June 7, 2023

The FTC Fires a Warning Shot Across the Bow for Marketers

Marketers are scrambling to learn how to leverage ChatGPT and generative AI for optimizing marketing and advertising returns.

At the same time, the FTC is busy projecting areas of concern for future regulation and enforcement actions.

FTC Blog Post

On May 1, 2023, an FTC provided a "shot across the bow" to marketers with a blog post on the deceptive and unfair use of AI in general and ChatGPT and Generative AI in particular.

FTC statement: "If we haven't made it obvious yet, FTC staff is focusing intensely on how companies may choose to use AI technology, including new generative AI tools, in ways that can have an actual and substantial impact on consumers."

FTC Concerns With AI

The FTC's overall concern: how marketers may use generative AI tools to “influence people's beliefs, emotions, and behavior.”

FTC jurisdiction: the FTC's general concern relates to its two jurisdictional buckets:

    *  Misleading and deceptive marketing practices.

    *  Unfair marketing practices: a practice is unfair if it to cause substantial injury to consumers that is not reasonably avoidable by consumers and not outweighed by countervailing benefits to consumers or competition.

One area of FTC concern is the use of chatbots “designed to provide information, advice, support, and companionship.”

The FTC believes with chatbots there may be a tendency for consumers to "think that they're conversing with something that understands them and is on their side."

Regarding marketing, the chief FTC concern is the use of generative AI tools for "tapping into unearned human trust," such as customizing ads for specific people or groups that may steer consumers into harmful decisions.

Consumer Rights Regarding Marketer's Use of AI

The FTC believes that consumers have certain fundamental rights regarding marketing that may be affected by marketers' use of AI.

    *  The right to know they're being advertised to: "It should always be clear that an ad is an ad."

    *  The right to know whether search results or any generative AI output is “organic... or is paid.”

    *  The right to know if an AI product's response is “steering them to a particular website, service provider, or product because of a commercial relationship.”

    *  The right to know whether they are "communicating with a real person or a machine."

Finally, the FTC made it clear that regulations may require marketers to “monitor and address the actual use and impact of any tools eventually deployed.”

Takeaway

Marketers should take notice.

ChatGPT and generative AI may automate and leverage traditional marketing activities.

The FTC, on the other hand, is concerned about how marketers may use these tools with misleading, deceptive, and unfair marketing practices.

Expect new FTC regulations in the near future.