FTC Unveils Expanded Crackdown on AI Abuses
Is your company ready for Operation AI Comply? It should be — because that’s what the U.S. Federal Trade Commission (FTC) is calling its “new law enforcement sweep” against artificial intelligence (AI) abuses. The FTC says it is “checking to see whether products or services actually use AI as advertised”; “whether they work as marketers say they will”; “whether AI and other automated tools are being used for fraud, deception, unfair manipulation, or other harmful purposes”; and “whether automated tools have biased or discriminatory impacts.”
Announced on September 25, 2025, Operation AI Comply’s opening salvo involved four cases against companies that made allegedly deceptive claims about their AI-powered offerings, including one company that advertised “the world’s first robot lawyer,” and a fifth against a company that provided an AI writing assistant that the FTC claims unlawfully provided the “means and instrumentalities” for unlawful deception by its users.
The Initial Cases: A Mix of the Routine and the Revolutionary
Four of the first Operation AI Comply cases involve deceptive marketing (especially get-rich-quick schemes) and fit squarely within the FTC’s enforcement tradition. They would be unremarkable except for the connection to AI.
- According to the FTC, DoNotPay claimed to provide “the world’s first robot lawyer” and advertised various legal capabilities. However, the FTC claims that DoNotPay never trained its system on legal authorities or legal reasoning and never tested the quality and accuracy of most of the advertised capabilities. In addition, the FTC alleges that a Los Angeles Times quotation highlighted on DoNotPay’s website and extolling the service actually came from an opinion piece on a website the newspaper hosts for high school students’ content. In its complaint, the FTC charges DoNotPay with false or unsubstantiated performance claims and with false claims, all in violation of Section 5 of the Federal Trade Commission Act. DoNotPay has agreed to a settlement with the FTC, including payment of $193,000, that will be subject to public comment before finalization.
- The FTC has sued various related parties it calls “Ascend” for allegedly making deceptive earnings claims about AI-powered e-commerce investment opportunities. The FTC also claims that Ascend did not provide disclosure documents required under the agency’s Business Opportunity Rule to prospective investors. And, when consumers spoke out, the FTC alleges that Ascend suppressed their comments with threats and intimidation. The FTC contends that this conduct violated Section 5 of the FTC Act, the Business Opportunity Rule, and the Consumer Review Fairness Act. The suit is pending in the Central District of California.
- The FTC similarly sued Empire Holdings Group (Empire) and its CEO and owner for allegedly falsely claiming that consumers will earn significant sums from their AI-driven online stores and related offerings. The FTC claims that Empire did not provide required disclosure documents, had contracts with consumers containing nondisparagement clauses, and challenged consumers who sought refunds. Again, the FTC contends this conduct violated Section 5 of the FTC Act, the Business Opportunity Rule, and the Consumer Review Fairness Act. This suit is pending in the Eastern District of Pennsylvania.
- In another case, the FTC sued an individual and nine related companies for allegedly making false or unsubstantiated earnings claims to persuade consumers to invest in AI-enabled e-commerce opportunities. Here, too, the FTC claimed the enterprise failed to make required disclosures, had contracts with consumers containing nondisparagement clauses, and challenged consumers who sought refunds. And again, the FTC contends this conduct violated Section 5 of the FTC Act, the Business Opportunity Rule, and the Consumer Review Fairness Act. This suit is pending in the District of New Jersey.
Unlike these four run-of-the-mill cases, Rytr marks an aggressive expansion of FTC enforcement. Rytr provides a generative-AI writing assistant over the Rytr.me website. This service offers over 40 “use cases” that produce different types of writing such as emails, product descriptions, and blog posts in response to user prompts. A now-discontinued use case allowed users to generate testimonials or reviews about products, services, or anything else someone else might want to appraise in this way. The FTC alleges that the “service generates detailed reviews that contain specific, often material details that have no relation to the user’s input” and thus could deceive potential consumers if submitted without revision. While some users apparently used Rytr to generate hundreds or even thousands of reviews, the complaint does not allege that anyone actually was deceived, that any of the reviews actually were published, or that any user actually posted Rytr’s output without revising it or even reviewing it for accuracy.
Despite the absence of such allegations, the FTC — over strong dissents by Commissioners Ferguson and Holyoak — concluded that Rytr’s “Testimonial & Review service causes or is likely to cause substantial harm to consumers” and that “its likely only use is to facilitate subscribers posting fake reviews with which to deceive consumers.” After alleging certain other elements, the FTC charged that Rytr had committed “unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act” by “furnishing others with the means and instrumentalities to engage in … deceptive practices” and by engaging in “an unfair act or practice.”
In filing the complaint, the FTC has moved well beyond precedent. If the agency maintains its position, generative AI companies will fear that they, too, are at risk of investigation and potential liability for providing a service that others could put to ill use.
Although it is questionable that the FTC could prove its case on the facts alleged — and Rytr may have various legal defenses, including under Section 230 of the Communications Decency Act and the First Amendment — Rytr chose to settle. Under its consent agreement with the agency, Rytr agreed that it, its officers, and its employees, among others, would not “advertise, market, promote, offer for sale, or sell” any review or testimonial-generation service and to certain reporting and notice, recordkeeping, and compliance monitoring requirements. The FTC will publish the consent agreement in the Federal Register for a 30-day comment period. It will be interesting to see whether generative AI advocates will oppose finalization of the agreement in an effort to restrain the FTC.
Rite Aid
Operation AI Comply builds on previous FTC cases about artificial intelligence. While most of those cases involved allegedly deceptive marketing, a case against the Rite Aid pharmacy chain stands out. In December 2023, the FTC filed a complaint and proposed settlement (later adopted) regarding Rite Aid’s use of AI-based facial-recognition surveillance technology. The complaint alleges that Rite Aid violated Section 5 of the FTC Act by using facial-recognition technology to identify shoplifters in an unfair manner that harmed consumers.
This case marked the first time that the FTC had used Section 5 to address non-privacy-related violations involving how a business had deployed an AI system. The FTC further alleges that Rite Aid violated an earlier settlement by failing to employ reasonable and appropriate measures to prevent unauthorized access to personal information. To settle the case, Rite Aid agreed, among other remedies, to what Commissioner Alvaro M. Bedoya called a “comprehensive algorithmic fairness program.” For more on this case, please see our Advisory.
The FTC’s Trajectory
In the spring of 2023, the FTC began ratcheting up its warnings of enforcement against unfairness and deception involving AI. It became clear to us that the FTC was readying its crackdown. As we told Legaltech News, it was not a question of if; “[t]he questions are what, how and when.”
Now, with Operation AI Comply, the FTC says it is “work[ing] to combat AI-related issues in the marketplace from every angle.” Company compliance programs should take a similar 360-degree view to stay a step ahead of the enforcers. Our interdisciplinary AI team would be happy to help.
For more on our coverage of the FTC and AI, please see these analyses:
AI Under Regulatory Scrutiny: FTC Reminds Companies There Is a Cop on the Beat
FTC Warns: All You Need To Know About AI You Learned in Kindergarten
Another Month, Another FTC Warning About AI Deceptions
Agencies Vow Enforcement of Antidiscrimination Laws When AI Systems Offend
Generative Uh-Oh? What Companies Should Learn From the FTC Investigation of OpenAI
The Growing Role of Independent Regulators in Protecting Consumers from AI-Related Harm
© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.
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