On February 15, 2024, the Federal Trade Commission (“FTC”) announced a supplemental Notice of Proposed Rulemaking (“NPRM”). The FTC has been the federal agency at the forefront of regulation in the Artificial Intelligence (“AI”) space. The NPRM has been issued under the FTC’s regulatory authority relating to consumer protection.

The February 15 NPRM is part of the FTC’s wider “Rule on Impersonation of Government and Business” (“Rule”)[1]. An interesting aspect of the NPRM seeks comment on whether the wider Rule should ban any AI product that generates deepfakes. Several comments urged the FTC to target actors who use AI tools for nefarious purposes. The commentators asked the FTC to tailor the NPRM, such that the AI tool itself, e.g. DALL-E, would not be banned.

Apple, Inc.’s comment summed up the industry’s fears neatly: “Apple, Inc., submitted a comment urging the Commission to adopt a rule targeting bad actors and their ‘facilitators’ that are engaging in impersonation fraud without stifling legitimate business activity.” A trademark firm in Virginia suggested the FTC target these “facilitators”: “landlords providing office space, mail services, the U.S. Postal 7 Service, ‘various banks and payment processing services,’ and domain registrars and website hosting services that host bad actors’ websites.”

The FTC is moving quickly to finalize the NPRM to incorporate it into the Rule. The Supreme Court limited the FTC’s ability to seek disgorgement and other equitable relief through direct actions[2]. Therefore, the FTC is seeking to finalize and enforce the Rule through its internal administrative proceedings.

There will no doubt be litigation over the finalized NPRM, especially when enforcement actions commence. However, at this time, the FTC remains at the forefront of AI regulation in the United States.

[1] https://www.ftc.gov/system/files/ftc_gov/pdf/r207000_impersonation_snprm.pdf.

[2] See AMG Capital Management LLC v. FTC, No. 19-508 (U.S. April 22, 2021).