In September, FTC Chairman Andrew Ferguson called for the FTC to regulate artificial intelligence claims through its existing consumer protection authorities:  “Imposing comprehensive regulations at the incipiency of a potential technological revolution would be foolish.  For now, we should limit ourselves to enforcing existing laws against illegal conduct when it involves AI no differently than when it does not.”  Two recently announced enforcement actions involving artificial intelligence underscore the new FTC leadership’s commitment to evaluate AI claims under traditional deception frameworks. 

As we’ve discussed previously, Workado agreed in April to resolve allegations that it made false or misleading performance claims in violation of Section 5 of the FTC Act related to its “AI Content Detector.”  The FTC alleged that Workado violated Section 5 when it promoted its AI detector as “98 percent accurate” even though independent testing showed a much lower accuracy rate. 

In March, Cleo AI agreed to pay $17 million to resolve allegations that Cleo AI made misleading promises about consumers’ access to quick cash advances.  Cleo AI provides subscribers with cash advances in amounts determined using an artificial intelligence risk classifier.  The FTC alleged that Cleo AI violated Section 5 of the FTC Act by making misleading claims about the timing and amount of cash advances.  The FTC also alleged that Cleo AI violated the Restore Online Shoppers’ Confidence Act (ROSCA) because it failed to disclose material information about the timing and amount of the cash advances when consumers subscribed to the service, and it also prevented subscribers with outstanding cash advances from cancelling.

These cases highlight the FTC’s willingness to pursue enforcement against companies that make deceptive claims involving AI, consistent with the Chairman’s statements.

If you have any questions concerning the material discussed in this post, please contact the members of our Advertising and Consumer Protection Investigations practice group.

Tags: AI, Consumer Protection, FTC
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Photo of Laura Kim Laura Kim

Laura Kim has a proven track record of successfully resolving clients’ most important consumer protection matters before the FTC, State AGs, and the NAD. She is well-known for her insider knowledge of the FTC as well as her practical approach to accomplishing her…

Laura Kim has a proven track record of successfully resolving clients’ most important consumer protection matters before the FTC, State AGs, and the NAD. She is well-known for her insider knowledge of the FTC as well as her practical approach to accomplishing her clients’ objectives.

As chair of Covington’s Advertising & Consumer Protection Investigations practice group, Laura represents corporate and individual clients in investigations before the FTC and State Attorneys General. She also provides pragmatic compliance advice on a wide range of consumer protection issues, including substantiating claims involving generative artificial intelligence, environmental benefits, and “Made in USA.” She counsels brands on emerging issues involving influencers, consumer reviews, AI-generated content, and subscription autorenewals. Laura regularly represents both challengers and advertisers before the NAD, achieving favorable outcomes in matters involving artificial intelligence, influencers, and claim substantiation.

During her twelve-year tenure at the FTC, Laura served as Assistant Director in two divisions of the Bureau of Consumer Protection, Attorney Advisor to Chairman William E. Kovacic, and Chief of Staff to Bureau Director Jessica Rich. She oversaw major rulemakings—including the Green Guides and the Telemarketing Sales Rule—and supervised dozens of investigations and enforcement actions. As Assistant Director in the Division of Enforcement, Laura also supervised compliance monitoring and enforcement proceedings for companies under federal court or Commission order.

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Photo of Andrew Siegel Andrew Siegel

Andrew Siegel defends clients in FTC, DOJ, and State AG consumer protection investigations and enforcement actions, including against allegations relating to advertising and marketing practices, subscription autorenewals, and unfair and deceptive trade practices.

Andrew has extensive experience representing clients across industries, including in…

Andrew Siegel defends clients in FTC, DOJ, and State AG consumer protection investigations and enforcement actions, including against allegations relating to advertising and marketing practices, subscription autorenewals, and unfair and deceptive trade practices.

Andrew has extensive experience representing clients across industries, including in the technology, consumer products, and financial services sectors, in high-stakes government investigations by federal and state regulators. He defends clients against allegations relating to the marketing of online subscriptions, the use of algorithms and artificial intelligence, undisclosed endorsements, claim substantiation, and other unfair and deceptive practices. He also counsels clients on proactive compliance with FTC and state regulations governing consumer interactions.

In addition, Andrew advises clients on the protection of customer information and other sensitive data as they respond to demands from U.S. and international law enforcement agencies and government regulators, as well as private plaintiffs. Andrew assists clients in navigating U.S. and international data privacy requirements as they respond to federal grand jury subpoenas, international legal demands, and discovery requests.

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Photo of Taylor Kay Taylor Kay

Taylor Kay is an associate in the firm’s Washington office. She is a member of the Advertising and Consumer Protection Investigations Practice Group and advises clients on a range of matters including endorsements/influencers, claim substantiation, and environmental/”green” marketing. She has also worked on…

Taylor Kay is an associate in the firm’s Washington office. She is a member of the Advertising and Consumer Protection Investigations Practice Group and advises clients on a range of matters including endorsements/influencers, claim substantiation, and environmental/”green” marketing. She has also worked on FTC investigations and regulatory due diligence matters. Taylor also maintains an active pro bono practice with focuses on freedom of speech and LGBTQ+ issues.

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