In this episode of “Clearly Conspicuous,” consumer protection attorney Anthony DiResta explores the Federal Trade Commission’s (FTC) increasing scrutiny of deceptive claims related to artificial intelligence (AI). He outlines the FTC’s focus on exaggerated performance claims, misleading product labeling, opaque data practices and bias in AI-powered systems, highlighting recent enforcement actions for false or misleading representations. Mr. DiResta emphasizes that businesses must ensure their AI-related claims are accurate, transparent and comply with existing consumer protection regulations.
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Good day and welcome to another podcast of Clearly Conspicuous. As we stated in previous sessions, our goal in these podcasts is to make you succeed in this current regulatory and governmental environment, make you aware of what’s going on with the federal and state consumer protection agencies and give you practical tips for success. It’s a privilege to be with you today.
Today we discuss the FTC’s interest in deceptive artificial intelligence claims and also provide a compliance management strategy. As you all may well be aware, the Federal Trade Commission (FTC) has shown a growing and express interest in scrutinizing deceptive claims related to artificial intelligence (AI). This interest stems from the agency’s core mission to protect consumers and ensure fair competition. So, here’s a broad overview of the FTC’s actions and posture on AI-related deception:
The FTC’s authority under Section 5 of the FTC Act gives it broad power to police unfair or deceptive acts or practices, including false advertising, misleading marketing claims and unfair business practices. As AI technologies, especially generative AI, have become more prominent in consumer products and business services, the FTC sees increased potential for deceptive or hyped claims that can mislead consumers or distort markets.
The FTC has signaled that it is especially concerned with:
The FTC has issued formal business guidance and blog posts warning companies about deceptive AI practices. Notable takeaways include:
FTC Chairman Andrew Ferguson called for the FTC to regulate artificial intelligence claims through its existing consumer protection authorities, and he quotes: “Imposing comprehensive regulations at the incipiency of a potential technological revolution would be foolish. For now, we should limit ourselves to enforcing existing laws against illegal conduct when it involves AI no differently than when it does not.” 
Two recently announced enforcement actions involving artificial intelligence underscore the new FTC leadership’s commitment to evaluate AI claims under traditional deception frameworks.
Workado agreed in April to resolve allegations that it made false or misleading performance claims in violation of Section 5 of the FTC Act related to its “AI Content Detector.” The FTC alleged that Workado violated Section 5 when it promoted its AI detector as “98 percent accurate” even though independent testing showed a much lower accuracy rate.
Cleo AI agreed to pay $17 million to resolve allegations that Cleo AI made misleading promises about consumers’ access to quick cash advances.  Cleo AI provides subscribers with cash advances in amounts determined using an artificial intelligence risk classifier. The FTC alleged that Cleo AI violated Section 5 of the FTC Act by making misleading claims about the timing and amount of cash advances. The FTC also alleged that Cleo AI violated the Restore Online Shoppers’ Confidence Act (ROSCA) because it failed to disclose material information about the timing and amount of the cash advances when consumers subscribed to the service, and it also prevented subscribers with outstanding cash advances from cancelling.
So folks, here’s the takeaway: The FTC is clearly laying the groundwork for aggressive enforcement against deceptive AI practices. Companies leveraging AI in their products, services or marketing must ensure claims about AI capabilities are truthful and substantiated, avoid manipulative design, bias or misuse of personal data, and stay current with FTC guidance, which reflects a desire to shape norms and deter misconduct early in this technological evolution.
So, ladies and gentlemen, stay tuned to further programs as we identify and address the key issues and developments, and provide strategies for success. I wish you continued success and a meaningful day. Thank you.
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