White & Case Tech Newsflash
Last week, on January 25, 2024, the US Federal Trade Commission (FTC) held an inaugural public summit on artificial intelligence (AI) policy, as the agency explores antitrust and consumer protection challenges posed by the rapid evolution and deployment of AI technology.1 The summit brought together experts from academia, industry, civil society organizations, and government to discuss competition and consumer protection considerations with respect to AI and the supporting technology stack. The FTC characterized the summit as a "horizon-scanning" exercise to learn more about the industry and better understand how control over important AI inputs like data, models and computational infrastructure could lead to anticompetitive outcomes, as well as emerging safety and data privacy risks.
An emerging agenda
FTC leaders at the summit highlighted their concerns about both anticompetitive considerations and consumer protection risks arising from the rapid adoption of large language models and generative AI. The discussions illustrated how the FTC is exploring heightened enforcement in the AI sector (which has been developing for some time now), but is still learning about the industry and building out its AI "liability regime", focusing on capability and control.
Competition analysis
During the summit, the FTC signaled its concern that incumbent technology companies will quickly consolidate control of the AI sector by leveraging existing influence over training data, internet, and cloud computing infrastructure and semiconductors,2 including through vertical integration between AI developers and the infrastructure stack that supports the technology.
FTC Chair Lina Khan argued that these companies already have power over the internet and digital media, and that the government should not allow that to happen in AI development. She suggested that this risk may require a policy solution to ensure open markets. The focus on risks from vertical integration also suggest that the FTC is looking beyond AI development to consider stakeholders deeper within the technology supply chain. The FTC's 2023 review of the cloud computing market fits this pattern, and the role of cloud computing companies appears to be an area of focus for the FTC's examination of the AI sector.3
Consumer protection scrutiny
The FTC also signaled it intends to focus on consumer protection matters stemming from both harmful use of AI products and privacy violations during the collection of training data.
The FTC is concerned about growing surveillance incentives created by the need for large volumes of training data, suggesting that such activities could violate the FTC's consumer protection regulations. The FTC is looking to set clear rules on what kind of data and creative inputs can be used for training AI, but have not yet settled on a final approach, while signaling that the monetization or use of certain data, like sensitive location data, is "off the table." In the past year, the FTC has pursued cases against several companies for allegedly improperly selling or misusing user data.4 FTC Chair Lina Khan said at the summit that remedies for data collection abuses will include deleting the models trained on the improperly collected data as well as deleting improperly collected data itself.5
On protecting consumers from harmful applications of AI products, FTC leaders at the summit highlighted concerns about deceptive marketing of AI product capabilities, discrimination from biased algorithms and AI-assisted fraud such as voice cloning.6 The commissioners reiterated that companies can be liable for taking insufficient care in deploying AI. The commissioners also pointed out that protection concerns go beyond new large language models and generative AI, and also apply to more traditional approaches to algorithmic decision-making processes. The FTC raised the recent case against Rite Aid's facial recognition program several times to illustrate the concerns about harmful applications and the ensuing liabilities.7
A new inquiry into recent AI investments
Finally, during the summit, the FTC announced a Section 6(b) inquiry into recent investments in and partnerships between AI developers and large cloud services providers, vesting investigators with broad power to study these investments and partners, and their competitive impact.
1 FTC Tech Summit, January 25, 2024, https://www.ftc.gov/news-events/events/2024/01/ftc-tech-summit.
2 "Generative AI Raises Competition Concerns," June 29, 2023, https://www.ftc.gov/policy/advocacy-research/tech-at-ftc/2023/06/generative-ai-raises-competition-concerns.
3"Cloud Computing RFI: What we heard and learned," November 16, 2023, https://www.ftc.gov/policy/advocacy-research/tech-at-ftc/2023/11/cloud-computing-rfi-what-we-heard-learned.
4"What goes on in the shadows: FTC action against data broker sheds light on unfair and deceptive sale of consumer location data," January 9, 2024, https://www.ftc.gov/business-guidance/blog/2024/01/what-goes-shadows-ftc-action-against-data-broker-sheds-light-unfair-deceptive-sale-consumer-location.
5"AI Companies: Uphold Your Privacy and Confidentiality Commitments," January 9, 2024, https://www.ftc.gov/policy/advocacy-research/tech-at-ftc/2024/01/ai-companies-uphold-your-privacy-confidentiality-commitments.
6 "Preventing the Harms of AI-enabled Voice Cloning," November 16, 2023, https://www.ftc.gov/policy/advocacy-research/tech-at-ftc/2023/11/preventing-harms-ai-enabled-voice-cloning.
7 "Rite Aid Banned from Using AI Facial Recognition After FTC Says Retailer Deployed Technology without Reasonable Safeguards," December 19, 2023, https://www.ftc.gov/news-events/news/press-releases/2023/12/rite-aid-banned-using-ai-facial-recognition-after-ftc-says-retailer-deployed-technology-without.
