Federal Trade Commission Targets Fraudulent Artificial Intelligence (AI) Businesses In New Initiative

The Federal Trade Commission (FTC) is intensifying its efforts to combat deceptive practices linked to artificial intelligence through a new initiative called Operation AI Comply.

The initiative targets companies that misuse AI to engage in misleading conduct that harms consumers. FTC Chair Lina M. Khan emphasized that using AI tools for deception is illegal and no exemptions exist for such practices under existing laws.

The commission aims to create a fair environment for honest businesses while protecting consumers from fraudulent schemes.

Also Read: Nvidia Faces Antitrust Probe Over Market Dominance As DOJ, FTC Crack Down On AI Powerhouses: Report.

Among the cases highlighted in the enforcement sweep is the DoNotPay incident. This company marketed itself as offering the world’s first robot lawyer, promising to help users generate valid legal documents and file lawsuits without needing a human lawyer.

However, the FTC’s complaint revealed DoNotPay could not substantiate these claims, lacking the necessary testing and legal expertise. The company has agreed to settle, which includes a payment of $193,000 and a commitment to refrain from making unsupported claims about its services.

Another prominent case involves Ascend Ecom, in which the FTC alleged that it defrauded consumers of at least $25 million by falsely claiming its AI-powered tools could help them earn substantial passive income through online storefronts.

The scheme’s operators, William Basta and Kenneth Leung, charged consumers significant fees to set up online stores, promising substantial returns that rarely materialized.

Additionally, the FTC charged Ecommerce Empire Builders (EEB), led by Peter Prusinowski, with falsely advertising training programs and pre-built online stores, claiming participants could achieve million-dollar businesses. However, many consumers reported minimal financial returns, leading to complaints against the company.

The FTC also targeted Rytr, which provided an AI writing assistant that generated fake reviews, potentially misleading consumers. A proposed order against Rytr aims to prevent further deceptive practices.

The ongoing actions against these companies underscore the FTC’s commitment to regulating AI, ensuring exaggerated claims do not mislead consumers.

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