FTC Investigates ChatGPT Creator: First Major Regulatory Challenge emerges

Artificial intelligence (AI) is gaining significant attention in the Web3 era, and as it becomes more prominent, it is not surprising that the Federal Trade Commission (FTC) has initiated an investigation into OpenAI, the creator of ChatGPT. The Washington Post has reported the development of this investigation.

The FTC has sent a 20-page letter to the San Francisco-based startup, demanding answers regarding the company’s handling of consumer data misuse and instances of “hallucination” by ChatGPT. Hallucination refers to situations where the AI has created false facts or narratives that have resulted in reputational damage.

The FTC’s Request

OpenAI will be the FTC’s first public case study as the agency aims to enforce consumer protection regulations concerning AI and address potential unfair or deceptive trade practices. Sam Altman, the co-founder of OpenAI, testified before Congress in May, advocating for AI legislation.

The FTC’s letter outlines the following requests for OpenAI:

  • Provide a comprehensive list of complaints received by the company, including cases where ChatGPT has made false, misleading, disparaging, or harmful statements about individuals.
  • Submit records related to a security incident disclosed by OpenAI in March, which exposed certain ChatGPT users to payment-related information and customer data from other users’ chat history.
  • Submit any research, testing, or surveys that evaluate customers’ understanding of OpenAI’s product functionality, advertising, and the potential for generating disparaging remarks using AI-based tools.

Zooming Out

The FTC’s scrutiny of OpenAI coincides with their exploration of instances of hallucination. The agency aims to clarify that existing consumer protection laws are applicable to AI, despite the ongoing challenges faced by the Biden Administration and Congress in formulating a regulatory framework.

Senate Majority Leader Chuck Schumer (D-NY) recently expressed his anticipation of new AI legislation being introduced within a few months. Meanwhile, the European Union’s AI Act is progressing through its final negotiation stages.

Vice President Kamala Harris believes in the possibility of advancing AI innovation while simultaneously protecting consumers. This was reiterated during a meeting at the White House where Harris engaged with consumer protection advocates and civil liberty groups to discuss the risks associated with AI’s safety and security.

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