FTC Enters Debate over Generative AI, Copyright and Consumer Deception

A contentious issue raised by the FTC is the alignment of generative AI with the Fair Use Doctrine.

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Showcase of Art created with Midjourney (Image: Midjourney)

The United States Federal Trade Commission (FTC) has officially expressed concern over potential copyright infringement and consumer deception issues stemming from the use of generative artificial intelligence (AI). As authorities examine the intersection of AI with copyright laws, the agency has decided to contribute its perspective to the ongoing debate. Despite its primary focus being consumer protection and anti-competitive practices, this marks FTC's bold step into the copyright discussion.

Conflict with Fair Use Doctrine

A contentious issue raised by the FTC is the alignment of with the Fair Use Doctrine. Representing practices that allow limited use of copyrighted material without permission, Fair Use is pivotal in sustaining freedom of expression and innovation. However, the FTC's submissions to the Copyright Office indicate that the proliferation of AI may provoke unfair practices or methods of competition under Section 5 of the FTC Act, even if such uses might otherwise be considered fair use.

Section 5 of the FTC Act addresses unfair methods of competition and the Commission's power to prohibit such practices. Specifically, it states:

  • Unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce are declared unlawful.
  • The Federal Trade Commission (FTC) is empowered and directed to prevent persons, partnerships, or corporations, with certain exceptions, from using unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce​​.

This section forms the basis for the FTC's authority to regulate and address practices that are deemed unfair or deceptive in the marketplace.

The FTC´s contention lies in the fact that generative AI models can replicate artists' unique styles, potentially leading consumers to misattribute the source of creativity. This concern extends to the training of AI on possibly illicitly sourced material. Hence, according to the FTC, operations that might align with Fair Use principles could still infringe upon consumer protection laws.

Implications for AI Companies and Developers

This latest stance from the FTC puts AI companies and developers on notice. High-profile AI enterprises, already facing lawsuits over alleged copyright infringements, must now navigate potential FTC Act violations concerning deceptive practices and anti-competitive behavior. The agency asserts that with copyright law does not safeguard against violations of consumer protection statutes.

The active role the FTC is prepared to take in regulating AI poses new challenges for technology firms. These companies should meticulously evaluate their obligations not only under copyright law but also in terms of consumer protection imperatives. With the pace of AI's technological progress, the context in which businesses operate has become legally intricate and requires a conscientious approach — one that respects both copyright and consumer rights while guarding against deception.