FTC’s AI Enforcement Review Gives Companies Chance at Reprieve

A newly mandated Federal Trade Commission review of enforcement actions that “unduly burden AI innovation” will give companies hit during a Biden-era crackdown an opportunity for a clean slate.

The Trump AI Action Plan released Wednesday directs the agency to review investigations launched under the Biden administration as well as more than a dozen final orders, consent decrees, and injunctions. The FTC will “where appropriate, seek to modify or set-aside any that unduly burden AI innovation.”

The review is another “signal of AI deregulation at the federal level,” said Maneesha Mithal, partner at Wilson Sonsini Goodrich & Rosati and former associate director of the FTC’s division of privacy and identity protection.

“This is going to be a free-for-all for the most connected companies to get a reprieve from having to follow the law,” said Sam Levine, former director of the FTC’s consumer protection bureau during the Biden administration.

Current FTC Chair Andrew Ferguson, a Trump appointee who has aligned himself with the administration, has issued numerous public statements that he opposes agency enforcement that would stifle AI innovation. Since Ferguson took over as chair in January, the agency levied a $17 million fine against fintech app Cleo AI and issued an order restricting marketing tool Workado from misleading consumers about the accuracy of its AI detection tool.

During the Biden administration, the FTC issued numerous guidance bulletins and more than a dozen AI related-enforcement actions, including five administrative complaints and proposed orders in September under its initiative “Operation AI Comply,” which targeted AI that led to consumer harm. Ferguson as an FTC commissioner dissented against one of the orders, which accused Rytr of violating the FTC Act by providing users an AI tool with which to generate false and deceptive reviews.

Calling any generative AI product illegal simply because it could be potentially used for fraud “threatens to turn honest innovators into lawbreakers and risks strangling a potentially revolutionary technology in its cradle,” Ferguson wrote at the time. He argued the FTC did not have the authority to regulate AI, a position he restated in May at a House Appropriations hearing after he became chairman.

Rytr did not respond to a request for comment.

The FTC declined to provide comments from Ferguson on the AI Action Plan.

Mithal said it was rare for the FTC to reopen orders it signed without a business first petitioning for a review. And even then, the commission must weigh if the law or facts of the case have changed significantly.

The CEO of defunct spyware company Spyfone, accused of privacy violations by the Biden administration, has already cited Trump’s deregulatory efforts in a bid to reopen a final order. While not strictly an AI case, Levine says that the vagueness of the Trump action plan’s definition of burdening industry could open the door for privacy and data security orders to be reopened.

“Any company with a lawyer is going to be able to argue with the FTC that being under investigation is going to impede AI innovation,” said Levine, now a senior fellow at the University of California, Berkeley’s Center for Consumer Law & Economic Justice.

Ferguson also shares the Trump administration’s opposition to efforts initiated under the Biden administration to address systematic biases in AI. As a commissioner, Ferguson concurred in an enforcement action against IntelliVision for misrepresenting the accuracy of its AI detection tool and its ability to perform its service with “zero gender or racial bias.” However, he clarified in a statement in December that he didn’t believe it was the commission’s job “to fix the meaning of ‘bias’ to require software to produce equal results ‘across race and sex groups.’”

The FTC referred a complaint to the Justice Department in January about Snap Inc.‘s “My AI” chatbot alleging the service was harmful to kids. The period for the Justice Department to bring a case, settle, or refer the complaint back to the FTC passed in March. Ferguson voted against referring the complaint.

The FTC and Snap declined to comment on the complaint.