On September 25, the Federal Trade Commission (FTC) announced that it brought five actions against companies it accused of using “artificial intelligence as a way to supercharge deceptive or unfair conduct that harms consumers.”  These actions, which the FTC indicated are part of its new enforcement sweep called “Operation AI Comply,” reflect the FTC’s repeatedly stated intention to exercise its authority under the FTC Act and other rules in connection with AI-related products and marketing claims. 

The five actions rely on a range of FTC authorities and target several different forms of conduct. 

  • DoNotPay: The FTC brought an action against DoNotPay, which purports to offer automated legal services, on the theory that it violated the FTC Act by making false claims that its product could substitute for the expertise of a human lawyer.  A proposed settlement would require DoNotPay to pay $193,000, provide notices to past subscribers, and avoid making claims about its ability to substitute AI for professional expertise without proper evidence.
  • Ascend Ecom: The FTC brought an action against Ascend and other defendants under the FTC Act and Business Opportunity Rule based on allegedly false claims that the company’s “AI-powered tools would help consumers quickly earn thousands of dollars a month in passive income by opening online storefronts,” and the company’s alleged failure to honor a money-back guarantee that it had extended to some customers.  The FTC also alleged that the defendants had violated the Consumer Review Fairness Act by using non-disparagement clauses to restrict customers from leaving accurate reviews of its services.
  • Ecommerce Empire Builders: The FTC brought an action against Ecommerce Empire Builders and other defendants under the FTC Act and Business Opportunity Rule based on alleged misrepresentations regarding the likely profitability of online stores “powered by artificial intelligence” that are sold by the defendants.  The FTC also alleged that defendants had violated the Consumer Review Fairness Act by using non-disparagement clauses to restrict customers from leaving accurate reviews of its services.
  • FBA Machine: The FTC brought an action against FBA Machine and other defendants under the FTC Act and Business Opportunity Rule based on allegations that the defendants “use deceptive earnings claims to convince consumers to shell out tens of thousands of dollars each to invest in what Defendants claim is a surefire business opportunity powered by artificial intelligence.”  The FTC also alleged that defendants had violated the Consumer Review Fairness Act by using non-disparagement clauses to restrict customers from leaving accurate reviews of its services.
  • Rytr: The FTC brought an action against Rytr, a service that it alleged enabled subscribers to create “AI-generated reviews featur[ing] information that would deceive potential consumers who were using the reviews to make purchasing decisions,” under Section 5 of the FTC Act.  The FTC alleged that Rytr’s review-generation tool “furnish[ed] others with the means and instrumentalities to” “generate written content for consumer reviews that is false and deceptive,” which it argued was an unfair and deceptive trade practice.  A proposed settlement would restrict Rytr and its partners from advertising or selling any service for generating reviews.

The FTC’s press release announcing the cases stressed that businesses must be transparent about their use of AI, and that “using an AI tool when you’re developing your product is not the same as offering your customers a product with AI inside.”  The FTC also stated that businesses making AI-related claims about the profitability of a business opportunity must “[h]ave concrete data demonstrating what you’re promising is typical for your customers.”

Summarizing its ongoing investigative work to “combat AI-related issues in the marketplace,” the FTC explained that “[w]e’re checking to see whether products or services actually use AI as advertised, if so, whether they work as marketers say they will. We’re examining whether AI and other automated tools are being used for fraud, deception, unfair manipulation, or other harmful purposes. On the back end, we’re looking at whether automated tools have biased or discriminatory impacts.” 

Photo of Yaron Dori Yaron Dori

Yaron Dori has over 25 years of experience advising technology, telecommunications, media, life sciences, and other types of companies on their most pressing business challenges. He is a former chair of the firm’s technology, communications and media practices and currently serves on the…

Yaron Dori has over 25 years of experience advising technology, telecommunications, media, life sciences, and other types of companies on their most pressing business challenges. He is a former chair of the firm’s technology, communications and media practices and currently serves on the firm’s eight-person Management Committee.

Yaron’s practice advises clients on strategic planning, policy development, transactions, investigations and enforcement, and regulatory compliance.

Early in his career, Yaron advised telecommunications companies and investors on regulatory policy and frameworks that led to the development of broadband networks. When those networks became bidirectional and enabled companies to collect consumer data, he advised those companies on their data privacy and consumer protection obligations. Today, as new technologies such as Artificial Intelligence (AI) are being used to enhance the applications and services offered by such companies, he advises them on associated legal and regulatory obligations and risks. It is this varied background – which tracks the evolution of the technology industry – that enables Yaron to provide clients with a holistic, 360-degree view of technology policy, regulation, compliance, and enforcement.

Yaron represents clients before federal regulatory agencies—including the Federal Communications Commission (FCC), the Federal Trade Commission (FTC), and the Department of Commerce (DOC)—and the U.S. Congress in connection with a range of issues under the Communications Act, the Federal Trade Commission Act, and similar statutes. He also represents clients on state regulatory and enforcement matters, including those that pertain to telecommunications, data privacy, and consumer protection regulation. His deep experience in each of these areas enables him to advise clients on a wide range of technology regulations and key business issues in which these areas intersect.

