The U.S. Federal Trade Commission (FTC) has initiated legal action against five artificial intelligence (AI) companies for deceptive and unfair marketing practices. This move is part of FTC's broader efforts to combat fraud within the AI and machine learning industries. The companies targeted are DoNotPay, Ascend Ecom, Ecommerce Empire Builders, Rytr, and FBA Machine.
DoNotPay claimed to offer automated legal services, but the FTC found that its robot lawyers could not match the capabilities of human lawyers. Rytr, an AI writing tool, was found to generate low-quality reviews containing false information, which misled consumers.
The other three companies, Ascend Ecom, Ecommerce Empire Builders, and FBA Machine, promoted AI tools that purported to help users set up e-commerce stores and achieve revenue. The FTC discovered these tools could not deliver on the promise of creating stores automatically and refused to issue refunds to consumers.
The FTC highlighted the misleading nature of many AI-related claims, which often promise to improve lives through automation and problem-solving. The companies in question leveraged the AI hype to attract consumers into fraudulent schemes while providing AI-driven tools that exacerbated the fraud.
FTC has since reached a settlement with DoNotPay, requiring them to pay $193,000 and notify customers who subscribed to their services between 2021 and 2023 about the limitations of its legal functionalities. A settlement was also reached with Rytr, which agreed to cease offering its review generation services.
FTC Chair Lina M. Khan emphasized that using AI tools to deceive or mislead consumers is illegal. Under her leadership, the FTC has been focusing on fraud in the rapidly evolving AI sector, targeting fake frauds earlier this year.
