Does FTC v. Ascend Ecom Signal a New Era of AI-Powered Deceptive Advertising Enforcement?

The FTC’s “Operation AI Comply” Targets Marketers That Use AI to Supercharge Deceptive Ad Claims and Business Practices

FTC v. Ascend Ecom (September, 2024)

The FTC alleged that Ascend Ecom used unsubstantiated earnings claims and false promises of risk-free investments to lure consumers into an e-commerce business opportunity scheme.

Central to this case is the FTC’s Business Opportunity Rule, which Ascend is accused of violating through deceptive advertising and failure to provide required disclosures.

Ascend Ecom didn’t comply with the New FTC Earnings Claims Framework.

FTC Allegations

The FTC complaint outlines several deceptive practices by Ascend Ecom.

• False Earnings Claims: Ascend Ecom advertised that consumers could earn "five-figure monthly passive income" and profit margins up to 50% using AI-driven strategies. In reality, most customers lost their investments.
• AI-Powered Deception: Ascend Ecom promoted proprietary AI tools as the backbone of its business model without substantiation, claiming that: their “business model was powered by AI”, and they used “proprietary software and AI to maximize clients’ business success.”
• Contractual Violations: Ascend Ecom failed to provide the required disclosures under the Business Opportunity Rule, including earnings substantiation and a list of previous buyers.
• Suppression of Reviews: Consumers who posted negative reviews were threatened with lawsuits and even intimidation tactics, including references to organized crime.

The Broader Impact of Operation AI Comply

The FTC’s allegations against Ascend Ecom, specifically that Ascend Ecom falsely attributed its business model's success to AI tools, make the case a good fit for the FTC’s “Operation AI Comply.”

Bottom Line: The FTC’s case against Ascend Ecom underscores the risks of leveraging AI-based claims with business opportunity offers without adequate substantiation.

Conclusion

With its enforcement action against Ascend Ecom, the FTC has made it clear that there is no “AI exemption” from compliance with advertising laws.

The FTC focused on (i) efficacy claims (i.e. does the AI-enabled product work as advertised?), and (ii) AI-enabled product exaggeration claims.

The FTC is on the lookout for earnings claims that promise AI-powered results.

For Informational purposes only; not legal advice

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