FTC Cracks Down on Deceptive AI Claims: What Businesses Need to Know for Compliance

FTC Cracks Down on Deceptive AI Claims: What Managers Need to Know

The Federal Trade Commission (FTC) is stepping up its scrutiny of misleading claims about artificial intelligence (AI). This move targets exaggerated promises, false product labeling, unclear data handling, and bias in AI systems. If your business markets or uses AI, staying compliant isn't optional—it’s essential.

Why the FTC Is Focusing on AI Claims

The FTC’s authority under Section 5 of the FTC Act covers unfair or deceptive business practices, including false advertising. As AI becomes a bigger part of products and services, the agency is watching closely for claims that might mislead consumers or distort the market.

Key Areas of Concern

• Exaggerated performance claims: Overstating what AI can do.
• AI-washing: Labeling products as AI-powered without basis to ride the hype.
• Opaque data practices: Especially around biometric or personal information collected by AI.
• Bias and discrimination: In AI decision-making like hiring or credit scoring.
• Consumer manipulation: Using hyper-personalized content or simulated human interactions to influence behavior.

FTC Guidance on AI Marketing

The FTC has issued warnings and guidance emphasizing that claims about AI must be truthful and backed by evidence. Unsubstantiated statements about AI use or capabilities can be deemed deceptive. Companies must avoid overpromising and ensure transparency, especially when biometric data is involved.

Recent Enforcement Actions to Note

• Workado: Settled FTC allegations for falsely claiming its AI content detector was 98% accurate when independent tests showed otherwise.
• Cleo AI: Paid $17 million to resolve claims of misleading consumers about quick cash advances determined by AI risk classifiers, including violations of the Restore Online Shoppers' Confidence Act.

These cases highlight that the FTC is applying existing consumer protection laws to AI-related claims without creating new regulations—at least for now.

Compliance Tips for Management

• Verify all AI claims: Ensure any statement about AI features or performance is supported by solid evidence.
• Be transparent about data: Clearly disclose what data is collected, how it’s used, and obtain proper consent.
• Review for bias: Regularly test AI systems for discriminatory outcomes, especially in sensitive areas like hiring or lending.
• Monitor marketing materials: Avoid hype and ensure messaging aligns with actual capabilities.
• Stay updated: Follow FTC releases and public statements on AI enforcement trends.

For managers leading teams that develop or market AI-powered products, these steps are critical to avoid costly enforcement actions and reputational harm.

Additional Resources

To build stronger AI compliance practices, consider exploring courses that focus on AI ethics, legal frameworks, and responsible AI deployment. Resources like Complete AI Training's latest AI courses offer practical insights tailored for professionals managing AI initiatives.

Staying ahead means treating AI claims with the same rigor as any other product claims and focusing on clear, honest communication with your customers.