FTC says AI outputs may constitute unfair competition
Agency submits wide-ranging comment on AI to the US Copyright Office | Concerns over consumer protection, transparency, deceptive practices and unfair competition | AI developers’ user copyright protection schemes may face sanctions.
The US Federal Trade Commission (FTC) has said an AI that sells output based on “protected expression” without the creator’s consent, may constitute unfair competition.
In a comment submitted to the US Copyright Office, the commission said a copyright violation that deceives consumers, exploits a creator’s reputation or diminishes the value of her existing or future works could face FTC sanctions.
As an independent federal agency, the FTC is tasked with promoting fair competition and safeguarding consumer interests in the US.
The agency has a history of adapting its mission to emerging technologies and “AI is the latest of such challenges”, said the FTC in its comment, which was provided as a response to a request for input in August this year.
The commission has been examining how AI has the potential to ‘turbocharge’ schemes and deceptive practices, including through privacy violations, and automated discrimination and bias.
Fair use, pirated content, consumer deception
The FTC’s comment expressed an interest in questions surrounding copyright, including fair use, and AI-generated content.
These include who is responsible when generative AI is used, including how to divide the responsibility among users, AI developers, and the developers of training data.
It said AI tools raised concerns over consumer protection and competition policy, especially when training data is sourced from platforms hosting pirated content.
The agency also highlighted how evolving caselaw involving fair use might impact the market for such tools.
“The use of AI technology raises significant competition and consumer protection issues beyond questions about the scope of rights and the extent of liability under the copyright laws,” said the FTC.
“As the courts apply the doctrine of fair use to the training and use of AI, the evolution of the doctrine could influence the competitive dynamics of the markets for AI tools and for products with which the outputs of those tools may compete.”
Additionally, not only are creators harmed, but when the authorship doesn’t match consumer expectations, it can lead to consumer deception, said the commission.
For instance “when a consumer thinks a work has been created by a particular musician or other artist, but it has been generated by someone else using an AI tool,” the agency said.
The FTC also stressed the importance of transparency and disclosure regarding the data used to train AI and the source of AI-generated works.
It was considered critical by the FTC to require AI systems to disclose the origins of their datasets and how the data will be used, with the appropriate compensation and acknowledgement for creators.
AI user copyright indemnification: Competition concerns
The FTC also waded into schemes by companies offering AI tools to protect users against copyright claims. On October 6, OpenAI followed Adobe and IBM, among others, in offering to settle copyright infringement action faced by users of its AI products.
“Many large technology firms possess vast financial resources that enable them to indemnify the users of their generative AI tools or obtain exclusive licenses to copyrighted (or otherwise proprietary) training data, potentially further entrenching the market power of these dominant firms,” the FTC said.
“These types of issues not only touch on copyright law and policy but also implicate consumer protection and competition concerns across a wide range of industries.”
Roundtable insights
The FTC also shared insights into its Creative Economy and Generative AI roundtable held on October 4, 2023.
The roundtable featured discussions with musicians, authors, actors, artists, and software developers who shared their experiences and concerns about the nature of generative AI.
Speakers included John August, a screenwriter and member of the negotiating committee for Writers Guild of America West, Neil Clarke, the editor of Clarkesworld Magazine, Karla Ortiz, Douglas Preston, and Steven Zapata.
The group voiced concerns about AI models using their work without consent, often sourced from platforms hosting pirated content.
Additionally, the ineffectiveness of "opt-out" frameworks, prompting a call for "opt-in" mechanisms.
There was a consensus for transparency and disclosure concerning training data and the origin of AI-generated content.
Moreover, there was the acknowledgement that AI, when used ethically and respecting IP rights, could enhance opportunities for artists.
Finally, the roundtable emphasised the acknowledgement of an unequal distribution of power between individuals whose data is used and those who use this data, particularly creative professionals in a vulnerable position.
The FTC submitted its comment to highlight AI-related and copyright issues and share insights found from its roundtable discussion with those it is directly affecting.
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