The FTC Warns Companies Against Exaggerating Their AI-Related Statements

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In Brief

The FTC has sent a warning to the over-eager industry over their use of “AI Powered” technology.

“AI Powered” is the tech equivalent of all natural, but it has progressed beyond cheeky.

It seems that many products out there claim to be powered by AI, but few go into detail about how it works or why.

The FTC doesn’t like this because it makes it hard for advertisers to stop making claims.

The Trust Project is a worldwide group of news organizations working to establish transparency standards.

The FTC warns companies to keep their AI claims in check and ensure their statements are not exaggerated or unsupported. “You don’t need a machine to predict what the FTC might do when those claims are unsupported,” it says ominously in its recent guidelines for AI claims.

The FTC is advising companies to ensure that their AI-related statements are accurate and not exaggerated
@Midjourney / RobertFreundLaw
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Back in 2021, the FTC noted that while AI can be useful, it can also exacerbate existing problems because of existing biases. Sure, it can revolutionize the way industries like medicine, finance, business operations, and media operate. For instance, prediction models can help prepare hospitals for the next spike in COVID-19 cases. However, what else can it do? According to a study FTC cites, it can also worsen the healthcare outcomes for people of color if the model is based on flawed and racially-biased data.

It seems FTC’s stance on AI has not become any more optimistic. It seems like just about every product out there claims to implement AI in some way or another, yet few go into detail — and fewer still can tell you exactly how it works and why. As TechCrunch notes, “AI-Powered” is the meaningless tech equivalent of “all-natural.”

And the FTC doesn’t like it. According to the FTC, “AI-powered” is nothing short of a marketing claim. Even before, the agency considered the AI-related vocabulary that tech-oriented companies love to throw around, “mysterious jargon” that makes AI seem “almost magical.” Whatever someone means when they claim “powered by artificial intelligence” or some version thereof, “One thing is for sure: it’s a marketing term,” the agency writes. “And at the FTC, one thing we know about hot marketing terms is that some advertisers won’t be able to stop themselves from overusing and abusing them.”

Everyone is saying AI is reinventing everything, but it’s one thing to do that at a TED talk; it’s quite another to claim it as an official part of your product. And the FTC wants marketers to know that these claims may count as “false or unsubstantiated,” something the agency is very experienced with regulating. Moreover, it warns against making claims that a product is risk-free if the risks and impacts are “reasonably foreseeable.”

It’s always appropriate to ask your lawyers for assistance with this question because they can help you understand the reasons why you should not push the envelope. There are many things that can go wrong with AI, including biased results due to biased datasets. The FTC asks you to consider the following:

Are you exaggerating what your AI product can do?  

It may be a good idea to tone down statements that your AI product can do things like read emotions, increase productivity, and predict behavior if these statements are unverifiable.

Are you promising that your AI product does something better than a non-AI product?

If you want to make claims like “four out of five dentists prefer our AI-powered toothbrush,” you’d better have the data to prove it. Any claim you make needs to be substantiated with evidence, and you cannot simply say your AI-powered product is the best and slap a high price tag on it. The FTC has issued another stern warning to the technology industry about misleading AI advertising.

Are you aware of the risks? 

You need to acknowledge and take into consideration any “reasonably foreseeable risks and impact.” If the term sounds a bit hazy, your lawyers can help you understand it better. If your product doesn’t work properly or its results are biased because your dataset was poorly constructed… you’re gonna have a bad time. “And you can’t say you’re not responsible because that technology is a ‘black box’ you can’t understand or didn’t know how to test,” the FTC adds. After all, if you don’t understand it or can’t test it, why are you offering it, let alone advertising it?

Does the product actually use AI at all?

 If you think you can get away with baseless claims that your product is AI-enabled, think again,” the agency warns. Just because one engineer used an ML-based tool to optimize a curve, it doesn’t mean your product uses AI. Unfortunately, plenty seems to think that a drop of AI means the whole bucket is full of it.

If you don’t want the FTC at your doorstep, make sure your products are actually AI-powered when putting them on the shelf.

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