On January 9, 2024, the Federal Trade Commission issued a blog post emphasizing the importance of artificial intelligence (“AI”) “model-as-a-service” companies upholding the privacy commitments they make to customers. This includes promises made in Terms of Service agreements, promotional materials, and online marketplaces.
“Model-as-a-service” companies provide AI products to customers through end-user interfaces or application programming interfaces (“APIs”). The FTC gives an example of a “model-as-a-service” company as a business that creates large language models (“LLMs”) and sells access to them to online retailers for use as customer service chatbots.
The FTC warns that AI “model-as-a-service” companies have a motive to continuously enhance their products by training AI models on new data sets. It cautions companies that retaining consumer data for AI training without clear notice or affirmative consent can lead to violations of consumer protection laws. The post reminds companies that misrepresentations in privacy commitments and failure to disclose material facts to consumers are subject to FTC enforcement.
The FTC also highlights that AI companies misusing consumer information to undermine fair competition based on false privacy promises to customers may also violate federal antitrust laws.
Although there are currently no specific federal regulations for AI in the private sector, the FTC reminds AI companies that they must adhere to existing federal laws and uphold privacy commitments made to their customers.