FTC Act Section 5: deceptive AI practices
United States (federal) · 15 U.S.C. § 45; 16 C.F.R. § 1.98 (penalty amounts) · effective 1914-09-26
Summary
Section 5 bans deceptive acts and practices in commerce. It has no AI rule and no required AI notice. A practice is deceptive if it is likely to mislead a reasonable consumer on something material, so leading customers to believe they are dealing with a person, when that would matter to their decision, risks a claim. In 2016 the FTC charged the operators of AshleyMadison.com with saying messages came from actual women when they came from fake profiles.
Who must comply
Businesses engaged in commerce in the United States, except those the statute leaves out, such as banks and common carriers.
What you must disclose
No set wording. Do not mislead consumers about whether they are interacting with a human or about what your AI can do.
When: The statute sets no timing. In practice, before the consumer relies on the interaction.
Other duties
- Do not make claims about your AI that you cannot back up.
- Good practice, not a duty in the statute: keep records of what disclosures were made and when.
Exemptions
- No AI exemption. The statute leaves out banks, savings and loans, federal credit unions, common carriers and air carriers.
Penalties
Orders and injunctions. Civil penalties up to $53,088 per violation apply to violations of FTC rules and orders, and to practices the FTC has already ruled unlawful when the business knew that.