FTC AI Guidelines: How to Avoid Enforcement Actions in 2025
The FTC's Operation AI Comply has resulted in millions in penalties. Learn what the FTC looks for, recent enforcement cases, and how to protect your business from AI-related enforcement actions.
"Using AI tools to trick, mislead, or defraud people is illegal. The FTC's enforcement actions make clear that there is no AI exemption from the laws on the books."
— FTC Chair Lina Khan, September 2024
That was FTC Chair Lina Khan announcing Operation AI Comply in September 2024 — a law enforcement sweep that has since resulted in millions of dollars in penalties against companies misusing artificial intelligence.
The message is clear: AI doesn't change the rules. The same consumer protection laws that have governed business practices for decades apply fully to artificial intelligence.
But here's what many businesses miss: FTC enforcement isn't just about fraud and deception. It's about fairness, transparency, and keeping the promises you make to customers. If your AI practices don't align with these principles, you're at risk.
Understanding the FTC's Authority Over AI
The Federal Trade Commission enforces consumer protection law through Section 5 of the FTC Act, which prohibits "unfair or deceptive acts or practices in or affecting commerce."
This authority is broad — and it absolutely covers AI.
Deceptive Practices Include:
- Making false claims about AI capabilities
- Failing to disclose AI limitations
- Using AI-generated content that misleads consumers
- Claiming AI features that don't exist ("AI washing")
Unfair Practices Include:
- AI systems that cause substantial consumer harm
- AI that processes data in ways consumers wouldn't expect
- Algorithmic discrimination
- Providing tools that enable others to deceive consumers
Key Principle:
The FTC has been crystal clear: there is no AI exemption. If your practice would be illegal without AI, it's illegal with AI. And using AI to do something harmful at scale makes it worse, not better.
Operation AI Comply: The Enforcement Sweep
In September 2024, the FTC launched Operation AI Comply — its first coordinated enforcement action targeting AI-related violations.
The Five Initial Cases:
DoNotPay ("Robot Lawyer")
Claim: "World's first robot lawyer" that could replace human legal expertise
Problem: Never tested whether AI performed at lawyer level; no attorneys on staff
Result: $193,000 settlement; required consumer notification; prohibited from unsubstantiated claims
Rytr (AI Writing Assistant)
Claim: AI tool for generating content
Problem: Specific feature designed to create fake reviews and testimonials
Result: Barred from selling review generation services; compliance reporting required
Ascend Ecom (E-commerce Opportunity)
Claim: "AI-powered" system generating passive income
Problem: False earnings claims; failed to honor money-back guarantees
Result: FTC lawsuit in California; case ongoing
Ecommerce Empire Builders
Claim: AI-driven strategies generating $10,000+/month
Problem: Consumers lost money; promised profits never materialized
Result: May 2025 settlement; banned from selling business opportunities; assets turned over for refunds
FBA Machine
Claim: "AI-powered software" for Amazon storefronts
Problem: Defrauded consumers of $15.9 million
Result: July 2025 settlement; permanent ban from business opportunity sales
2025 Enforcement: The Pattern Continues
Operation AI Comply wasn't a one-time event. The FTC has continued aggressive AI enforcement into 2025:
IntelliVision Technologies (January 2025)
- Company claimed facial recognition AI worked equally across all ethnicities without bias
- Reality: Trained on only ~100,000 faces (not "millions"); algorithms performed differently across demographics
Result: Barred from false claims; must substantiate all claims with competent testing
Evolv Technologies (December 2024)
- Marketed AI-powered security screening for schools
- Claimed AI could detect weapons and distinguish them from personal items
- Reality: Schools reported missed weapons; high false alarm rates
Result: Banned from unsubstantiated claims; must allow K-12 customers to cancel contracts
Click Profit (March 2025)
- Promised "automated, AI-powered system" generating passive income
- Typical biz-op fraud supercharged by AI claims
Result: FTC action; case ongoing
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