FTC Issues Guidance on Claims About AI-Powered Products

By: Vejay Lalla , Kimberly Culp

As lawmakers race to catch up on AI technology, the FTC has issued guidance warning marketers not to make false or unsubstantiated claims about AI-powered products. As we see AI starting to emerge in many consumer applications, from personalized shopping to the creation of brand content, this new guidance by the FTC highlights four particular areas that the FTC is focused on with respect to claims about AI products: (1) exaggeration of the technical capabilities of a product; (2) unproven assertions that an AI-powered product is superior to one without AI; (3) understanding of the risks associated with the AI (e.g., failure or biased results), including at a technical level; and (4) whether a product actually uses AI at all. This guidance builds upon earlier FTC commentary on fairness and equity in the use of AI, encouraging companies to design their AI offerings in a way that ensures results are unbiased and do not cause consumer injury. As with earlier guidance, if companies fail to comply, they risk enforcement action under Section 5 of the FTC act, which prohibits unfair or deceptive practices.

The current guidance focuses on claims made by advertisers in which the use of AI is highlighted, but as technology continues to evolve, regulators likely will have to consider other ways that AI may impact the advertising landscape. These include the potential that the use of AI is not being disclosed to consumers at all where it should be, and whether disclosures will be required in the context of consumers interacting with AI-based influencer or native content. We are currently witnessing the simultaneous rise of sophisticated AI-powered chatbot technology and the increasingly common use of generative AI to automate the creation and integration of brand content. Those trends have given rise to AI-enabled influencers that consumers can interact with, follow on social media and be influenced by to purchase related merchandise or content. As these technologies continue to evolve and improve, marketers should think carefully about whether the AI-generated content or experience itself constitutes an inherently deceptive trade practice without disclosure that the content or experience is AI-enabled (if that fact is not otherwise transparent to the user). Marketers should also pay attention to existing FTC guidance and enforcement on endorsements, testimonials and native advertising for failure to disclose material connections and otherwise ensuring consumers understand that they are in fact viewing advertising and not entertainment or editorial content. The guiding principle for marketers is to ensure the consumer at all times has the information necessary to make purchasing decisions or otherwise engage with such marketers in a transparent manner.