FTC Guidance on AI Chatbot Use: Key Pitfalls and Compliance Strategies

The Federal Trade Commission (FTC) has cautioned companies using AI chatbots, emphasizing the importance of transparency, accountability, and consumer protection. An article by Fenwick highlights the FTC guidance on AI, including five key pitfalls to avoid when integrating AI chatbots:

Misrepresentation: Companies must clearly communicate the nature and capabilities of AI chatbots, avoiding misleading claims. Non-compliance can result in hefty fines, mandatory refunds, and marketing bans.

Risk Mitigation: Companies should assess and mitigate risks associated with AI chatbots to prevent harmful or offensive content, especially for children.

Transparency in Advertising: Ads within chat interfaces must be clearly identified as paid content to avoid consumer deception.

Manipulation: Exploiting consumer relationships with AI avatars or bots for commercial gain, such as pushing sales or collecting data without explicit consent, is prohibited.

Privacy Violations: Companies must respect consumer privacy, avoiding unauthorized data collection through AI chatbots.

To ensure compliance, companies should:

• Provide clear disclosures about AI chatbots and sponsored content.
• Review marketing materials for substantiated claims and clear disclosures.
• Implement comprehensive compliance programs, including staff training and customer complaint review.
• Ensure chatbot outputs are truthful and not misleading.
• Stay informed about evolving legal regulations on AI.

The FTC guidance on AI highlights its commitment to preventing deceitful AI practices and protecting consumers, with non-compliance potentially leading to severe financial and business consequences.