FTC Issues Informal Guidance on Promoting Digital Products in the Age of Generative AI

The Federal Trade Commission has been thinking quite a bit about artificial intelligence lately.  For example, the FTC, along with several other federal agencies, issued a joint statement on AI, which outlined the agencies' commitment to monitor the use of AI and to engage in appropriate enforcement to protect consumers' rights.  The FTC also recently warned about AI and the Engineering of Consumer Trust and Chatbots, Deepfakes, and Voice Clones: AI Deception for Sale and told marketers to Keep Your AI Claims in Check. 

Yesterday, the FTC's Division of Advertising Practice published a blog post about the marketing of digital products in the age of generative AI.  The post shares some of the FTC's thinking about the marketing of digital products and provides some specific guidance about how to market them lawfully.  Here the key points.  

Disclose the terms

When marketing digital products, the FTC says that you must "ensure that customers understand the material terms and conditions, including whether they're buying an item or just getting a license to use it."  The FTC is particularly concerned that, when consumers buy digital products, they may not understand what they are buying.  As the FTC explained, "Companies are always obliged to ensure that customers understand what they're getting for their money."  If consumers are only getting a limited license to use something -- and that license can be taken away -- you'd better make that very clear to consumers up front.  

The FTC also warned marketers about changing the license terms after customers have already made the purchase.  The FTC explained, "Unilaterally changing those terms or undermining reasonable ownership expectations can get you in trouble, too." 

Don't mislead consumers about who the creator was

When marketing products created by generative AI tools, don't mislead consumers into believing that the product was actually created by a person.  Similarly, don't mislead people into thinking they're buying a piece of creative work -- whether it's a book or a piece of music -- by a particular famous creator.  The FTC warned that misleading consumers about who the creator of a work is violates the FTC Act. The FTC explained, "Selling digital items created via AI tools is obviously not okay if you're trying to fool people into thinking that the items are the work of particular human creators."  

Don't mislead consumers about their rights on creative platforms

When marketers create environments or other platforms for consumers to create and display their work, marketers should be transparent with them about what their rights are to that work, how the work could be used by others, and whether those rights can be taken away.  As the FTC explained, "Some creators may develop content specifically for the digital environment, and they may reasonably expect to have some control over what they've made and how it's used and presented."  

In addition to being upfront with consumers about what their rights are, the FTC also warned marketers about changing the terms later.  The FTC explained, "We may take a close look if such a platform isn't living up to promises made to creators when they signed up to use it." 

Be clear about how generative AI works

The FTC also expressed concerns that, when using generative AI tools, consumers may not understand how the work is actually created, and that it may be based on other work that is protected by intellectual property rights.  The FTC warned, "you may need to tell customers whether and the extent to which the training data includes copyrighted or otherwise protected material."  

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The FTC is paying close attention to the ways in which the marketing of AI and other digital tools may have the capacity to mislead consumers.  By issuing this guidance, it's clear that the FTC is expecting marketers to pay attention as well.  The FTC warned, "But we take note – and can take action – if companies aren’t upfront about what consumers are buying, who made it, how it was made, or what rights people have in their own creations."