The Federal Trade Commission (FTC) has initiated enforcement actions against five businesses, including the legal services company DoNotPay, for what it describes as “deceptive AI claims and schemes.”
This crackdown aims to address how these companies have exploited the growing public interest in artificial intelligence to mislead consumers and promote fraudulent practices.
According to the FTC, these enforcement actions demonstrate a pattern of companies using the hype surrounding AI technology to lure customers into schemes that offer little or no real value.
“Using AI tools to trick, mislead, or defraud people is illegal,” stated FTC Chair Lina Khan.
She emphasized that the FTC’s efforts underscore that there is no exemption for AI-related practices from existing laws designed to protect consumers.
In its complaint, the FTC specifically called out DoNotPay for its claims of being “the world’s first robot lawyer.” The agency noted that the company failed to substantiate its assertions that customers could successfully navigate legal matters such as suing for assault without the assistance of an attorney. Additionally, the FTC indicated that DoNotPay’s service, which purported to check for legal violations on small business websites using only a customer’s email address, did not perform as advertised.
To settle the charges, DoNotPay has agreed to pay $193,000 and will be required to notify consumers who subscribed to its service between 2021 and 2023 about the limitations of its legal features. The settlement also prohibits the company from making unverified claims about its ability to replace professional services.
Among the other companies targeted in this enforcement sweep is Ascend Ecom, accused of defrauding consumers of at least $25 million by promoting deceptive earnings claims related to e-commerce ventures. The FTC’s lawsuit alleges that the scheme, run by William Basta and Kenneth Leung, misled customers into investing substantial amounts of money by promising unrealistic returns through purported AI-driven business models.
The FTC has also filed actions against Ecommerce Empire Builders, which allegedly claimed to help consumers create profitable online businesses through AI, but failed to deliver on these promises. Similar complaints have been lodged against the companies Rytr and FBA Machine, both accused of promoting services based on misleading claims related to AI.
With input from CNBC and Federal Trade Commission.
