As part of a new enforcement effort called “Operation AI Comply,” the Federal Trade Commission is investigating multiple companies that rely on artificial intelligence as a means to enforce deceptive or unfair practices that harm consumers. We are taking measures against this.
The lawsuits announced today include companies promoting AI tools that allow customers to create fake reviews, companies claiming to sell “AI lawyer” services, and companies using AI to help consumers earn money online. It includes lawsuits against multiple companies that claim they can make money. over the counter.
“Using AI tools to deceive, mislead, or defraud people is illegal,” said FTC Chair Lina M. Khan. “The FTC’s enforcement actions make clear that AI is not exempt from the law on the books. By cracking down on unfair or deceptive practices in these markets, the FTC will ensure that honest companies and innovators rights and ensure that consumers are protected.”
Claims about artificial intelligence are becoming more common in the market, including frequent promises that it has the potential to improve people’s lives through automation and problem solving. The cases included in this investigation show companies capitalizing on the hype around AI and using it to lure consumers into deceptive schemes, as well as AI-powered tools that can powerfully enhance deception. It shows that it is provided.
don’t pay
The FTC has filed a lawsuit against DoNotPay. DoNotPay claimed to offer an AI service that was “the world’s first robot lawyer,” but its product failed to live up to lofty claims that its service could replace the expertise of human lawyers. Ta. .
According to the FTC’s complaint, DoNotPay claims that its services allow consumers to “file assault claims without a lawyer,” “immediately create fully valid legal documents,” and that the company is a “$200 billion The company promised to replace the legal industry in 2017. Using artificial intelligence. ” However, DoNotPay failed to deliver on these promises. The complaint alleges that the company did not conduct any testing to determine whether the AI chatbot’s output was on par with the level of human lawyers, and that the company itself does not employ or employ lawyers. I am doing it.
The complaint also alleges that DoNotPay provided a service that checked small business websites for hundreds of federal and state violations based solely on consumers’ email addresses. The feature purports to detect legal violations that, if left unaddressed, could cost small businesses $125,000 in legal fees, but the service also was ineffective, according to the complaint.
DoNotPay agreed to a proposed Commission order to resolve the charges. The proposed settlement requires the company to pay $193,000 and send a notice to consumers who subscribed to the service between 2021 and 2023 warning them of limitations on legal features on the service. It will be done. The proposed order would also prohibit the company from making claims about the ability to substitute professional services without supporting evidence.
The commission’s vote to authorize employees to file complaints and issue proposed executive orders was 5-0. Holyoak Commissioners issued a statement echoed by Commissioner Lina M. Khan. Commissioner Ferguson issued a similar statement. The FTC plans to publish a description of the consent agreement package in the Federal Register soon. The agreement will be open for public comment for 30 days, after which the commission will decide whether to finalize the proposed consent order. Instructions for submitting comments are provided in the published notice. Once your comment is processed, it will be posted to Regulations.gov.
Ascend Ecom
FTC files suit against Online Business Opportunity Scheme, says its “cutting-edge” AI-powered tools can help consumers quickly earn thousands of dollars in passive income a month by opening online stores He claims that he made false claims. The scheme defrauded consumers of at least $25 million, according to the complaint.
The scheme is run by William Basta and Kenneth Leung and has operated under various names since 2021, including Ascend Ecom, Ascend Ecommerce, Ascend CapVentures, ACV Partners, ACV, Accelerated eCom Ventures, Ethix Capital by Ascend, and ACV. I am. Nexus.
According to the FTC’s complaint, the system’s operators charge consumers tens of thousands of dollars to start an online store on e-commerce platforms like Amazon, Walmart, Etsy, and TikTok, while spending tens of thousands more on inventory. I am requesting that. Ascend’s advertising content claimed that the company is an e-commerce leader that uses proprietary software and artificial intelligence to maximize business success for its customers.
In the complaint, Ascend promises consumers that they will build a store with a five-figure monthly income by the second year, but for nearly all consumers, the promised profits never materialized, leaving consumers with a depleted bank account. They say they were left with accounts and large credit card bills. According to the complaint, Ascend received numerous complaints from consumers, pressured consumers to change or delete negative Ascend reviews, frequently failed to honor its “Buyback Guarantee,” and The lawsuit alleges that the remaining users were illegally threatened with withholding the supposed “purchase guarantee.” Company online.
In response to the FTC’s complaint, a federal court issued an order temporarily suspending the program and placing it in receivership. The FTC’s lawsuit against the system is ongoing and will be decided by a federal court.
The commission’s vote to authorize staff to file charges was 5-0. The complaint was filed in the United States District Court for the Central District of California.
e-commerce empire builders
The FTC helps consumers build “AI-powered e-commerce empires” by enrolling in training programs that cost nearly $2,000 or by purchasing online storefronts that are “complete” for tens of thousands of dollars. It accused Business Negotiation Scheme of making false claims of support. dollar. The scheme, known as E-Commerce Empire Builders (EEB), claims consumers could potentially earn millions of dollars, but the FTC’s complaint alleges that no such profits were realized. I am doing it.
