FTC’s Crackdown on Deceptive AI Claims: A Closer Look

The Federal Trade Commission (FTC) has recently intensified its efforts to combat misleading claims surrounding artificial intelligence (AI). This crackdown specifically targets companies that have exaggerated the capabilities of their AI products, leading consumers to believe they can achieve results that are simply unattainable. The FTC’s actions are a significant step in protecting consumers from deceptive marketing practices in the rapidly evolving tech landscape.

The Companies Under Fire

The FTC has taken action against five companies that have been accused of promoting AI-based services that failed to deliver on their lofty promises. These companies include DoNotPay, Ascend Ecom, Ecommerce Empire Builders, Rytr, and FBA Machine. Each of these entities has been implicated in schemes that misled consumers about the effectiveness and reliability of their AI offerings.

DoNotPay: The "Robot Lawyer" That Couldn’t Deliver

DoNotPay, often heralded as the “world’s first robot lawyer,” claimed to offer consumers a way to bypass expensive legal fees. The company promised users that they could “sue for assault without a lawyer” and generate valid legal documents quickly. However, the FTC’s complaint revealed that DoNotPay had not conducted any testing to verify whether its AI chatbot could match the expertise of a human lawyer. Furthermore, the company did not employ any licensed attorneys to support its claims. As a result, DoNotPay has agreed to pay $193,000 to settle the FTC’s claims and will now provide warnings to customers about the limitations of its services.

Ascend Ecom: A Web of Deception

Ascend Ecom, operated by William Basta and Kenneth Leung, marketed itself as a leader in e-commerce, promising customers the ability to create online storefronts for passive income. The FTC’s complaint alleges that the company charged consumers tens of thousands of dollars to set up these stores while requiring additional investments in inventory. Ascend Ecom has operated under various names since 2021, and its misleading advertising claimed to utilize proprietary software and AI to ensure client success. A federal court has temporarily halted Ascend Ecom’s operations, placing it under the control of a receiver as the case unfolds.

Ecommerce Empire Builders: Empty Promises of Wealth

Ecommerce Empire Builders (EEB) offered users the chance to make millions through its training programs and pre-built online stores. The FTC’s complaint highlights that CEO Peter Prusinowski allegedly misused consumer funds, enriching himself while failing to deliver on promises of substantial income from online sales. EEB’s marketing claimed that clients could earn $10,000 monthly, but the FTC found no evidence to support these assertions. Many consumers reported that the stores they purchased generated little to no revenue, and EEB was resistant to refund requests. Like Ascend Ecom, a federal court has temporarily halted EEB’s operations pending further investigation.

Rytr: The Flawed Writing Assistant

Rytr marketed itself as an AI writing assistant capable of generating reviews with minimal input. However, the FTC’s complaint indicated that the service produced detailed reviews containing material inaccuracies unrelated to the user’s input. This led to potentially misleading information being published online, deceiving consumers who relied on these reviews for purchasing decisions. The FTC’s proposed settlement would prohibit Rytr from marketing any service that generates reviews or testimonials in the future.

FBA Machine: A Rebranded Scam

FBA Machine, operated by Bratislav Rozenfeld, promised users guaranteed income through AI-powered online storefronts, reportedly taking over $15.9 million from consumers. Initially launched as Passive Scaling, the scheme was rebranded after consumers sought refunds due to unmet promises. FBA Machine’s marketing claimed to use AI tools to optimize product pricing and maximize profits, while falsely guaranteeing refunds for those who did not recoup their investments. A federal court has also ordered a temporary halt to FBA Machine’s operations as the case proceeds.

The FTC’s Stance on AI Misrepresentation

FTC Chair Lina M. Khan has made it clear that using AI tools to mislead or defraud consumers is illegal. The agency’s enforcement actions underscore that there is no exemption for AI from existing consumer protection laws. By cracking down on these deceptive practices, the FTC aims to foster a fair marketplace for honest businesses and protect consumers from exploitation.

Join the Conversation

As the FTC continues its efforts to regulate the AI landscape, the conversation around the ethical use of AI technology is more important than ever. Consumers, businesses, and regulators alike must engage in discussions about the implications of AI claims and the responsibilities of companies in this rapidly evolving field. The recent actions taken by the FTC serve as a reminder that transparency and honesty are paramount in maintaining consumer trust in technology.