On December 22, the Federal Trade Commission (“FTC”) issued an order setting aside its 2024 final consent order against Rytr, LLC (“Rytr”) on the grounds that the facts alleged in the Rytr complaint did not violate Section 5.  The Commission further found that the Rytr order did not provide any benefit to consumers and thus unduly burdened AI innovation in violation of the Trump Administration’s July 2025 AI Action Plan. 

This is the first FTC action to implement the AI Action Plan, which directed the agency to review “all FTC final orders, consent decrees, and injunctions,” and “where appropriate, seek to modify or set-aside any that unduly burden AI innovation.”

The FTC sued Rytr, a seller of a suite of AI writing tools, in September 2024 as part of its “Operation AI Comply” enforcement sweep.  The complaint alleged that Rytr had engaged in unfairness and “provided the means and instrumentalities” for deception by offering a product that enabled users to generate false and deceptive consumer reviews.  Specifically, the complaint alleged that Rytr’s product would often “generate[] detailed reviews that contain specific, often material details that have no relation to the user’s input,” and there was no limit on the number of reviews a subscriber could generate.  The complaint concluded that the product had no or de minimis legitimate uses, and that “its likely only use is to facilitate subscribers posting fake reviews with which to deceive consumers.”  In December 2024, the FTC issued a final order prohibiting Rytr from advertising, marketing, or selling any “Review or Testimonial Generation Service” for 20 years.

In his dissent from the action, then-Commissioner (and current Chairman) Ferguson argued that alleging means and instrumentalities liability was improper because “Rytr’s tool has both lawful and unlawful potential uses,” was not “inherently deceptive,” and there was no allegation that Rytr had knowledge that its tool was being used deceptively.  He also argued that the action was not in the public interest, warning that overbroad regulatory enforcement could chill AI innovation and violate First Amendment limits on “the government’s authority to regulate the inputs of speech,” especially for general-purpose AI tools.

The set-aside order confirms the current Commission’s view that the allegations in the complaint did not support a violation of Section 5 under either the means and instrumentalities theory or unfairness.  As to the unfairness allegations, the set-aside order specifically points out that “consumers benefit from the invention and availability of new tools” like AI.  Finally, the Rytr set-aside order illustrates Chairman Ferguson’s view that the FTC should police AI providers using the agency’s well-established deception authority—such as when companies misrepresent their AI capabilities.  The order closes with a warning that “[t]reating as categorically illegal a generative AI tool merely because of the possibility that someone might use it for fraud is inconsistent with our precedents and common sense.  And it threatens to turn honest innovators into lawbreakers and risks strangling a potentially revolutionary technology in its cradle.”