The complaint alleges that EEB CEO Peter Prusinowski failed to live up to the program’s promise of making large sums of money by selling products online. It alleges that it used consumer money, including $35,000 earned from consumers purchasing the store. In marketing, EEB encourages consumers to “skip the guesswork and start your million dollar business today” by leveraging “the power of artificial intelligence” and the strategies envisioned in this plan. I’m doing it.
EEB claims customers can earn $10,000 a month with social media ads, but the FTC complaint says the company has no evidence to support that claim. Many consumers complain that stores that buy from EEB make little or no profit and that the company resists refunding consumers, refusing to give refunds or only giving partial refunds. There is.
In response to the FTC’s complaint, a federal court issued an order temporarily suspending the program and placing it in receivership. The FTC’s lawsuit against the system is ongoing and will be decided by a federal court.
The commission’s vote to authorize staff to file charges against Mr. Prusinowski and his company was 5-0. The complaint was filed in the United States District Court for the Eastern District of Pennsylvania.
Lytle
Since April 2021, Rytr has been marketing and selling its AI “Writing Assistant” service for a variety of applications, one of which specifically was the generation of “testimonials and reviews.” Paid subscribers can generate an unlimited number of detailed consumer reviews based on very limited and general input.
According to the FTC’s complaint, Rytr’s service generates detailed reviews containing certain key details unrelated to user input, and these reviews are nearly invisible to users who copy and publish them online. It will definitely be false. In many cases, subscriber AI-generated reviews contained information that was misleading to potential consumers who used the reviews to make purchasing decisions. The complaint also alleges that at least some of Rytr’s subscribers used the service to create hundreds, or even tens of thousands, of reviews that could contain false information.
The complaint accuses Rytr of violating the FTC Act by providing subscribers with the means to generate false and deceptive content for consumer reviews. The complaint also alleges that Rytr engaged in unfair business practices by providing services that could pollute the marketplace with large numbers of false reviews, harming both consumers and honest competitors.
The proposed order resolving the Commission’s complaints is intended to prevent Rytr from engaging in similar illegal conduct in the future. This would prohibit the company from advertising, promoting, marketing, or selling services that are specialized in or advertised as generating consumer reviews and testimonials.
The commission’s vote to authorize the staff to issue the complaint and the proposed executive order was 3-2, with Commissioners Melissa Holyoake and Andrew Ferguson voting against it. Commissioners Holyoak and Ferguson issued statements. The FTC plans to publish a description of the consent agreement package in the Federal Register soon. The agreement will be open for public comment for 30 days, after which the commission will decide whether to finalize the proposed consent order. Instructions for submitting comments are provided in the published notice. Once your comment is processed, it will be posted to Regulations.gov.
FBA machine
In June, the FTC took action against a business opportunity scheme that allegedly falsely promised consumers that they could earn money through online stores using AI-powered software. The scheme, which operated under the names Passive Scaling and FBA Machine, cost consumers more than $15.9 million based on false revenue claims that rarely materialized, according to the FTC.
The complaint alleges that Bratislav Rozenfeld (also known as Steven Rozenfeld and Steven Rozen) operated the scheme since 2021, initially as a passive scaling operation. When Passive Scaling failed to deliver on its promises and consumers sued for refunds, Rosenfeld rebranded the scheme as FBA Machine in 2023. Rebranded marketing materials claim that FBA Machine uses “AI-powered” tools to help price products in stores. and maximize profits.
The scheme’s claims were wide-ranging, promising consumers they could run a “seven-figure business” and citing supposed testimonials from customers “making more than $100,000 a month.” . The company’s distributors told consumers the business was “risk-free” and falsely guaranteed tens to hundreds of thousands of dollars in refunds to consumers who did not recoup their initial investment. .
In response to the FTC’s complaint, a federal court issued an order temporarily suspending the program and placing it in receivership. Litigation against the plan is currently underway and will be decided by a federal court.
The committee voted 5-0 to authorize officials to file a complaint against Mr. Rosenfeld and numerous companies involved in the scheme. The complaint was filed in U.S. District Court for the District of New Jersey.
The Operation AI Comply lawsuit announced today builds on a number of recent FTC cases involving claims related to artificial intelligence. Career Step is a company that allegedly used AI technology to persuade consumers to enroll in bogus career training. NGL Labs, a company that allegedly claimed to use AI to provide moderation in anonymous messaging apps it illegally marketed to children. Rite Aid allegedly used AI facial recognition technology in its stores without reasonable safeguards in place. CRI Genetics allegedly misled users about the accuracy of its DNA reports, including claims that it used AI algorithms to perform genetic matches.
