This story has been updated. Please see the most recent update below.

On September 25, 2024, the Federal Trade Commission (FTC) announced five separate actions against companies relating to their use of artificial intelligence (AI) for deceptive or unfair conduct, as part of Operation AI Comply.

The FTC highlighted that it has issued proposed orders against three companies including DoNotPay, Inc., Rytr LLC, and FBA Machine. The FTC also noted that it filed a lawsuit against Ascend and charged Ecommerce Empire Builders (EEB) as well.

DoNotPay

The FTC highlighted that DoNotPay offered AI-powered legal services functioning as 'the world's first robot lawyer.' Specifically, DoNotPay allegedly promised that its service would allow consumers to 'sue for assault without a lawyer' and 'generate perfectly valid legal documents in no time.'

However, the FTC outlined that DoNotPay did not deliver on such promises, failing to conduct testing to determine whether its AI chatbot's output was equal to the level of a human lawyer, and noted that DoNotPay did not hire or retain any attorneys. Likewise, the FTC detailed that DoNotPay subscribers complained that DoNotPay did not ask them to submit information relevant to their breach of contract claims, failed to consider important legal issues, and generated legal documents that were not fit for use.

In light of the above complaint, the FTC held that DoNotPay agreed to a proposed order settling the charges made by the FTC, requiring DoNotPay to pay a penalty of $193,000.

Rytr

The FTC provided that Rytr marketed and sold an AI 'writing assistant' for purposes including 'Testimonial & Review' generation.

The FTC charged Rytr with violation of the Federal Trade Commission Act (the FTC Act) by providing subscribers with the means to generate false and deceptive written content for consumer reviews. Further, the FTC alleged that Rytr engaged in unfair business practices by offering a service that would likely result in polluting the marketplace with fake reviews that would harm consumers.

Accordingly, the FTC held that Rytr violated the FTC Act, ordering Rytr to, among other things:

• submit a compliance report to the FTC;
• create records and retain them for five years; and
• monitor compliance with the FTC's order.

FBA Machine

The FTC also issued a proposed order against a business opportunity scheme that allegedly promised consumers they would make guaranteed income through online storefronts that utilized AI-powered software. The FTC clarified that the operation functioned under the name Passive Scaling but when subjected to lawsuits, subsequently rebranded to FBA Machine Inc.

Specifically, FBA Machine told consumers the business was 'risk-free' and falsely guaranteed refunds to consumers who did not make back their initial investments.

Consequently, the FTC outlined that it had issued a court order temporarily halting the scheme and put the scheme under the control of a receiver.

Ascend

In addition, the FTC filed a lawsuit against a business scheme run under different names including, among others, Ascend Ecom, Ascend Ecommerce, and Ascend CapVentures (collectively Ascend). The FTC clarified that the business scheme alleged that it used AI-powered tools to help consumers earn passive income.

Notably, the FTC provided that Ascend received numerous complaints from consumers, pressured consumers to modify or delete negative reviews of Ascend, and failed to honor a 'guaranteed buyback' system.

Accordingly, the FTC determined Ascend to have violated the FTC Act, the Business Opportunity Rule, and the Consumer Review Fairness Act (CRFA), issuing a court order to halt the scheme and place it under the control of a receiver.

Ecommerce Empire Builders

Finally, the FTC also filed a lawsuit against a business scheme known as EEB for falsely claiming that consumers could generate income from online stores 'powered by artificial intelligence.'

Specifically, the FTC outlined that when selling their business opportunities, EEB used non-disparagement clauses that prohibit all communications or statements about EEB, in violation of the Business Opportunity Rule and the CRFA.

Accordingly, the FTC issued a court order to halt the scheme and place it under the control of a receiver.

You can read the press release here, the DoNotPay complaint here and proposed order here, the Rytr complaint here and proposed order here, the FBA Machine lawsuit here and proposed order here, the Ascend order here, and the EEB lawsuit here.

Update: December 19, 2024

FTC issues final order against Rytr for providing means to generate false and deceptive reviews

On December 3, 2024, the FTC published a final order for Rytr for the alleged violation of Section 5(a) of the FTC Act. 

The FTC found that Rytr violated the FTC Act by providing subscribers with a service with the means to generate false and deceptive written content for detailed reviews that contained specific, often material, details unrelated to the user's input. Moreover, the FTC held that Rytr engaged in an unfair business practice by offering a service likely to pollute the marketplace with fake reviews.

In light of the above, the FTC prohibited Rytr from, among other things, advertising, marketing, promoting, offering for sale, or selling any review or testimonial generation service.

You can read the press release here, the complaint here, and the final order here.