and FBA Machine, placing these companies under the control of court-appointed receivers. The FTC indicated that further actions against DoNotPay and Rytr are pending. The term 'AI washing' refers to the marketing tactic where companies exaggerate or falsely advertise their products or services as utilizing AI, making them appear more advanced or innovative than they actually are.