On September 25, the Federal Trade Commission (FTC) launched “Operation AI Comply,” a new enforcement initiative targeting companies that misuse artificial intelligence (AI) for deceptive or unfair practices. The FTC announced five law enforcement actions aimed at companies that have exploited AI hype to defraud consumers, marking a significant move in the agency’s efforts to protect consumers from misleading AI-related claims.
“Using AI tools to trick, mislead, or defraud people is illegal,” said FTC Chair Lina M. Khan. “The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books. 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.”
Among the most high-profile cases announced was against DoNotPay, a company that falsely advertised its AI service as “the world’s first robot lawyer.” DoNotPay claimed that its technology could replace human lawyers and provide services like suing for assault without a lawyer and generating valid legal documents in minutes. However, the FTC’s complaint revealed that DoNotPay failed to back up these claims and did not conduct adequate testing to ensure its AI chatbot’s output was comparable to a human lawyer’s work. Furthermore, DoNotPay did not employ or retain any licensed attorneys to support its legal service claims.
In addition, the FTC found that DoNotPay promoted a service that supposedly checked small business websites for law violations based on users’ email addresses—another service that did not deliver as promised. As part of a settlement, DoNotPay agreed to pay $193,000 and notify consumers about the limitations of its AI legal tools. The company is also prohibited from making future claims about its ability to replace professional services without sufficient evidence.
The FTC also filed a lawsuit against Ascend Ecom, an online business opportunity scheme that promised consumers thousands of dollars in passive income through AI-powered ecommerce stores. Ascend Ecom, run by William Basta and Kenneth Leung, allegedly defrauded consumers of at least $25 million by charging them tens of thousands of dollars to create online storefronts on platforms like Amazon and Etsy. Despite these hefty investments, the FTC’s complaint revealed that consumers rarely saw the promised income, and many were left in financial ruin.
Ascend Ecom’s operators reportedly pressured customers to modify or delete negative reviews and frequently failed to honor their “guaranteed buyback” offers. In response to the FTC’s action, a federal court issued an order temporarily halting the scheme and placing it under the control of a receiver.
Ecommerce Empire Builders (EEB), another online business opportunity scheme, was charged with misleading consumers by claiming they could build an “AI-powered Ecommerce Empire” and earn millions of dollars. CEO Peter Prusinowski marketed EEB’s training programs for up to $2,000, while also selling “done-for-you” online storefronts for tens of thousands of dollars. However, according to the FTC, few consumers saw any income from the stores, and the company often denied refunds.
As in the Ascend Ecom case, a federal court has intervened, halting EEB’s operations and placing it under the control of a receiver. The FTC’s case against EEB is ongoing and will be decided by a federal court.
In addition to deceptive business opportunity schemes, the FTC took action against *Rytr*, a company that marketed an AI “writing assistant” service capable of generating consumer reviews. Rytr’s service allowed paid subscribers to create detailed reviews based on minimal input, often resulting in fake and misleading content. The FTC alleged that Rytr’s service contributed to a flood of fake reviews that misled consumers and harmed competitors.
The proposed order against Rytr would prohibit the company from offering services that generate consumer reviews or testimonials without providing accurate and transparent information. The settlement will be subject to public comment before the Commission makes it final.
Earlier in 2024, the FTC took action against FBA Machine, an ecommerce scheme that used AI-powered software to promise consumers guaranteed income from online stores. FBA Machine, operated by Bratislav Rozenfeld, was accused of defrauding consumers out of more than $15.9 million by making exaggerated claims about the profitability of its AI-powered storefronts.
As in the other cases, a federal court temporarily halted FBA Machine’s operations, and the case remains ongoing.
“Operation AI Comply” marks the FTC’s latest effort to combat misleading AI-related practices, as companies increasingly use AI to exaggerate claims about their products or services. Through this sweep, the FTC has sent a strong message that AI is not a free pass for deceptive conduct. The agency continues to emphasize the importance of protecting consumers and ensuring that AI technologies are used ethically and responsibly.
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