Decades in Business, Technology and Digital Law

FTC Puts AI on Trial – Recent Actions

by | Jun 4, 2024 | Firm News


The FTC’s enforcement actions underscore the agency’s commitment to ensuring that AI technologies are developed and deployed in a manner that protects consumers and maintains fair competition. This is particularly important as AI systems become increasingly sophisticated and integrated into products and services that consumers rely on daily.

The FTC’s actions are rooted in its mandate to prevent deceptive practices and unfair competition. By focusing on AI, the FTC aims to address potential harms that could arise from the misuse of these technologies, such as biased algorithms, lack of transparency, and data privacy concerns. This proactive stance is intended to safeguard consumers from potential exploitation and ensure that businesses adhere to ethical standards in AI development and deployment.

Here are three recent FTC actions involving AI issues:

  1. Inquiry into Generative AI Investments and Partnerships: The FTC launched an inquiry in January 2024 into the investments and partnerships between major tech companies and generative AI developers. The FTC issued compulsory orders to Alphabet, Amazon, Anthropic, Microsoft, and OpenAI, seeking detailed information about their partnerships and strategic rationales. This investigation aims to understand the impact of these relationships on market competition and innovation. The FTC’s focus is to ensure that these partnerships do not stifle competition or harm consumers by distorting the innovation landscape. More details can be found here​ (​.


  1. Action Against Automators AI for Deceptive E-Commerce Scheme: In February 2024, the FTC announced a settlement with the owners of Automators AI, a company that falsely claimed its AI-powered e-commerce system could generate significant passive income for consumers. Defendants Roman Cresto, John Cresto, and Andrew Chapman, along with their companies, deceived consumers into investing in online stores on platforms like Amazon and Walmart, promising high returns. The majority of customers, however, did not achieve the promised earnings and often faced store suspensions. The settlement includes a lifetime ban on the defendants from selling business opportunities or coaching programs related to e-commerce and requires them to surrender millions in assets for consumer refunds. More details can be found here​ (​.


  1. Enforcement Action Against Rite Aid for Unfair Use of AI: In December 2023, the FTC took action against Rite Aid for its use of facial recognition technology (FRT) in stores to identify potential shoplifters. The FTC found that the FRT system often generated false-positive matches, particularly affecting minority groups and women, leading to unfair surveillance and customer harm. Rite Aid failed to ensure the accuracy of the technology and did not adequately train employees on its use. Additionally, Rite Aid violated a 2010 FTC order by not maintaining a comprehensive information security program. The settlement includes a five-year ban on using FRT, mandatory deletion of related biometric data, and the implementation of new data protection measures. More details can be found here​ ( ​.

These actions reflect the FTC’s increasing focus on ensuring AI technologies are used fairly and transparently, protecting consumers from deceptive practices and potential harms associated with AI.