Federal Trade Commission Act, section 5 — deceptive claims about artificial intelligence
Any person, partnership or corporation in or affecting commerce. No size, revenue, sector or geography threshold — a sole trader advertising an AI-powered service is caught on the same terms as a platform. Banks, common carriers and some non-profits sit outside the Commission's jurisdiction.
- 01Hold competent and reliable evidence for every objective claim about what your AI does — and hold it at the moment the claim is first made, not afterwards.
- 02Hold that evidence again each time the claim is repeated.
- 03Do not describe a product as artificial intelligence if the underlying technology is not what a reasonable customer would understand as artificial intelligence.
- 04Do not claim your AI performs better than a non-AI alternative without evidence comparing the two.
- 05Do not use AI to generate reviews, testimonials or endorsements.
- 01Nothing distinct. Section 5 reaches whoever makes the claim. The Commission's one attempt to hold a tool vendor liable for what customers did with its output was reopened and set aside in December 2025, on the reasoning that the complaint did not support the allegation and the order unduly burdened a nascent industry. Vendor liability for downstream misuse is not current policy.
- 01No registration, filing, licence, impact assessment, audit or written AI policy.
- 02No obligation to disclose that you use artificial intelligence internally.
- 03No obligation to label AI-generated marketing copy as AI-generated.
- 04No pre-clearance of advertising.
- 05Substantiation need not be a formal scientific study unless the claim is one professionals would test scientifically.
No civil penalty for a first deception. Remedies are injunctive relief and consumer redress. Civil penalties, currently up to $53,088 per violation, attach only to breaching an existing order or rule. Recent outcomes: a company claiming its AI content detector was 98% accurate when real-world accuracy was around 53% took a consent order and four years of compliance reporting; an AI legal-services claim settled at $193,000; deceptive AI-powered advertising claims cost three media companies close to $1 million in May 2026.
This is the row that carries real money for a small business, and the exposure is not about disclosure at all — it is about performance claims. Barnes Signal Advisor makes claims about what its work does. Whether every one of them is substantiated to this standard, before it was published, has not been assessed on the record.
“each time such representation is made thereafter, they possess and rely upon competent and reliable evidence”
FTC Decision and Order, Docket C-4822