Welcome to the forefront of conversational AI as we explore the fascinating world of AI chatbots in our dedicated blog series. Discover the latest advancements, applications, and strategies that propel the evolution of chatbot technology. From enhancing customer interactions to streamlining business processes, these articles delve into the innovative ways artificial intelligence is shaping the landscape of automated conversational agents. Whether you’re a business owner, developer, or simply intrigued by the future of interactive technology, join us on this journey to unravel the transformative power and endless possibilities of AI chatbots.
Legal Insight for the Retail and Consumer Products Industry
Key Takeaway #1 California’s new AI chatbot law — “Adam’s Law” (SB 1119) — requires companion chatbot operators to conduct mandatory independent child safety audits and annual risk assessments, implement crisis protocols for queries involving self-harm, and notify parents when children disable safety settings. Non-compliance exposes businesses to significant civil liability.
Key Takeaway #2 Assembly Bill 1709 prohibits social media platforms from offering addictive features to users under 16, such as infinite scroll, autoplay, and algorithmically personalized feeds. Social media companies found to have negligently harmed children through their platforms face civil penalties of up to $1 million per child under Assembly Bill 2.
Key Takeaway #3 SB 867 prohibits companies for four years from selling or manufacturing toys for children under 16 that include chatbots, further restricting the deployment of AI companionship features in consumer products directed at minors.
On September 10, 2026, Governor Gavin Newsom signed landmark bipartisan legislation strengthening California’s protections for children online and in their interactions with artificial intelligence, including new safeguards for companion chatbots, a prohibition on addictive social media features for users under 16 years old, and expanded privacy protections for children. With these signings, California has enacted what is widely regarded as the strongest legislation regulating chatbots and social media for young users in the United States.
In total, Newsom signed more than 10 bills aimed at keeping young people safe online. While the legislation is framed around child safety, its obligations fall squarely on businesses—specifically, companies that operate AI companion chatbots, social media platforms, and any online services regularly used by minors. Companies across these industries should carefully assess whether their products and practices are compliant with the standards set out in the new laws and begin preparing for enforcement.
California lawmakers have tried to tackle online safety concerns for years while facing intense lobbying from tech companies with deep pockets, and the state’s laws disproportionately impact the global tech industry because so many of the sector’s largest companies are headquartered there. The recent legislative push comes as parents and children grapple with how social media and AI chatbots may be harming people’s mental and physical health—a concern that has intensified as technology plays a bigger role in classrooms, offices, and homes.
The legislation follows a series of social media trials in which thousands of teenagers, schools, and states accused major social media companies of hooking young users with addictive products, drawing parallels to decades of litigation against big tobacco and cigarette advertisements. Last month, one of the largest social media companies settled with 47 states, Washington, D.C., and U.S. territories for up to $17.1 billion and agreed to major changes aimed at protecting young users on its platform.
The new California laws build on the passage of more than two dozen child safety social media and AI bills this year in state legislatures across the U.S., and France, Britain, Indonesia, and Greece have also introduced laws restricting the use of social media by children under 16. California’s laws are notable, however, in their breadth and the specificity of business obligations they impose.
SB 1119 — “Adam’s Law”: Companion Chatbot Regulations
“Adam’s Law” requires robust protections around companion chatbots for children, including crisis protocols in cases of suicidal ideation, parental controls, and notifications should a child disable safety settings. The bill is also the first in the country to require companies to conduct independent child safety audits and annual risk assessments. The bill also requires companion chatbot operators to assess risks and notify parents in certain cases if their child threatened to harm themselves.
AB 1709 — Prohibition on Addictive Social Media Features
Assembly Bill 1709 will require social media platforms to provide versions to children under 16 years old that do not include personalized feeds driven by algorithms, infinite scrolls, autoplaying videos, and other addictive features. This is the first law of its kind in the nation. Tech industry groups have opposed the bill, raising concerns that it could cut off access to social media’s benefits, such as people’s ability to connect with family and friends, and have argued that lawmakers should enforce current laws to strengthen parental controls rather than pass new ones.
AB 2 — Heightened Civil Penalties for Child Harm
Assembly Bill 2 would increase the penalties for social media companies who are found to have injured children. The laws will penalize large social media companies up to $1 million per child if they are found negligent of harming children through their platforms. This creates a significant financial exposure for platforms that fail to implement adequate child safety measures.
SB 867 — Prohibition on Chatbot-Enabled Toys for Children
SB 867 prohibits companies for a period of four years from selling or manufacturing toys designed for children under 16 that incorporate chatbot functionality. The measure reflects growing legislative concern over the deployment of AI companionship features in consumer products marketed to minors and further restricts the contexts in which children may interact with AI-driven conversational tools.
The package of legislation also includes several other notable requirements for businesses:
Enforcement risk is real and immediate. The laws penalize social media companies up to $1 million per child for negligently harming children through their platforms. With millions of minor users on major platforms, aggregate exposure from even a small number of violations could be enormous.
Legal challenges are coming — but are not a basis for non-compliance. Industry trade groups have sued California and other states to block the enforcement of new online safety laws, raising First Amendment concerns about the new bills and arguing that “[t]he state cannot simply describe speech as addictive and then claim a right to regulate access to it.” The measures could still face legal challenges. However, businesses should not treat pending litigation as a basis for non-compliance. Courts may decline to enjoin enforcement, and the reputational and regulatory risks of inaction are substantial.
California’s laws set the national standard. The state’s laws have a disproportionate impact on the global tech industry because so many of the field’s titans are based there. The 13 bills signed on Thursday include measures that rewrite existing laws on child-safety design to respond to court rulings, meaning businesses that believed they were operating under a stable compliance framework must reassess. Companies operating nationally should expect other states to replicate California’s approach. The momentum is already clear: as one California Assembly member put it, “[w]e have passed a tipping point — it’s now an avalanche.”
The regulatory landscape for AI is accelerating in parallel. Governor Newsom also signed laws this week, supported by Anthropic, that require the state to create rules for independent organizations to evaluate the safety risks of AI models, and require the creation of a registry of AI auditors who must be financially independent from the businesses they audit. Businesses deploying AI systems in any consumer-facing context should be tracking this broadening framework.
Companies in the social media, AI, consumer technology, and ed-tech sectors should take the following steps:
Crowell & Moring is a full-service, international law firm that represents a broad spectrum of clients in the retail and consumer product industries, including wholesale and specialty retailers, department stores, and big-box retailers, apparel, cosmetics, food and beverage, consumer electronics and other consumer products companies, as well as investors in these sectors.
At Crowell & Moring, we understand the specific needs to the retail and consumer products industries. Our firm has established a broad array of capabilities that are focused on the complex issues facing these businesses. We provide sophisticated, multidisciplinary legal counsel, with attention to detail and the extensive resources of a full-service, international law firm. Our success is demonstrated by our clients’ decisions to call upon us, time and again, to help them navigate the complex legal and regulatory regimes, both domestically and internationally, applicable to the design and promotion of products and services, and to assist them in taking innovative and proactive measures to protect their business from the array of challenges before them.
By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.
Accept All CookiesReject Nonessential Cookies
