Online Sellers Should Heed FTC Warnings on AI

The FTC issued a warning to companies about their use of AI (artificial intelligence) in commercial practices. It’s easy for online sellers to forget they’re obligated to comply with consumer-protection laws, but some fairly small sellers have gotten into big trouble over issues including price-fixing, price-gouging, and fake reviews.

Sellers may use third-party tools assuming they must be legitimate, but that’s not always the case, and the government could come after the seller who uses them.

As for the latest warning, the FTC said on Monday:

“Companies thinking about novel uses of generative AI, such as customizing ads to specific people or groups, should know that design elements that trick people into making harmful choices are a common element in FTC cases, such as recent actions relating to financial offers, in-game purchases, and attempts to cancel services. Manipulation can be a deceptive or unfair practice when it causes people to take actions contrary to their intended goals. Under the FTC Act, practices can be unlawful even if not all customers are harmed and even if those harmed don’t comprise a class of people protected by anti-discrimination laws.

“Another way that marketers could take advantage of these new tools and their manipulative abilities is to place ads within a generative AI feature, just as they can place ads in search results.”

The warning in the following paragraph is crucial for sellers to understand:

“Among other things, it should always be clear that an ad is an ad, and search results or any generative AI output should distinguish clearly between what is organic and what is paid. People should know if an AI product’s response is steering them to a particular website, service provider, or product because of a commercial relationship. And, certainly, people should know if they’re communicating with a real person or a machine.”

You can find the full blog post, “The Luring Test: AI and the engineering of consumer trust,” on the FTC.gov website, which also serves as a warning for consumers (including sellers) who might be misled by AI chicanery.

Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.