The Federal Trade Commission is cracking down on companies that use
On Wednesday, the agency unveiled five law enforcement actions against companies that it says use AI in deceptive ways. This includes three companies in the e-commerce space where consumers invested money into online storefronts that generated little if any revenue and sent some into credit card debt. These five cases follow several other recent FTC actions against companies that use AI in exploitative or disingenuous ways, including another online storefront company called Automakers AI, which settled with the FTC in February.
The three e-commerce companies targeted in this sweep often made claims in their marketing efforts about how AI would maximize profits for consumers' online storefronts.
"The cases included in this sweep show that firms have seized on the hype surrounding AI and are using it to lure consumers into bogus schemes," reads the press release.
Concurrently, the hype around AI is being tempered by
The three e-commerce companies in Operation AI Comply allegedly dangled the opportunity for consumers to make thousands or tens of thousands in income in exchange for paying them similar amounts to open online storefronts or receive training. They allegedly withheld refunds when consumers complained or threatened them with legal action for writing negative reviews. The cases against each are still ongoing and will be decided by a federal court.
For example, one company mentioned in the sweep, Ascend Ecom, allegedly defrauded consumers of more than $25 million by charging them to open online stores on e-commerce platforms such as Amazon or Etsy. The company claimed this would generate five figures in monthly income, with the help of Ascend's AI-powered tools to "maximize … business success."
"In truth, virtually none of Ascend's clients earn the advertised income," reads the FTC's complaint, which was filed on September 9. "Most lose their entire investment, and some are saddled with burdensome credit card debt. Many of the online stores that Ascend established and managed for its clients on Amazon and Walmart have been suspended, and ultimately terminated, by Amazon and Walmart for policy violations."
Ecommerce Empire Builders charged consumers thousands of dollars for a training program or a fully installed online storefront "powered by artificial intelligence" that it claimed would rake in $10,000 per month. In reality, consumers found their online stores made little or no money and struggled to obtain full refunds from EEB.
A third went by the name Passive Scaling before customer complaints and lawsuits triggered a rebranding to FBA Machine in 2023. This company also hawked online storefronts on e-commerce platforms such as Amazon and Walmart, where consumers had to invest tens of thousands of dollars for a fully run store with the promise of earning thousands in passive income. In FBA Machine's case, it claimed to use AI to price products and maximize profits.
"In reality, the promised gains never materialize, and consumers are left with depleted bank accounts and hefty credit card bills," reads the complaint.
The e-commerce companies targeted by Operation AI Comply did not immediately respond to a request for comment.
"The FTC's enforcement actions make clear that there is no AI exemption from the laws on the books," FTC Chair Lina Khan said in a press release.
