By Randy Hutchinson
President of the BBB of the Mid-South
Reprinted from The Commercial Appeal
I’ve written earlier columns about Artificial Intelligence (AI) being used to make scams more believable in order to ensnare more victims. The Chair of the FTC said, “We are seeing risks that AI could be used to turbocharge fraud and scams.”
In an initiative dubbed Operation AI Comply, the FTC has acted against companies that made deceptive claims about AI-driven services. Three of them involve companies that claimed to use AI to help people earn money setting up their own businesses.
The FTC alleged that Ascend Ecom defrauded consumers out of at least $25 million by claiming that its “cutting edge” AI-powered tools would help them earn thousands of dollars in monthly passive income by operating online stores on Amazon, Etsy, Tik Tok, and Walmart’s ecommerce platform. Few consumers made money and many were left with depleted bank accounts and in debt. The company appears to be out of business.
Ecommerce Empire Builders and FBA Machine, also known as Passive Scaling, allegedly deceived consumers with similar claims. Ecommerce Empire Builders encouraged consumers to “Skip the guesswork and start a million-dollar business today” by harnessing the “power of artificial intelligence.” FBA Machine said consumers could “generate over $100,000 per month in profit” utilizing its AI-powered software to set up online storefronts.
The FTC alleges Ascend Ecom and FBA Machine collectively defrauded consumers out of more than $40 million. It didn’t cite an aggregate number for Ecommerce Empire Builders, but says the owner used as much as $35,000 of consumers’ money to enrich himself.
A company called Rytr had a different AI-related scheme. It sold an AI “writing assistant” that subscribers could use to generate detailed consumer reviews based on limited and generic input. The FTC’s complaint against Rytr said the company “engaged in an unfair business practice by offering a service that is likely to pollute the marketplace with a glut of fake reviews that would harm both consumers and honest competitors.”
The FTC has acted against other companies that used deceptive AI claims to:
- Operate a chatbot to produce “iron clad” legal documents without the involvement of an attorney.
- Convince consumers to enroll in bogus career training.
- Provide moderation in an anonymous messaging app it unlawfully marketed to children.
- Deceive users about the accuracy of its DNA reports.
The FTC offers these takeaways for other businesses considering the use of AI-based tools:
· Be skeptical of AI-related products that claim they can fully replace a qualified human professional.
· Don’t take shortcuts on reviews. By posting fake reviews you betray your customers’ trust and hurt honest businesses trying to compete fairly.
- Don’t say you use AI tools to boost sales if you don’t. Be aware that just using an AI tool when you’re developing your product is not the same as offering your customers a product with AI inside.
- The FTC expects you to have a reasonable basis for any claim you make about your product or service. If special rules apply to the product or service you offer, like business opportunities, you must follow those as well. Don’t think using technological jargon or saying your product or program relies on AI changes the analysis.
The FTC and BBB recommend that consumers not let AI hype cloud their judgment when evaluating a business opportunity.