In September, FTC Chairman Andrew Ferguson called for the FTC to regulate artificial intelligence claims through its existing consumer protection authorities:  “Imposing comprehensive regulations at the incipiency of a potential technological revolution would be foolish.  For now, we should limit ourselves to enforcing existing laws against illegal conduct when it involves AI no differently than when it does not.”  Two recently announced enforcement actions involving artificial intelligence underscore the new FTC leadership’s commitment to evaluate AI claims under traditional deception frameworks. 

As we’ve discussed previously, Workado agreed in April to resolve allegations that it made false or misleading performance claims in violation of Section 5 of the FTC Act related to its “AI Content Detector.”  The FTC alleged that Workado violated Section 5 when it promoted its AI detector as “98 percent accurate” even though independent testing showed a much lower accuracy rate. 

In March, Cleo AI agreed to pay $17 million to resolve allegations that Cleo AI made misleading promises about consumers’ access to quick cash advances.  Cleo AI provides subscribers with cash advances in amounts determined using an artificial intelligence risk classifier.  The FTC alleged that Cleo AI violated Section 5 of the FTC Act by making misleading claims about the timing and amount of cash advances.  The FTC also alleged that Cleo AI violated the Restore Online Shoppers’ Confidence Act (ROSCA) because it failed to disclose material information about the timing and amount of the cash advances when consumers subscribed to the service, and it also prevented subscribers with outstanding cash advances from cancelling.

These cases highlight the FTC’s willingness to pursue enforcement against companies that make deceptive claims involving AI, consistent with the Chairman’s statements.

If you have any questions concerning the material discussed in this post, please contact the members of our Advertising and Consumer Protection Investigations practice group.

Tags: AI, Consumer Protection, FTC
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Photo of Laura Kim Laura Kim

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Laura advises…

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Laura advises on a wide range of consumer protection issues, including green claims, influencers, native advertising, claim substantiation, Made in USA claims, children’s privacy, subscription auto-renewal marketing, and other digital advertising matters. In addition, Laura actively practices before the NAD, including recent successful resolution of matters for both challengers and advertisers. She is the Chair of Covington’s Advertising and Consumer Protection Investigations Group and participates in the firm’s Internet of Things Initiative.

Laura re-joined Covington after a twelve-year tenure at the FTC, where she served as Assistant Director in two divisions of the Bureau of Consumer Protection, as well as Chief of Staff in the Bureau of Consumer Protection and Attorney Advisor to former Chairman William E. Kovacic. She worked on key FTC Rules and Guides such as the Green Guides, Jewelry Guides, and the Telemarketing Sales Rule. She supervised these and other rule making proceedings and oversaw dozens of the Commission’s investigations and enforcement actions involving compliance with these rules. Laura also supervised compliance monitoring for companies under federal court or Commission order.

Laura also served as Deputy Chief Enforcement Officer at the U.S. Department of Education, where she helped establish a new Enforcement Office within Federal Student Aid. In this role, she managed investigations of higher education institutions and oversaw issuance of fines and adverse actions for institutions in violation of federal student aid regulations. Laura also supervised the borrower defense to repayment division and the Clery campus safety and security division.

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Photo of Andrew Siegel Andrew Siegel

Andrew Siegel advises clients on advertising, data security, and privacy matters. Andrew represents clients in investigations by the Federal Trade Commission and State Attorneys General, advising clients on a variety of privacy and consumer protection matters, including marketing and claim substantiation issues. In…

Andrew Siegel advises clients on advertising, data security, and privacy matters. Andrew represents clients in investigations by the Federal Trade Commission and State Attorneys General, advising clients on a variety of privacy and consumer protection matters, including marketing and claim substantiation issues. In addition, Andrew advises clients in investigating and responding to data security incidents and cyber-based attacks, including data breaches involving personal and other regulated data, advanced persistent threats, and state-sponsored attacks.

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