Federal Trade Commission Expands Investigative Authority over AI

This week, the Federal Trade Commission (FTC) announced an expansion of its investigative authority over products and services involving artificial intelligence (AI). While AI offers great potential, its increasing role in various industries has caught the attention of regulators. The FTC’s move signifies a more rigorous scrutiny of AI practices, with new tools in place to collect information through civil investigative demands (CIDs) according to a recent release.

Cracking Down on Illegal Robocalls

The FTC previously utilized CIDs in the technology sector to combat illegal robocalls. In 2022, the agency obtained federal court orders against VoIP providers XCast Labs and Deltracon for failing to comply fully with CIDs. Samuel Levine, director of the bureau of consumer protection at the FTC, stressed that CIDs carry the force of law, with non-compliance potentially resulting in contempt charges. This action served as an example, highlighting the consequences for companies that fail to promptly provide the required documentation and data.

The FTC’s expanded AI resolution aligns with its authority over other industries, indicating that tech firms should pay attention. To preempt possible scrutiny, businesses should proactively organize internal records related to AI claims, product development practices, and third-party oversight. Being prepared allows for a swift response should the need arise.

Ensuring Consumer Protection And Fair Competition

According to the FTC, the resolution was designed to expedite the gathering of facts about AI applications that implicate consumer protection and fair competition. Of particular interest will be marketing claims made by organizations promoting AI solutions. These claims must be substantiated by substantive proof of the presented performance characteristics.

To corroborate AI solution disclosures, companies should maintain records of model training data, validation studies, case studies demonstrating real-world impact, and ongoing monitoring reports. Peer reviews, oversight of third-party data sources, and efforts to identify and mitigate risks also contribute to credibility.

Algorithmic fairness and the mitigation of unintended biases remain key concerns as AI is increasingly integrated into decision-making processes. The FTC expects organizations to proactively address these issues throughout the product development life cycle. Evidence of diligence can be provided through documentation of design processes, impact assessments, risk logging mechanisms, oversight programs, and response protocols.

For organizations already using AI operationally, compliance programs need to demonstrate ongoing monitoring and a commitment to addressing emerging issues. While technical problems may arise despite best efforts, resolving them promptly and transparently can foster goodwill with regulators. Taking a proactive stance in the face of increased scrutiny is generally advised.

The new FTC resolution indicates that oversight responsibilities now extend beyond internal teams; organizations relying on third parties for data sources, model training, and other aspects of AI solutions will be expected to provide access to information about those systems and activities. Strong contractual protections that ensure transparency, verification of claims, and controls are crucial. Regular audits and documentation of third-party due diligence protect the organization and end users, reflecting an understanding that compliance obligations extend even when technical elements are outsourced.

Voice Cloning Challenge and Beyond

In addition to expanding its investigatory authority, the FTC plans to launch a Voice Cloning Challenge to foster the development of technical and policy solutions that protect users from financial fraud or privacy violations involving synthetic voices. The agency recognizes that new techniques must be met with safeguards, as impersonating someone’s voice could enable scams. Multi-stakeholder cooperation is sought to address these abusive applications of emerging capabilities.

The FTC also submitted comments to the U.S. Copyright Office in October, emphasizing its jurisdiction over consumer protection and competition issues related to generative AI. While copyright matters fall under different jurisdiction, the FTC argues that certain uses of AI-generated content have the potential to facilitate deception or unfair practices in violation of its statutes. This stance has faced criticism from those who view it as an overreach into established legal doctrines like fair use. Nevertheless, as new technologies continue to challenge existing regulatory paradigms, advocating for the FTC’s mandate is to be expected.

Overall, the FTC aims to strike a balance between innovation and responsible oversight through a combination of advisory initiatives and traditional enforcement tools.

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