The Federal Trade Commission recently sued Automators AI, alleging that the company made a number of false claims in connection with the marketing of business opportunities and coaching services, including claims that the company uses artificial intelligence to help investors earn money. In connection with the filing of the lawsuit, a federal court in California granted the FTC a temporary restraining order, which includes, among other things, an asset freeze.

In announcing the action, Samuel Levine, the Director of the FTC's Bureau of Consumer Protection, said, "The defendants preyed on consumers looking to provide for their families with promises of high returns and the use of AI to power such returns."

The FTC's lawsuit against Automators AI includes wide-ranging allegations about false and unsubstantiated claims, the use of endorsements and affiliate marketing, and violations of the Business Opportunity Rule and the Consumer Review Fairness Act, all in connection with the marketing of business opportunities. None of this is all that newsworthy. What all advertisers should be paying particular attention to, however, are the AI-related aspects of this enforcement action.

Here, the FTC alleged that Automators AI marketed "artificial intelligence-integrated" e-commerce business opportunities, that, through the use of "AI machine learning" would generate monthly profit margins between eight and twenty percent. The FTC charged, however, that virtually all purchasers did not achieve those profits -- and most lost their entire investment.

The FTC also alleged that the company then promoted another business opportunity which would teach investors how to use AI to find top-selling products in order to make over $10,000 a month in sales. The FTC said that, as part of this offering, the company claimed to coach investors how to use Chat GPT in order to create customer service scripts. The FTC charged the company with making claims such as, "We've recently discovered how to use AI tools for our 1 on 1 coaching program, helping students achieve over $10,000/month in sales!" and "use AI or chatgpt tools like chatgpt to scale an Amazon store to 10k a month and beyond." The FTC said, however, that virtually none of the investors made the advertised amounts and most did not recoup their investments."

The FTC has made it very clear that it has real concerns about how the use of artificial intelligence may impact consumers. Significantly, the FTC has issued both public statements and informal guidance warning marketers about ways in which AI can be misused (more information about that here). This enforcement action -- following on the heels of those warnings -- shows that the FTC is closely watching what marketers are saying about artificial intelligence and is going to bring enforcement actions when the agency feels that those claims are unsubstantiated.

(And h/t to FTC attorney Lesley Fair who, on the FTC's always informative and entertainingbusiness blog, said that AI stands for "allegedly inaccurate.")

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