32_The_FTC_-_AI and_Its_Existing_Authority

Joly MacFie10min

Andy Jung

00:01

My name is Andy Jung Associate Counsel at Tech freedom. We're a small technology and law, Think Tank. I guess we're based in DC these days are pretty spread apart. I'm located in California, where I'm certified as a lawyer. So today I'm talking about the Federal Trade Commission, referred to as the FTC, the Federal Trade Commission is an independent agency of the US federal government. And what the FTC does is it protects consumers and businesses from from scams, harmful conduct to consumers, and unfair business practices unsavory business practices that harm competition. The FTC was created in 1914 by the Federal Trade Commission Act. And I'm going to be talking today about Federal Trade Commission authority, FTC authority over AI. And what's amazing is that the focus of my talk today will be on the FTC Act that was passed in 1914. It's over 100 years old. And it still applies artificial intelligence, the authority that the Federal Trade Commission has to regulate artificial intelligence comes from this old law. And that leads me to my main takeaway from today, I'm just going to start with and then end with, and that is that the FTC has authority to regulate AI. That might sound controversial. Some people might be upset by that statement, but it does. And it's currently using its authority to do a variety of different things, artificial intelligence, and so it's active, and it's engaged on these policy matters. So I'm gonna go through some FTC authority and try and provide some concrete examples of what is currently doing and the type of AI practices that the FTC can and might regulate. So up here, I have three different sources of three different types of FTC authority. I'm going to be focusing today on the first two, but it's worth mentioning all three. So what what can the FTC do? The FTC can investigate companies and people have investigative authority, the FTC can enforce rules and laws and regulations on these companies that it investigates, and it also has rulemaking authority to pass regulations, I'm going to skip over that today. In the interest of time, it's not quite as relevant to the current moment, but it will be in the future. So hopefully, I'm back next year. FTC investigative authority. So Section six, nine and 20 of the FTC act, authorize it to carry out investigations, it can do so through a variety of different forms of compulsory process, like subpoenas, civil investigative demands, they want to see IDs, or special reports that can require companies to file special reports. And I'm gonna be coming back to that in a moment. So that's a good one to remember. And what the FTC collects what it can demand from organizations, or people or companies are things like business records, documents, internal communications, reports on business, conduct, that sort of thing.

