• The FTC has launched five law enforcement actions under Operation AI Comply to target misleading AI marketing practices.

• The initiative focuses on businesses falsely promoting AI capabilities or making deceptive claims about the technology’s performance.

• Companies including DoNotPay and Ascend Ecom have been scrutinized for overstating AI functionalities.

In an effort to address deceptive marketing in the AI space, the Federal Trade Commission (FTC) has launched "Operation AI Comply." This initiative is aimed at curbing the rise of fraudulent or misleading AI-related claims and marketing practices. 

The crackdown targets companies making bold but unsubstantiated assertions about their AI-powered products and services. The agency announced five cases, including actions against a company promoting an AI tool that enabled its customers to create fake reviews, a company claiming to sell “AI Lawyer” services, and multiple companies claiming that they could use AI to help consumers make money through online storefronts.

Case Summaries

1. DoNotPay

• Marketed as the world’s first AI-powered "robot lawyer" that could “replace the $200-billion-dollar legal industry.”

• Allegedly misrepresented its ability to provide legal services, did not conduct testing to determine if its AI chatbot could provide the same level of service as a human lawyer.

• Failed to deliver on promised automated legal functionalities..

• Following the FTC action, DoNotPay settled the charges against it, agreed to pay a $193,000 fine, and inform its subscribers about the limitations of its service.

2. Ascend Ecom

• Claimed its “cutting edge” AI-powered tools would help consumers earn thousands of dollars a month in passive income by opening online storefronts. 

• The scheme, operating under different names since 2021, defrauded consumers of at least $25 million.

• Charged with false promises of guaranteed earnings.

• Targeted vulnerable consumers with exaggerated results, and the promised gains never materialized, leaving consumers with deleted bank accounts and large credit card bills.

• Following the FTC complaint, the U.S. District Court for the Central District of California issued an order temporarily halting the scheme and putting it under the control of a receiver. The FTC’s case against the scheme is ongoing.

3. Ecommerce Empire Builders (EEB)

• Promoted its AI system as a tool to build ecommerce wealth as an “AI-powered Ecommerce Empire” by participating in expensive training programs or buying online storefronts for tens of thousands.

• Allegedly exaggerated the ease of success using its services, claiming that consumers could make millions of dollars this way.

• The FTC found no evidence that the company’s’ AI tools brought consumers the significant earnings that it claimed and that the EEB CEO used consumer funds to enrich himself.

• Following the FTC complaint, the U.S. District Court for the Eastern District of Pennsylvania issued an order temporarily halting the scheme and putting it under the control of a receiver. The FTC’s case against the scheme is ongoing.

4. Rytr

• Marketed as an AI-powered content generator, especially as a writing assistant for testimonial and review generation.

• Misrepresented the quality and originality of AI-generated work – the service generated detailed reviews that contained specific, often material details that had no relation to the user’s input, or featured information that would deceive potential consumers who were using the reviews to make purchasing decisions.

• Charged with violating the FTC Act by providing subscribers with the means to generate false and deceptive written content for consumer reviews, thus engaging in an unfair business practice.

• Rytr settled the case, and was ordered to refrain from engaging in similar illegal conduct in the future, being banned from advertising, promoting, marketing, or selling any service dedicated to –generating consumer reviews or testimonials.

5. FBA Machine

• Claimed that it could help its consumers make guaranteed income through online storefronts that utilized AI-powered software.

• Misleading advertisements on the profitability of using AI for Amazon FBA (Fulfilled by Amazon).

• Promised promising consumers that they could operate a “7-figure business” and citing supposed testimonials from clients who “generate over $100,000 per month in profit.”

• Promised earnings without disclosing the risks involved.

• Following the FTC complaint, the U.S. District Court for District of New Jersey issued an order temporarily halting the scheme and putting it under the control of a receiver. The FTC’s case against the scheme is ongoing.

The Operation AI Comply cases follow similar recent FTC actions involving deceptive claims about artificial intelligence. “Using AI tools to trick, mislead, or defraud people is illegal,” said FTC Chair Lina M. Khan. “The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books. By cracking down on unfair or deceptive practices in these markets, FTC is ensuring that honest businesses and innovators can get a fair shot and consumers are being protected.”