FTC Opens Consumer Protection Investigation of OpenAI, Creator of ChatGPT


The Investigation

The Federal Trade Commission (FTC) recently opened an investigation into OpenAI, creator of ChatGPT, to determine whether the artificial intelligence company violated consumer protections laws. According to the Civil Investigative Demand (CID) issued by the FTC and recently published in the Washington Post, the FTC is seeking information on whether OpenAI, in connection with the use of ChatGPT has:

  1. Engaged in unfair or deceptive privacy or data security practices or
  2. Engaged in unfair or deceptive practices relating to risks of harm to consumers, including reputational harm.

According to the CID, the FTC is seeking this information to determine whether FTC action to obtain monetary relief from OpenAI would be in the public interest.

The FTC's investigation of ChatGPT is part of a broader effort by the agency to examine the use of artificial intelligence (AI) in commerce. The agency recently issued a Joint Statement with the Department of Justice, Equal Employment Opportunity Commission, and the Consumer Financial Protection Bureau pledging to enforce laws and regulations to promote “responsible innovation in automated systems.” In recent years, the FTC has issued guidance on the use of AI in advertising and has issued warnings concerning other AI-powered products, such as facial recognition software.

FTC’s Authority and Potential Penalties

The FTC's investigation focuses on Section 5 of the FTC Act, 15 U.S.C. §45 which prohibits unfair or deceptive acts or practices in or affecting commerce. The FTC has broad investigative powers, including the use of CIDs to obtain documents and tangible things, obtain oral testimony, and require recipients to file written reports and answers to specific questions.

If the FTC finds that a company has violated Section 5, the agency has several enforcement options available, including:

  • Issuing a cease-and-desist order, which prohibits the company from engaging in unlawful conduct
  • Seeking civil penalties, which can be up to $50,120 per violation
  • Requiring the company to take corrective action through a consent decree, such as issuing refunds to consumers

Businesses Should Be Careful

The FTC's investigation of ChatGPT is a reminder that businesses that use AI-powered products and services need to be aware of the potential for consumer harm. Businesses should carefully consider the risks associated with using AI and take steps to mitigate those risks to avoid actions that may harm consumers.

The potential penalties for violating Section 5 of the FTC Act can be significant, so businesses should take steps to ensure they comply with the law. This includes carefully reviewing their marketing and sales practices to make sure businesses are not making any misleading or deceptive claims.

Businesses should also be aware of the FTC's guidance on AI, which provides information on the potential risks associated with using AI-powered products and services. By taking appropriate precautions, businesses can help protect themselves, comply with the law, and avoid FTC enforcement actions.

If you have questions or concerns about your business’s use of artificial intelligence, please contact a member of the WRVB Cybersecurity & Data Privacy practice team.

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