The FTC’s AI Enforcement

The FTC’s mandate – under the FTC Act and other statutes – to promote competition and protect consumers gives it the power to address unfair or deceptive acts or practices and unfair methods of competition. The FTC has characterized AI as the latest in a series of new technologies that pose novel and important challenges for consumers, workers, and businesses, which falls within the purview of the FTC’s “economy-wide mission.” According to the FTC, as companies deploy AI-enabled systems across a wide range of industries and people incorporate AI-powered products and services into their daily lives, the potential for harm to consumers increases.

The FTC has experience applying its existing legal authority to address alleged unlawful practices and unfair competition involving AI. Prior actions and guidance have addressed a variety of consumer protection allegations, such as algorithms that rely on consumer’s personal information, algorithm-driven recommendations communicating deceptive claims, and algorithms making biased decisions. The FTC has also called attention to potential advertising concerns relating to AI, and has highlighted the risk of fraud stemming from the use of chatbots, deepfakes, and voice clones.

Consumer Protection, Competition, and Copyright

In its comments to the Copyright Office, the FTC highlights important intersections across consumer protection, competition law and policy, and copyright law and policy.  The Commission’s comments note three areas of interest where the FTC might seek to address unfair or deceptive practices to ensure a competitive marketplace.

First, the FTC notes that decisions about where to draw the line between human creation and AI-generated content may cause harm to both creators and consumers. Creators may be harmed by their work being used to train an AI tool without their consent. Consumers, on the other hand, may be harmed if there is a lack of transparency about AI authorship.

Second, the FTC argues that questions about how to address liability for AI-generated content can implicate consumer protection and competition policy. These questions include what liability principles should apply, assigning and apportioning liability, treatment of pirated content, and the role of disclosures, among other issues. As policymakers seek answers to these questions, there may be overlap and potentially some conflict with consumer protection or competition interests. For example, as the FTC notes, “the use of pirated or misuse of copyrighted materials could be an unfair practice or unfair method of competition under Section 5 of the FTC Act.”

Third, the FTC argues that consumer protection and competition principles may call for policy protections that “go beyond the scope of rights and the extent of liability under the copyright laws.” There may be times when consumer protection or competition policy and copyright policy are aligned, as in the example above where misuse of copyrighted materials would likely violate both the FTC Act and copyright law. The FTC raises the possibility, however, that there may also be circumstances where companies run afoul of Section 5 with their AI-generated content even if that content would not violate copyright law.

Impact of Generative AI on Creative Economy

The FTC also seeks to highlight impacts on content creators. Along with its written remarks, the FTC submitted the transcript of its October 4, 2023, “Creative Economy and Generative AI” roundtable, which featured musicians, authors, actors, artists, software developers, and other creative professionals discussing the impact of generative AI on their work. The FTC transcript noted views shared by participants on topics such as: (1) works being used to train generative AI without participants’ consent; (2) insufficient or ineffective mechanisms for obtaining consent, including reliance on opt-out approaches; (3) lack of transparency and disclosure about training data and authorship of AI-generated content; (4) the ample use cases of AI for creative professionals but the need for better guardrails to protect creators; and (5) the putatively great power imbalance between the creators and the generative AI companies.

What’s Next

Companies that develop and use generative AI and other AI technologies should keep a close eye on this proceeding, as well as other FTC initiatives related to AI. While it may take some time for the Copyright Office to review the more than 9,700 comments received in response to its Notice of Inquiry, the FTC has made clear it is closely scrutinizing advanced AI developments and business conduct and has pledged to “vigorously use the full range its authorities to protect Americans” in this space.