Rytr

Operation AI Comply: FTC Sues Five Companies for Misusing AI & Incurred $40M in Losses

The United States Federal Trade Commission has launched an investigation against five companies. FBA Machines, DoNotPay, Ascend Ecom, Ecommerce Empire Builders, Rytr, and FBA Machine, have been found to use artificial intelligence (AI) to deceive consumers.

The FTC has cracked down on these companies as it is accused of relying on AI to facilitate deceptive or unfair conduct. Dubbed “Operation AI Comply” the FTC has kept these five companies under radar.

FTC Chair Lina Khan emphasized, "Using AI tools to trick, mislead, or defraud people is illegal." Khan stressed that this enforcement action reaffirms that there is "no AI exemption from the laws on the books."

It was further noted that the FTC aims to protect consumers and businesses who rely on fair practices to innovate.

One of the primary targets is DoNotPay, a company claiming to be the "world's first robot lawyer." The FTC alleged that DoNotPay failed to provide valid legal services, despite promises to "sue for assault without a lawyer" and "generate perfectly valid legal documents in no time."

DoNotPay settled by agreeing to pay $193,000 and notify consumers about its limitations.

Another company sued by the FTC, Ascend Ecom is accused of running a fraudulent scheme of claiming AI could generate significant passive income. In the initial investigation, the FTC said it found that Ascend Ecom allegedly defrauded consumers of over $25 million.

On the other hand, Rytr, an AI writing assistant, allegedly generated misleading consumer reviews, contributing to false information. A proposed settlement would prohibit Rytr from offering such services.

The FBA Machine, a scheme promising guaranteed income through AI-powered online stores, was sued by the FTC in June, with alleged losses exceeding $15.9 million.

The FTC chair, Lina Khan further emphasized the matter and said, "By cracking down on unfair or deceptive practices in these markets, FTC is ensuring that honest businesses and innovators can get a fair shot and consumers are being protected."

The FTC's enforcement action underscores the importance of transparency and accountability in AI development. As AI technology advances, regulatory bodies must adapt to address emerging challenges.