Summary
The Federal Trade Commission's guidance on how it applies its legal authority to prevent unfair and deceptive practices in the use of AI technologies. This guidance serves as a warning to businesses that the FTC is actively monitoring AI deployments and will take enforcement actions against those that harm consumers.
Key Obligations
- •Make truthful and substantiated claims about AI capabilities
- •Ensure AI systems do not discriminate against protected classes
- •Protect consumer data used in AI systems
- •Provide transparency about AI-driven decisions
- •Maintain human oversight of AI systems
- •Test AI systems before deployment and monitor them afterward
Enforcement
Regulator
Federal Trade Commission (FTC)
Penalties
Injunctions, monetary penalties, mandatory compliance programs, and other remedies under FTC Act
Audit Mechanism
FTC investigations, often triggered by consumer complaints or market monitoring
Applicable To
- •Businesses using AI that impacts US consumers
- •Companies making marketing claims about AI capabilities
- •Organizations using AI for decision-making affecting consumers
- •Developers and deployers of consumer-facing AI systems
AI-GPM Coverage
Rakshan helps organizations navigate FTC AI enforcement risks through marketing claim verification, bias detection and mitigation, data governance controls, explainability tools, human oversight workflows, and FTC compliance monitoring.
Resources
Overview
The Federal Trade Commission (FTC) has issued guidance on how it will apply its existing legal authority to address unfair and deceptive practices involving artificial intelligence. This guidance serves as a warning to businesses that the FTC is actively monitoring AI deployments and will take enforcement actions against those that harm consumers.
The FTC's approach is grounded in its authority under Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in or affecting commerce. The guidance makes clear that existing consumer protection laws apply to AI, and the FTC will not hesitate to use its enforcement powers against companies that violate these laws through their use of AI.
While not a formal regulation, the guidance signals the FTC's enforcement priorities and provides businesses with a roadmap for avoiding potential liability when developing and deploying AI systems that impact consumers.
Key Components
1. Truth in Marketing
Companies must not make false or unsubstantiated claims about their AI capabilities. The FTC will scrutinize marketing claims about AI performance, capabilities, and limitations.
2. Fairness and Non-Discrimination
AI systems must not discriminate against protected classes. The FTC will enforce against discriminatory outcomes in areas such as credit, housing, employment, and public accommodations.
3. Data Privacy and Security
Companies must protect consumer data used in AI systems and be transparent about data collection and use. The FTC will enforce against inadequate data security practices.
4. Transparency and Explainability
Companies should be able to explain how their AI makes decisions, particularly when those decisions affect consumers in significant ways. The FTC may require companies to provide explanations for adverse decisions.
5. Human Oversight and Accountability
Companies should maintain human oversight of AI systems and be accountable for their outcomes. The FTC expects companies to test their AI systems before deployment and monitor them afterward.
Implementation Timeline
April 2023
FTC issues "Keeping AI Honest" blog post outlining enforcement approach
November 2023
FTC issues additional guidance on AI and consumer protection
Ongoing
FTC actively investigating and bringing enforcement actions against companies for AI-related violations
Future
Expected to issue more specific guidance as AI technologies evolve and new consumer protection issues emerge
How Rakshan Helps
Rakshan's AI Governance Platform helps organizations navigate FTC AI enforcement risks:
- Marketing Claim Verification: Tools to document and verify AI performance claims to ensure marketing accuracy
- Bias Detection and Mitigation: Automated testing for discriminatory outcomes across protected classes
- Data Governance Controls: Comprehensive data management capabilities to ensure privacy and security compliance
- Explainability Tools: Features that help document how AI systems make decisions and generate consumer-facing explanations
- Human Oversight Workflows: Processes to implement and document human review of AI decisions
- FTC Compliance Dashboard: Real-time visibility into compliance with FTC expectations and potential risk areas
- Enforcement Action Monitoring: Updates on FTC enforcement trends and precedents to inform risk management
By implementing Rakshan's platform, organizations can proactively address FTC concerns, document their compliance efforts, and reduce the risk of costly enforcement actions while building consumer trust in their AI systems.
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