[author: Raj Gambhir]

Welcome to this week's issue of AI: The Washington Report, a joint undertaking of Mintz and its government affairs affiliate, ML Strategies.

The accelerating advances in artificial intelligence (“AI”) and the practical, legal, and policy issues AI creates have exponentially increased the federal government’s interest in AI and its implications. In these weekly reports, we hope to keep our clients and friends abreast of that Washington-focused set of potential legislative, executive, and regulatory activities.

This issue covers the Federal Trade Commission’s (“FTC” or “Commission”) October 4, 2023, roundtable discussion on “Creative Economy and Generative AI.” Our key takeaways are:

1. During the panel, the commissioners were unanimous in asserting that the FTC’s ability to regulate certain AI uses is firmly rooted in the Commission’s long-standing statutory authority. Chair Lina Khan plainly stated that “there's no AI exemption to the laws on the books.”
2. Commissioners highlighted two AI uses to which they are paying special attention: fraud and unfair methods of competition.
3. While the commissioners were unitedin asserting that the creative economy should be protected against the disruptions likely to be caused by generative AI, they did not make clear what steps the Commission would take to provide such protection, if any.

FTC Panel on “Creative Economy and Generative AI”

On October 4, 2023, the Federal Trade Commission (“FTC” or “Commission”) hosted a virtual roundtable discussion entitled “Creative Economy and Generative AI.” The panel featured artists and creatives working in a range of professions. Panelists discussed how the rapid development of generative AI tools has impacted their industries.

Through the course of the panel, the three current FTC commissioners delivered remarks. While the commissioners touched on the possible implications of generative AI tools on the creative economy, their remarks extended to a general discussion of the FTC’s role in AI regulation. The current Democratic commissioners all believe that the FTC possesses the statutory authority to regulate certain AI uses.

Chair Khan: No AI Exemptions

For Chair Lina Khan, the FTC’s authority to regulate cutting-edge AI technologies is rooted in the original the Federal Trade Commission Act of 1914.

Chair Khan began the roundtable discussion by providing an overview of the historical period in which Congress established the FTC. She posited that the foundational antitrust and antimonopoly laws of the late nineteenth and early twentieth centuries were concerned with ensuring that “Americans…could engage in commerce on fair terms no matter what the technological advances of the day were. Congress created the FTC to enforce these rules of fair competition. A key part of our mandate is ensuring that these core principles continue to apply even as technologies and business practices evolve.”

For Chair Khan, AI represents just one in a series of technologies for which the Commission has possessed jurisdiction over their commercial deployment. In her remarks, Chair Khan made clear her view that “there's no AI exemption to the laws on the books.”

Commissioner Slaughter concurred with Chair Khan’s analysis, arguing that the “FTC’s prohibitions against unfair and deceptive practices and unfair methods of competition apply to applications of AI just as much as they have to every other new technology that has been introduced in the market in the last one hundred years.”

AI Abuses on the Commission’s Radar

In their remarks, the commissioners highlighted two uses of AI that they consider to be violations of the laws the FTC administers.

1. Fraud. Commissioner Bedoya began his closing remarks by noting that he is “profoundly worried about fraud and AI use.” As discussed in a previous newsletter, the FTC has released guidance directing businesses “not to overpromise what your algorithm or AI-based tool can deliver.” Other Commission guidance has warned that the “FTC Act’s prohibition on deceptive or unfair conduct can apply if you make, sell, or use a tool that is effectively designed to deceive – even if that’s not its intended or sole purpose.” This discussion is no longer theoretical. In August, the FTC filed a first-of-its-kind individual case on AI-related misrepresentations.
2. Unfair methods of competition. In her opening remarks, Chair Khan noted that the FTC is considering how generative AI tools could “entrench the dominance of firms that control the necessary raw inputs [into AI products and services], like cloud services and computing power...” As discussed in a previous newsletter, the FTC has released guidance on the competition concerns raised by generative AI, noting that “control over one or more of the key building blocks that generative AI relies on could affect competition in generative AI markets.” Given these concerns, the FTC has stated that “the Bureau of Competition, working closely with the Office of Technology,” is prepared to utilize the Commission’s “full range of tools to identify and address unfair methods of competition.”

AI’s Impact on the Creative Economy

While the commissioners primarily discussed the general issue of the FTC’s statutory authority over certain AI uses, their remarks also touched on the specific issue of the impact of generative AI on the creative economy.

“Generative AI, in particular, poses a unique set of opportunities and challenges to creative industries,” noted Chair Khan. These technologies could “virtually overnight significantly disempower creatives and artists, who may watch their livelihood…be appropriated into models over which they have no control.”

Notably, the commissioners’ comments did not address how the FTC might respond to AI’s impact on the creative economy. In her remarks, Commissioner Slaughter acknowledged that while the FTC possesses “powerful tools [that the Commission] can use on behalf of creators, workers, and consumers,” advances in AI may create “gaps in the law that need to be filled.”

On this same issue, on September 19, 2023, Representative Deborah Ross (D-NC-2) introduced the Protect Working Musicians Act of 2023. This bill would allow independent music creators to collectively negotiate with AI developers and refuse to license their music to these developers under certain circumstances. Crucially, this bill would grant these privileges by making this conduct by independent music creators permissible under antitrust law, including the FTC Act.

[View source.]