Speaker 1

02:58

FTC AI related investigations. There are two up on the board. One is public one is leaked, I'm going to focus on the public one, this is a pretty big deal. This is new. This is about two weeks ago, the FTC launched an inquiry into generative AI investments and partnerships. So what does that mean? They set up FTC sent a bunch of dissent borders, to file special reports to five AI companies, Google, Amazon, and Dropbox, Microsoft and open AI. And these these orders to file special reports requested as a nice way to put it information from these companies about their competitive relationships and partnerships. So for example, they requested information regarding a specific investment or partnership, and the strategic rationale behind that partnership. So this is a competition focused investigation. What the FTC is looking into is the partnerships between these AI companies, and how those partnerships might be impacting the growing AI industry and competition within that industry. So for example, how are these companies sharing data? Are there agreements within these companies to share data with one another, but not share data with other organizations that could be potentially implicate some of the FTC authority and so that investigation into the AI companies could turn into an enforcement action. And so I'll transition to my next topic here. So that the investigation into these five AI companies if they the first part of before, even though federal credit union has seemed to get before it, if they find something interesting in news reports that they think that myleeza More than could be to enforce the natural the second piece of FTC authority about that. And that's what I'm going to focus on was that it's sort of the most interesting as applied AI at the moment. So the FTC Act prohibits unfair competition, and unfair or deceptive acts or practices. That took me a couple of years for those jerks just to get them my train and make sense. So I'm gonna repeat them a couple times today. As after the FTC does it theories on investigation. If and the reason to believe the law is be recut I had in mind if you bring enforcement action either Athan, its own administrative courts or ended up judicious and two main branches sub SEC working with orienting Hopcroft today, I mentioned was going on unfair methods of competition. It's abbreviated as UFC authority, and that is the FTC, competition authority, authority to regulate competition between companies. It's focused on the conduct of companies within the economy. And that the second sort of trawling the vertices, of course, uniformity is over unbearable, because the other patch of practices, abbreviated is UDOT to 40. And that's super, that's a variety of issues that affect consumers, leathers, issues that in that company that issues that impact consumers sort of Team pitted and branches of the story. So first, let's talk about comment, different authority of AR. And I'm going to try to give some concrete examples here. And all these examples that I provide are examples that the FTC has provided itself either in blog posts or so for energy horsemen Ashton's talking about artificial intelligence. So if you're wondering, yeah, what is an unfair method of competition as it applies to AI, hopefully, some of these symbols can can help. So we're talking about anti competitive AI practices here and the upcoming one, and this week's ball I'll be, I'll read both of them off. There are two main ones, the FTC has hands of barred, and the first would be Laurie and locking in customers based on false promises. So if you as an actor, or send emails, central customers, saying something along the lines of switch to our AI from our competitors, AI, it's 10,000 times more powerful, and that was inaccurate. And that gave him a business ads that could be potentially to convert after the competition. And the second example, that the FBI had to walk us through for competition authority is an AI company where to appropriate the competitively significant information, this list of users. So firstly, it will open a Expedia is a business customer of open AI. And so if open AI were to take advantage of his business relationship, and appropriate the data of Expedia, or if Expedia had other AI related data, that opening I wanted to appropriate and then use it to its advantage, and the competitive marketplace that could potentially implicate some of the competition authority of the FTC. So now, we were talking about competition authority. Now I'm gonna switch over to consumer protection authority. And this is the area that I relate the most to maybe you all find that the same. And there are two branches of consumer protection authority. So the first we're going to talk about is unfairness. Unfair, the FTC Act prohibits unfair acts. So what is unfair AI? The FTC Act prohibits the sale or use of racially biased algorithms is a prominent example the FTC has given and they've recently brought a case related to this. It's called in rewriting, it's worth looking up. I'll give a quick summary today. But essentially, the FTC found that Rite Aid had used facial recognition software to search for security in their stores that was pilot powered by biased AI software. So I encourage everyone to look up the case. But the rule of thumb that the FTC puts forward and just easier to remember than focusing too much on specific cases, AI should do more harm than good. Now, I'm gonna talk about the second branch of Consumer Protection Authority, as applied to AI. And that's deception. The FTC has broken out, it's the deception AI authority into two buckets. These are its phrases. Maybe they're confusing, maybe they're helpful. So there can be fake AI, and there can be aI fakes. Fake AI is when an AI company over promises, whether it's AI based tool can deliver. And actually a good starting point is does this tool even use AI to begin with, and AI fakes? And again, this is the part that I really find most relatable. I'd like to see the Federal Trade Commission focus a lot on this. I think this there's a lot of harm currently happening to consumers with AI fakes. So those are AI powered scams. That's AI to generate phishing emails AI to generate fake websites AI to generate fake consumer reviews. There's a story in the media recently of AI being used to generate deep fakes of the voices of service members. And then the scammer is called service members, parents to try and extort them for for money. And that's an example of a an AI fake that the FTC could have authority over. So I'm coming towards the end. And I'm going to skip to my conclusion. So again, my conclusion is that the FTC has authority to regulate AI. The way they like to put it. And this is an many speeches I've noticed recently, there is no AI exemption from the law on the books. What is the law on the books that they're talking about? It's FTC, UMC and UDF authority, it applies. But I guess I'll end with With this thought, it is not the artificial intelligence commission. It's the Federal Trade Commission. So their authority applies to artificial intelligence as they relate to trade practices. And I think the next big question will be does Congress want to create an agency specifically to regulate AI? And if it did, how would that intersects with the FTC? So thank you all so much for your patience, and it's been great talking to you

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