US FTC Launches Investigation into OpenAI Over Consumer Protection Concerns

US FTC Launches Investigation into OpenAI Over Consumer Protection Concerns

The US competition watchdog Federal Trade Commission (FTC) has launched an investigation into OpenAI, the artificial intelligence start-up that makes ChatGPT, over whether the chatbot has harmed consumers through its collection of data and its publication of false information on individuals.

The FTC through a 20-page letter sent to the San Francisco company said it would also probe into OpenAI’s security practices. The FTC asked OpenAI dozens of questions in its letter, including how the start-up trains its AI models and treats personal data, and said the company should provide the agency with documents and details.

The FTC is examining whether OpenAI ‘engaged in unfair or deceptive privacy or data security practices or engaged in unfair or deceptive practices relating to risks of harm to consumers’, the letter said.

The FTC investigation poses the first major US regulatory threat to OpenAI, one of the highest-profile AI companies, and signals that the technology may increasingly come under scrutiny as people, businesses and governments use more AI-powered products. The rapidly evolving technology has raised alarms as chatbots, which can generate answers in response to prompts, have the potential to spread disinformation.

The company founder Sam Altman, openly welcomed the investigation, but expressed disappointment at the case being opened and how he found out via a leak to the Washington Post. In May he had testified in Congress to invite AI legislation and has visited hundreds of lawmakers, aiming to set a policy agenda for the technology.

OpenAI launched ChatGPT in November, enthralling consumers and fuelling one-upmanship at large tech companies to showcase how their AI-imbued products will change the way societies and businesses operate.

The AI race has raised widespread concerns about potential risks and regulatory scrutiny of the technology. Global regulators are aiming to apply existing rules covering everything from copyright and data privacy to two key issues: the data fed into models and the content they produce.

In the United States, Senate Majority leader Chuck Schumer has announced for ‘comprehensive legislation’ to advance and ensure safeguards on AI, and pledged to hold a series of forums later this year aimed at laying down a new foundation for AI policy.

Moreover, OpenAI in March ran into trouble in Italy, where the regulator had ChatGPT taken offline over accusations the company violated the European Union's GDPR, a wide-ranging privacy regime enacted in 2018.

ChatGPT was reinstated later after the U.S. company agreed to install age verification features and let European users block their information from being used to train the AI model.