FTC Cracks Down on AI Deception: Legal Action Against Five Companies for Misleading Claims

The U.S. Federal Trade Commission (FTC) recently initiated legal actions against five AI companies for deceptive marketing practices. This initiative marks a significant step in FTC’s efforts to combat fraud in the burgeoning AI sector. The companies targeted include DoNotPay, Ascend Ecom, Ecommerce Empire Builders, Rytr, and FBA Machine.

DoNotPay, which offers automated legal services, claimed its AI could perform like human lawyers. However, the FTC found these assertions unsubstantiated, noting that the service fell short of its promises, such as generating legally effective documents without human input. As part of a settlement, DoNotPay agreed to pay $193,000 and inform subscribers of its service limitations.

Rytr, an AI-powered writing tool, was criticized for producing low-quality, misleading reviews. These reviews contribute to market misinformation, posing a significant issue for consumers seeking reliable feedback.

The other three entities, Ascend Ecom, Ecommerce Empire Builders, and FBA Machine, advertise AI tools purportedly capable of creating and managing e-commerce stores effortlessly. The FTC found these claims misleading, as the tools failed to deliver as promised, and the companies refused refunds to dissatisfied clients.

FTC Chair Lina M. Khan emphasized the agency’s commitment to curbing AI-related consumer deception, highlighting that AI technologies are not exempt from legal scrutiny. Under Khan’s leadership, the FTC remains vigilant against evolving digital marketplace frauds, reinforcing the accountability of emerging AI technologies.