The FTC’s National Nanny Returns: AI Edition

from the not-the-ftc’s-job dept

In 1978, the Federal Trade Commission, the agency that regulates unfair or deceptive advertising, proposed limiting TV ads for sugary foods on programs targeted at children. The Washington Post’s editorial board scoffed that the plan would “turn the agency into a great national nanny.” Congress clipped the agency’s wings, and “kidvid” entered history as a cautionary tale of regulatory hubris. Once again, the FTC is channeling its inner Mary Poppins in the name of consumer protection. Only in this incarnation, she pulls a novel theory of deception from her regulatory carpetbag to control what AI chatbots say.

Under the FTC’s proposed policy statement on “Suppression of Accuracy in Artificial Intelligence Systems,” announced July 1, AI developers “likely” commit false advertising whenever they “steer” their models’ outputs toward objectives users don’t expect. The theory: because AI companies market their products as helpful, consumers expect maximally accurate answers, and any undisclosed editorial shaping of a model’s responses is deception. 

It is a policy proposal in search of a problem. True to Mary Poppins’ “I never explain anything” credo, it does not identify a single false advertisement or deceived consumer.

It is also wanting on the legal front, failing to pay even lip service to relevant Supreme Court precedent. In Brown v. Entertainment Merchants Association, the court held that video games—interactive software sold for profit—receive full First Amendment protection, because the Constitution’s protections “do not vary” when a new medium appears. In Moody v. NetChoice, the court reaffirmed that a platform’s choices about what expressive content to present are protected editorial discretion. The design choices underpinning large language models make them legally indistinguishable from video games and social media.

What the FTC calls “steering” is what the Supreme Court calls editing.

The FTC says developers could avoid liability under the policy by “clearly and conspicuously” disclosing that their systems prioritize objectives other than pure accuracy. But how would that work for Truthly, an AI chatbot promoted for its Catholic bias? Truthly’s slogan is “Every other AI is built to agree with you. Truthly tells you the truth.” Although Truthly affirmatively discloses its Catholic worldview and disclaims impartiality—seemingly just what the FTC policy demands—it also claims that, unlike secular chatbots, its news and information is filtered “through truth and morality.” Consumers might struggle to reconcile the chatbot’s biased-but-true disclaimers, rendering them ineffective under the FTC’s own disclosure standards. Paradoxically, a religious chatbot could face false-advertising charges for fulfilling its core function—generating religious outputs.

Freedom of the press, an explicit guarantee of the First Amendment, also would be vulnerable under the proposal’s legal logic. In theory, it would put a target on any media outlet that promises accuracy while exercising editorial judgment, including the NY Times, whose front page has promised “All the News That’s Fit to Print” since 1897. 

Right-leaning media also would be at risk. Newsmax tells viewers it delivers “real news.” Breitbart’s editorial guidelines declare its goal is “to report the truth – accurately and fairly.” One America News brands itself “Your Credible Source for National & International News.” 

Would print articles resort to cigarette-style bias warning labels to avoid an FTC investigation? Would cable news programs run a continuous chyron with their editorial criteria?

In 2004, the agency rejected any application of FTC law in this manner when it declined to challenge Fox News’s “Fair and Balanced” slogan as false advertising. According to then-Chairman Timothy Muris, the inquiry would have entailed an evaluation of the news content at issue, which is a “task the First Amendment leaves to the American people, not a government agency.”

The FTC’s new proposal, however, points the opposite way.

Not so long ago, FTC Chairman Andrew Ferguson touted the Commission’s enforcement focus on actors that use AI to violate the law or deceive consumers about the capabilities of their generative AI. When DoNotPay promoted a “robot lawyer” as comparable to a human professional, then-Commissioner Ferguson rightly voted to hold it accountable. When Workado exaggerated the accuracy of its AI-detection product, the FTC, with Ferguson as chair, ordered it to stop making unsubstantiated claims. 

At the same time, Ferguson was advocating for regulatory humility, declaring that “the FTC’s enforcement actions ought to be guided by the law, not the personal ideology, politics, or novel legal theories of its chairman or commissioners.” Under the Biden administration, he dissented from a proposed consent order against Rytr, a generative AI writing tool that was capable of generating deceptive outputs, arguing that the Commission was punishing “a product that helps people speak, quite literally.” 

Commissioner Melissa Holyoak, whom Ferguson joined in dissent, observed that “[p]art of generative AI’s promise is its ability to suggest new lines of thought that may never have occurred to a user in the first place.” In other words, he signed on to the view that generative AI may be most valuable when it defies consumer expectations. As chairman, Ferguson went further, vacating the Rytr order outright and condemning law enforcement “unsupported by facts or law.”

But that was then. 

The Supreme Court in Trump v. Slaughter subsequently stripped the FTC of its statutory independence, blessing a two-member, one-party Commission. And this Commission has not been shy about asserting its anti-left viewpoints. The FTC proposal puts “equity” in scare quotes and castigates Colorado’s AI law, while ignoring AI laws in Texas and Utah. Meanwhile, the administration the Commissioners serve requires federally purchased AI models to conform to its own official version of the truth. When a future administration inevitably jerks the ideological steering wheel leftward, consumers and AI developers—not the current Commission leadership—will suffer the whiplash. 

In the 1964 film, Mary Poppins measured the children with a tape measure calibrated with subjective character traits instead of inches. Of course, she was deemed “practically perfect in every way.” The FTC’s proposal similarly cloaks a subjective assessment in the language of unassailable objectivity. But all the spoonfuls of sugar in the history of children’s advertising could not mask the bitter taste of conformity with a single worldview.

By fostering regulatory uncertainty, the FTC’s proposal threatens to stall the innovation that the administration insists is essential to AI supremacy. Its facile assurance that developers could avoid deception liability through a disclosure that “dispel[s] the notion that the system is designed to give the best answer possible” is, in “Mary Poppins” parlance, “a piecrust promise. Easily made, easily broken.”

Keith R. Fentonmiller served more than two decades as a senior attorney in the Federal Trade Commission’s Division of Advertising Practices. He is also a published fiction author. The views expressed are his own.

Filed Under: ai, andrew ferguson, fair and balanced, false advertising, ftc, steering