‘Just Getting Started’: Bureau Head Says FTC Taking On AI Scams, Consumer Fraud

Sam Levine

The Federal Trade Commission’s recent flurry of enforcement actions and rulemaking on deceptive artificial intelligence claims, junk fees and other hot-button topics is just the beginning of the agency’s aggressive push to shield the public from a broad range of harms, the head of its consumer protection bureau said Monday. 

Despite challenges posed by the advent of new technologies and a 2021 U.S. Supreme Court decision that curtailed the agency’s ability to seek restitution from fraudsters, the FTC has continued to use all of its available tools to crack down on some of the most prevalent frauds and scams targeting consumers and workers, bureau Director Samuel Levine said during a speech at the National Advertising Division’s annual conference in New York City. 

“At the FTC, we’re not nibbling around the edges,” Levine said. “We’re taking on big challenges that have plagued consumers for decades. And we have much work still to do.”

The commission is “leading the charge” with its work on issues ranging from hidden fees and subscription traps to data privacy and AI, and often serves as a “model” for legislatures across the country as they seek to regulate these issues, according to Levine. 

“This grassroots support for our work gives me confidence that it will continue, regardless of what happens in November [with the presidential election],” he said. He added that the agency is “firing on all cylinders” and it’s been so busy that the “frequent calls” from past years for Congress to establish a new data protection authority have dried up. 

One particular area of focus for the FTC is ensuring that technologies that use AI are “working for people and not just tech giants,” according to Levine. 

Reiterating remarks he delivered at last year’s National Advertising Division conference, the bureau chief stressed the FTC wouldn’t be repeating the “mistake” it made with the rise of the modern internet of allowing tech companies to police themselves on AI. 

Instead, the commission is taking “a proactive approach to addressing AI-related harms,” including AI-based fraud that originates on social media, Levine said.

“Over the last year, we’ve sued one firm for defrauding consumers with AI claims, and we’re just getting started,” he said. 

The commission is also focused on ensuring that it has the appropriate enforcement tools it needs to “shut down these schemes,” according to the bureau chief. 

The commission earlier this year issued a final rule banning government impersonation scams, which Levine called “the type of fraud that generative AI can turbocharge,” while simultaneously proposing to expand the restriction to cover the impersonation of individuals.

Additionally, the FTC has made clear that AI robocalls aren’t exempt from its telemarketing sales rule. It has also recently finalized a rule cracking down on firms that generate fake reviews, which Levine described as “an online scourge that AI threatens to turbocharge,” and the commission has solicited proposals from the public on how to combat voice cloning. 

“There is no single solution to AI-fueled fraud, but we should never count out American ingenuity as a complement to strong enforcement,” Levine said. 

The bureau chief added that companies shouldn’t interpret the FTC’s proactive approach to enforcement as being “anti-AI.”

“We want to see innovators compete fairly to bring existing new products and services to market, and that means not only scrutinizing potentially anti-competitive practices, but also ensuring that claims around AI are backed up,” Levine said. 

He highlighted a July enforcement action accusing those behind the anonymous messaging app NGL of falsely claiming that its AI content-moderation program filtered out cyberbullying and other harmful messages, stressing that the public should “expect more actions like [this] before the end of the year.”

The FTC has also prioritized issues that cost consumers and workers significant time and money, including hidden or “junk” fees that aren’t disclosed upfront, unrelenting telemarketing calls and being locked into subscriptions that are difficult to cancel. 

“People are sick of how difficult — and I’m a pretty good lawyer, it’s hard for me to cancel some of the subscriptions I have — people are getting fed up with this, and I really hope companies can clean up their practices,” Levine said. 

The FTC has sought to combat these issues by not only bringing enforcement actions, but also engaging in extensive rulemaking, as the commission has proposed both a junk fee ban that would require companies to post prices at the outset rather than burying mandatory fees and a “click-to-cancel” rule that would mandate that companies make subscriptions as easy to cancel as they are to join. 

While Levine declined to offer a timeline for when either of those rules may be finalized, he stressed that companies should already be well aware that “hiding fees and trapping consumers in subscriptions is already unlawful not only under the FTC Act, but under other laws we enforce.”

“Companies should heed the call to follow the law now rather than waiting for a final rule,” he said. 

Additionally, the FTC has made significant progress in advancing privacy and safety online, especially for kids and teens, according to Levine.

In a 2022 speech, he criticized the traditional framework of providing notice and allowing consumers to choose how their data is being collected and shared, arguing Monday that “actual restrictions on data use, rather than more disclosures” that require consumers to signal their consent, was necessary. 

While “some were skeptical” about whether such a move was possible, “that paradigm shift is exactly what we’ve achieved,” according to Levine, who highlighted the commission’s groundbreaking moves in recent enforcement actions to require companies to adhere to data minimization requirements, halt the sharing of sensitive health data, and shield sensitive geolocation data from disclosure. 

The FTC also remains “laser-focused on making sure that companies are complying with their orders,” which is “something that TikTok learned earlier this summer” when it was hit with a government lawsuit accusing it of allowing minors to create accounts and of unlawfully gathering personal information from them despite being under an FTC order prohibiting such conduct. 

Throughout all of its work, the National Advertising Division, which is an industry self-regulatory body that’s part of BBB National Programs, has been and continues to remain “a critical partner to the FTC,” according to Levine. 

“I really consider NAD a model self-regulatory organization,” Levine said. “And I would certainly take their determinations quite seriously if I were a marketer.”

—Editing by Adam LoBelia and Michael Watanabe.