FTC and SEC Scrutiny Increases on Artificial Intelligence Data Applications

Businesses utilizing artificial intelligence technologies face mounting legal risks and regulatory scrutiny when their disclosures regarding data practices do not align with the actual operation of the systems. An analysis conducted by Gouchev Law reveals that the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and European authorities expect companies to accurately disclose their artificial intelligence practices to users.

According to the analysis, companies need to tie their statements to actual data flows, vendor agreements, and model developments, and address changes before they take effect. The FTC focuses on the collection of information under specific promises followed by the expansion of its scope without providing sufficient transparency. For instance, a business that pledges not to share customer information without obtaining consent may encounter risks when it sends chat transcripts to an external artificial intelligence provider for optimization. The analysis warns that making hidden and retroactive changes to contract terms can be unfair or deceptive.