FTC Cracks Down on AI Hype: Legal Actions Target Dubious Claims by Five Companies

The U.S. Federal Trade Commission (FTC) announced on September 25 its decision to take legal action against companies accused of falsely advertising AI capabilities or selling substandard AI technologies. The initial wave of lawsuits targets five companies: DoNotPay, Ascend Ecom, Ecommerce Empire Builders, Rytr, and FBA Machine.

Notably, DoNotPay markets itself as an AI-powered robot lawyer service, developed by Stanford University student Joshua Browder in 2016. The service, which claims to replace human lawyers, charges a subscription fee of $36 per quarter. However, the FTC alleges that DoNotPay fails to substantiate its claims of equivalency to human legal professionals and criticizes some service functionalities as deceptive. These include assertions that users can instantly verify compliance with hundreds of federal regulations.

Rytr, known for providing AI-generated reviews, is accused by the FTC of producing reviews that are marred by low quality and misinformation. These reviews are said to clutter the market and serve as tools for businesses to inflate their ratings dishonestly.

The other three companies—Ascend Ecom, Ecommerce Empire Builders, and FBA Machine—offer services related to e-commerce. They reportedly claim that their AI tools allow users to create online stores effortlessly and promise thousands of dollars in monthly passive income. However, the FTC contends that these claims are misleading. The tools purportedly do not perform as advertised, failing to facilitate easy store creation, and the companies have allegedly refused refunds to dissatisfied customers.