FTC Chairman Lina Khan testifies during a hearing of the House Financial Services and General Government Appropriations Subcommittee entitled “Federal Trade Commission Fiscal Year 2025 Requests” in the Rayburn Building on Wednesday, May 15, 2024.
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this Federal Trade Commission A tough crackdown was announced on Wednesday regulator Called “deceptive artificial intelligence claims and plans” by three business opportunities businesses and two companies, including a legal services firm No payment.
The FTC said the five enforcement cases it has filed show that these companies and businesses “capitalized on the hype surrounding ‘artificial intelligence’ and used it to lure consumers into participating in false schemes.”
“It is unlawful to use artificial intelligence tools to trick, mislead, or defraud people,” FTC Chairman Lina Khan said in a statement.
“The FTC’s enforcement actions make clear that artificial intelligence is not exempt from the law,” Khan said. “By combating unfair or deceptive practices in these markets, the FTC ensures that honest businesses and innovators have fair access to opportunities and protect consumers.”
in a complainThe Federal Trade Commission said DoNotPay, which touted its artificial intelligence service as “the world’s first robot lawyer,” failed to live up to that claim.
While DoNotPay says its service will allow customers to sue someone for assault without a lawyer and produce valid legal documents “immediately,” the company has not tested whether its AI chatbot’s “output is equivalent to that of a human lawyer.” level”. the Federal Trade Commission said in a statement.
The FTC also said DoNotPay’s service allegedly used only customers’ email addresses to check small business websites for federal and state violations, but was unable to effectively detect these potentially costly violations.
DoNotPay did not admit wrongdoing but agreed to pay $193,000 and inform consumers who subscribed to its service from 2021 to 2023 about the limitations of the service’s legally relevant features to resolve the FTC’s allegations.
“The proposed order would also prohibit the company from making claims without evidence that it has the ability to substitute for any professional services,” the FTC said.
In four more cases announced Wednesday, the Federal Trade Commission is prosecuting a business opportunity scheme that operated under the names Ascend Ecom, Ascend CapVentures and ACV Nexus, among others, and was run by two men named William Basta and Kenneth Leung .
The U.S. Federal Trade Commission (FTC) alleges in a lawsuit filed in federal court in Los Angeles that Ascend “defrauded consumers of at least $2,500 through a scheme to convince consumers to spend tens of thousands of dollars each to invest in a product through deceptive benefit claims.” Thousands of dollars”. The defendant claimed that this was a necessary business opportunity in e-commerce or online stores. “
“Beginning in approximately 2023, Defendants’ deceptive sales pitches claimed that their business model was powered by artificial intelligence (“AI”),” the lawsuit states. “Defendants claimed that consumers would soon receive thousands of dollars in passive Revenues will come from sales in online stores on e-commerce platforms such as Amazon and Walmart.”
When consumers invest in the scheme, “the promised benefits will never materialize, consumers’ bank accounts will be drained and their credit card bills will be drained,” the lawsuit states.
As a result of the lawsuit, a judge has issued an order temporarily halting the program and placing it under the control of a receiver, the FTC said.
In a second lawsuit filed in June in federal court in New Jersey, the FTC targeted an opportunity program operating under the names Passive Scaling and FBA Machine that allegedly cost customers money by deceptively claiming to guarantee revenue. for about $16 million or more.
In a third lawsuit filed in federal court in Pennsylvania, the FTC alleges that the e-commerce empire builder “falsely claimed to help consumers build… An e-commerce empire driven by artificial intelligence.” Spend tens of thousands of dollars on your online storefront,” the agency said.
Like Ascend, a judge has placed the program under the control of the recipients, according to the FTC.
“The scheme … claimed that consumers had the potential to earn millions of dollars, but the FTC complaint alleges that these profits failed to materialize,” the FTC said.
As in the other two lawsuits, a judge has placed the program under the control of a receiver, according to the FTC.
In a regulatory complaint, the FTC targeted Rytr, a company that sells an artificial intelligence writing assistant that generates recommendations and customer reviews.
The FTC said the service “produced detailed reviews that were specific and often material.”
Details irrelevant to user input, the comments are almost certainly wrong for users who copy them and post them online.
“In many cases, subscribers’ AI-generated reviews contain information that deceives potential consumers who use the reviews to make purchasing decisions,” the agency said.
Rytr has agreed to resolve the case through a consent order, which will prohibit the company from providing or selling services that generate consumer reviews or recommendations.
