FTC v. FBA Machine (“AI-powered” Tools)
Chip Cooper
eCommerce Attorney. I help marketers, advertisers & agencies solve their FTC earnings claim compliance problem for a fixed, flat fee. Get new strategies by downloading my Earnings Claim Guide and newsletter (Link Below)
FTC’s “Operation AI Comply” Targeted Exaggerated AI-Related Claims
The FTC launched “Operation AI-Comply” in 2024
Operation AI included five FTC enforcement actions against marketers that allegedly were deceptive, either because they:
? ??*?? Used AI hype in advertising, or
? ??*?? Marketed AI-enable technology.
FBA Machine’s Business
FBA Machine marketed and sold a business opportunity program that promised consumers that they would make a guaranteed income through online eCommerce stores that utilized “AI-powered” tools.
FBA claimed that their “AI-Powered” tools would help price products in the stores and maximize profits.
FTC Allegations Regarding Earnings Claims
?? ?*??FBA Machine’s earnings claims promised consumers that they could operate a “7-figure business” citing alleged “success story” testimonials from clients who “generate over $100,000 per month in profit.” The FTC alleged that few participants made back their initial investments.
? ??*??In its earnings claims made through general media, including from their related Passive Scaling website, FBA Machine failed to include information required by the Business Opportunity Rule regarding earnings claims.
?? *?? Specifically, Business Opportunity information regarding the (i) beginning and ending dates when represented earnings were achieved, and (ii) the number and percentage of all persons who purchased the business opportunity prior to that ending date who achieved at least the stated level of earnings.
Temporary Order
As a result of the FTC’s complaint, a federal court issued an order temporarily halting FBA Machine’s business operations. As of the date of this email, the case is yet to be resolved.
Takeaway
??? *?? In its 2023 policy statement regarding AI, the FTC issued a warning regarding the efficacy of an AI-enabled product/service: does it work as advertised?
??? *?? Also, in its 2023 policy statement, the FTC issued a warning regarding product exaggeration. The FTC didn’t specifically raise the exaggeration issue in the FBA Machine case (the FTC merely alleged that the claimed results didn’t occur).
??? *? At some point I expect to see the FTC raise the issue of an implied claim; specifically, that the net impression of consumers is that an AI-enabled product/service inherently capable of outperforming human beings with creating pricing structures that maximize profits.
For Informational purposes only; not legal advice
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2 周Thanks for sharing such valuable insights! Digital marketing strategies are indeed crucial for maximizing earnings and uncovering new moneymaking opportunities. Looking forward to more of your posts.