With respect to technology and telecommunications matters, Yaron advises clients on a broad range of business, policy and consumer-facing issues, including:

  • Artificial Intelligence and the Internet of Things;
  • Broadband deployment and regulation;
  • IP-enabled applications, services and content;
  • Section 230 and digital safety considerations;
  • Equipment and device authorization procedures;
  • The Communications Assistance for Law Enforcement Act (CALEA);
  • Customer Proprietary Network Information (CPNI) requirements;
  • The Cable Privacy Act
  • Net Neutrality; and
  • Local competition, universal service, and intercarrier compensation.

Yaron also has extensive experience in structuring transactions and securing regulatory approvals at both the federal and state levels for mergers, asset acquisitions and similar transactions involving large and small FCC and state communication licensees.

With respect to privacy and consumer protection matters, Yaron advises clients on a range of business, strategic, policy and compliance issues, including those that pertain to:

  • The FTC Act and related agency guidance and regulations;
  • State privacy laws, such as the California Consumer Privacy Act (CCPA) and California Privacy Rights Act, the Colorado Privacy Act, the Connecticut Data Privacy Act, the Virginia Consumer Data Protection Act, and the Utah Consumer Privacy Act;
  • The Electronic Communications Privacy Act (ECPA);
  • Location-based services that use WiFi, beacons or similar technologies;
  • Digital advertising practices, including native advertising and endorsements and testimonials; and
  • The application of federal and state telemarketing, commercial fax, and other consumer protection laws, such as the Telephone Consumer Protection Act (TCPA), to voice, text, and video transmissions.

Yaron also has experience advising companies on congressional, FCC, FTC and state attorney general investigations into various consumer protection and communications matters, including those pertaining to social media influencers, digital disclosures, product discontinuance, and advertising claims.

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Photo of Laura Kim Laura Kim

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Laura advises on…

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Laura advises on a wide range of consumer protection issues, including green claims, influencers, native advertising, claim substantiation, Made in USA claims, children’s privacy, subscription auto-renewal marketing, and other digital advertising matters. In addition, Laura actively practices before the NAD, including recent successful resolution of matters for both challengers and advertisers. She is the Chair of Covington’s Advertising and Consumer Protection Investigations Group and participates in the firm’s Internet of Things Initiative.

Laura re-joined Covington after a twelve-year tenure at the FTC, where she served as Assistant Director in two divisions of the Bureau of Consumer Protection, as well as Chief of Staff in the Bureau of Consumer Protection and Attorney Advisor to former Chairman William E. Kovacic. She worked on key FTC Rules and Guides such as the Green Guides, Jewelry Guides, and the Telemarketing Sales Rule. She supervised these and other rule making proceedings and oversaw dozens of the Commission’s investigations and enforcement actions involving compliance with these rules. Laura also supervised compliance monitoring for companies under federal court or Commission order.

Laura also served as Deputy Chief Enforcement Officer at the U.S. Department of Education, where she helped establish a new Enforcement Office within Federal Student Aid. In this role, she managed investigations of higher education institutions and oversaw issuance of fines and adverse actions for institutions in violation of federal student aid regulations. Laura also supervised the borrower defense to repayment division and the Clery campus safety and security division.

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Photo of Andrew Longhi Andrew Longhi

Andrew Longhi advises national and multinational companies across industries on a wide range of regulatory, compliance, and enforcement matters involving data privacy, telecommunications, and emerging technologies.

Andrew’s practice focuses on advising clients on how to navigate the rapidly evolving legal landscape of state…

Andrew Longhi advises national and multinational companies across industries on a wide range of regulatory, compliance, and enforcement matters involving data privacy, telecommunications, and emerging technologies.

Andrew’s practice focuses on advising clients on how to navigate the rapidly evolving legal landscape of state, federal, and international data protection laws. He proactively counsels clients on the substantive requirements introduced by new laws and shifting enforcement priorities. In particular, Andrew routinely supports clients in their efforts to launch new products and services that implicate the laws governing the use of data, connected devices, biometrics, and telephone and email marketing.

Andrew assesses privacy and cybersecurity risk as a part of diligence in complex corporate transactions where personal data is a key asset or data processing issues are otherwise material. He also provides guidance on generative AI issues, including privacy, Section 230, age-gating, product liability, and litigation risk, and has drafted standards and guidelines for large-language machine-learning models to follow. Andrew focuses on providing risk-based guidance that can keep pace with evolving legal frameworks.

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Photo of John Bowers John Bowers

John Bowers is an associate in the firm’s Washington, DC office. He is a member of the Data Privacy and Cybersecurity Practice Group and the Technology and Communications Regulation Practice Group.

John advises clients on a wide range of privacy and communications issues…

John Bowers is an associate in the firm’s Washington, DC office. He is a member of the Data Privacy and Cybersecurity Practice Group and the Technology and Communications Regulation Practice Group.

John advises clients on a wide range of privacy and communications issues, including compliance with telecommunications regulations and U.S. state and federal privacy laws.

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