Key Points
- FTC took action against five companies for using AI in deceptive ways, including DoNotPay and Rytr.
- DoNotPay settled with the FTC, agreeing to pay $193,000 and notify customers about its limitations, but did not admit wrongdoing.
- Rytr stopped offering a review generation tool used to create fake product reviews after the FTC’s settlement.
- The FTC emphasized that there are no legal exemptions for AI technologies that deceive consumers.
The U.S. Federal Trade Commission (FTC) announced enforcement actions against five companies on Wednesday, accusing them of using artificial intelligence (AI) in deceptive and unfair ways. Among the companies targeted were businesses that falsely claimed to help consumers generate passive income through e-commerce storefronts and AI-powered services like DoNotPay and Rytr.
The FTC’s actions included suspending operations at three businesses that promoted fraudulent e-commerce schemes. These companies misled consumers by suggesting they could quickly and easily make passive income by opening and managing online stores, a promise that failed to deliver results.
In addition, the FTC settled with DoNotPay, a company that claimed to offer automated legal services. The regulator found that the AI tool exaggerated its capabilities, misleading customers about the effectiveness of its legal assistance. Under the settlement, DoNotPay agreed to pay $193,000 and inform customers who subscribed between 2021 and 2023 about the limitations of its services. Despite the settlement, DoNotPay did not admit any wrongdoing.
Rytr, an AI writing tool, also faced action for allowing users to generate fake product reviews. The FTC argued that Rytr’s service enabled subscribers to create thousands of misleading reviews with minimal user input, which violated consumer protection laws. Rytr agreed to stop offering its review generation feature as part of the settlement but did not admit to any misconduct.
FTC Chair Lina M. Khan emphasized that using AI tools to deceive or defraud consumers is illegal, stating, “The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books.” The agency’s actions warn companies in the rapidly growing AI industry that using these technologies in a deceptive manner will not go unchecked.
However, the Rytr case exposed some internal disagreements within the FTC. While all five commissioners supported actions against fraudulent AI claims, the two Republican commissioners expressed concerns over the decision to target Rytr. Despite these debates, the FTC enforced the law against the writing tool company.
These cases are part of the FTC’s broader effort to crack down on unethical uses of AI and ensure that businesses comply with existing consumer protection laws. The commission’s actions signal its commitment to regulating the emerging AI sector and preventing companies from exploiting these technologies to mislead or defraud the public.
