BizTech Law Blog

Robot Lawyers? FTC Targets AI Legal Services

The Federal Trade Commission (FTC) is continuing its firm stance in regulating companies making unsubstantiated or exaggerated claims about their products or services employing artificial intelligence (AI).

As AI applications rapidly migrate to multiple industries and fields, the FTC is ramping up its effort to establish regulatory guidelines. As part of this strategy, the agency initiated Operation AI Comply. In late 2024, the agency announced it had acted against several companies which employed false and/or deceptive claims in promoting the capabilities of their standalone AI services or those enhanced by AI-technology.

FTC Moves Against the “World’s First Robot Lawyer”

In one notable and instructive case, the FTC took enforcement action against a company called DoNotPay which claimed that its AI-powered legal service was the “world’s first robot lawyer.” Founded in 2015 to help people fight parking tickets, the company later expanded and began offering a subscription service to address other legal matters.

According to DoNotPay’s promotional materials, the automated service could generate a variety of valid legal documents for a fraction of the cost for a human attorney or law firm.

The subsequent FTC investigation of the company found that its AI-powered legal service did not perform as promoted and the documents generated were often incomplete, inaccurate or otherwise flawed.

False Advertising Promoting AI is Still False Advertising

In the administrative complaint filed against DoNotPay, the FTC reported that the company’s promotional materials promised that the service would enable non-lawyer customers to “generate perfectly valid legal documents in no time” and assist them to “sue for assault without a lawyer.” All for a monthly subscription fee ranging from $20 to $50.

The FTC complaint stated DoNotPay failed to live up to most of its claims and promises that its product could deliver legitimate, useable legal documents. The complaint also detailed how the company hadn’t conducted any testing to determine if the output of its chat box was equivalent to that of a human attorney; nor did it hire or retain any attorneys to test and evaluate the quality, accuracy and usefulness of the service.     

In a settlement with the FTC, DoNotPay agreed to pay a $193,000 fine and was ordered to notify its customers about the limitations of the services they’ve purchased and refrain from making further unsubstantiated claims about its AI-powered services.

Operation AI Comply is hardly a new direction for the FTC. Protecting consumers from unfair and deceptive marketing practices has been part of the agency’s mission for decades. But, the FTC has acknowledged the significant potential for misleading and fraudulent claims in marketing AI or AI-enhanced offerings. This enforcement initiative is clearly designed to help address and lessen the problem.    

Recommendations for Businesses

Given the FTC’s heighted scrutiny of AI-related marketing practices, it’s critical for organizations with AI-related offerings to be cautious about publishing inaccurate or unverifiable product claims. Recommendations and considerations regarding the promotion of AI-powered products or services include:

• Evaluate Legitimacy and Provability – Products with an AI component -- whether offered as a standalone or in AI-enhanced service -- should have an obvious, legitimate business application that has been proven effective. Businesses are advised to have evidence and hard data to back claims about the power and competitive advantages conferred by AI technologies. This proof of concept is developed via thorough testing, validation and documentation of the specific AI technology being offered.
• Avoiding Unsubstantiated and Exaggerated Product Claims – As with any product or service, businesses should avoid making unsubstantiated claims regarding the capabilities of their AI technologies. A complicating factor is the ever-growing volume of misinformation/disinformation circulating about the use of AI in commercial applications, which underlines the importance of presenting a clear, accurate and realistic picture of what AI can achieve – and what it cannot.
• Transparency and Disclosure – This includes explaining the data sources used to train the AI model being utilized and disclosing possible discriminatory or biased results associated with its application and other known risks associated with its use.
• Consumer Education – Informing and educating consumers about the nature and potential uses of the emerging AI technologies, their real-world capabilities and their known limitations is vital to avoid misunderstandings and better manage overall expectations.  

Honesty is Best AI Marketing Strategy

The FTC’s recent enforcement actions serve as a reminder to businesses that promotional claims must always be honest and provable, even if the product has potential to be a revolutionary game-changer. Certainly, the upside, transformative potential of AI-enhanced services is novel, exciting and often generates heady confidence in the competitive advantages it can bring.

But, we’re still in the early stages of an AI revolution that isn’t fully understood. American businesses keen on rapidly integrating AI with their services are cautioned to be circumspect in their communications and marketing efforts.

Adapting and bringing AI to the marketplace will be a long game and it’s clear that misleading consumers about the capabilities and effectiveness of AI services is risky and could result in negative legal consequences and lasting reputational damage.

The attorneys of Foster Swift’s Business and Technology Practice Group consult with organizations on the legal implications of technology and its impact on their enterprises, including AI. If you are introducing AI-powered products or have any questions about the legal implications of AI offerings in your portfolio, please contact your Foster Swift attorney.

Categories: Artificial Intelligence (AI), Contracts, Cybersecurity, Liability, Technology