FTC Resolves “AI-Washing” Case

The economy has been abuzz with AI innovations for several years now. Almost every day, we hear stories about how companies are leveraging AI to do incredible things. However, some claims are too good to be true, and the Federal Trade Commission (FTC) is actively enforcing against companies that overpromise on AI. Most recently, the FTC announced that it resolved its case against Growth Cave LLC. A recent DLA Piper memo describes the case:

“In Growth Cave, among other allegations, the complaint asserted that the company misrepresented to consumers that its “AI software,” GrowthBox, would ‘automate nearly 100% of the process’ of setting up and operating an online education course. According to the FTC, the technology instead ‘requires users to manually upload their advertisements, set appointments, and input messages that can be sent out to potential customers via text message and email.'”

AI washing was a small part of Growth Cave’s misconduct, which collectively netted the company a $48,597,538 judgement. However, the AI piece of the litigation gives insight into how the FTC approaches AI-based claims. By looking at the restrictions placed on Growth Cave, we can see what conduct the FTC finds objectionable. The memo notes that the order bars Growth Cave from:

1. “Misrepresenting that a product uses AI when it does not; and
2. Making misleading claims that AI will improve the product’s profitability, effectiveness, or efficiency.”

Companies need to be careful when marketing products as “AI-powered” or “AI-enabled.” Precision is key; some claims may need to be qualified with language explaining how AI enhances a product. Additionally, the impacts of using AI should not be overstated. New trends and technologies often result in a slew of unverified and misleading claims. Marketing communications related to AI should be scrutinized to ensure accuracy.