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FTC Investigates OpenAI, Maker of ChatGPT, for Potential Consumer Harm

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The FTC is Investigating OpenAI for Possible Violations of Consumer Protection Laws


The Federal Trade Commission (FTC) has launched an investigation into OpenAI, the company behind ChatGPT, to determine if it has violated consumer protection laws. The FTC's 20-page civil investigative demand (CID), which is similar to a subpoena, outlines the key areas of focus for the probe. The FTC is looking into whether OpenAI has engaged in unfair or deceptive privacy or data security practices, as well as unfair or deceptive practices related to potential harm to consumers.

Legal Authority and Proactive Oversight

The investigation highlights the increasing importance of artificial intelligence (AI) in Washington, as lawmakers grapple with the need for new regulations to protect intellectual property and consumer data in the era of generative AI. The FTC and other regulatory agencies have stressed that they already possess the legal authority to address harms caused by AI. This proactive approach aligns with FTC Chair Lina Khan's goal of focusing on next-generation technologies and being forward-looking in terms of oversight.

Key Areas of Inquiry

The CID issued to OpenAI requests detailed information, including:

1. Third-party access to OpenAI's Large Language Models (LLMs) and a list of the top ten customers or licensors.
2. The company's practices for retaining and utilizing consumer information.
3. The methods used by OpenAI to obtain information for training its LLMs.
4. OpenAI's approach to assessing risk in LLMs and how it handles misleading or disparaging statements about individuals.

Previous Incident Involving User Data

The CID also specifically references an incident disclosed by OpenAI in March 2020. This incident involved a bug that allowed certain users to view titles from another active user's chat history, potentially exposing payment-related information of 1.2% of ChatGPT Plus subscribers during a specific nine-hour timeframe.

Responses and Perspectives

OpenAI CEO Sam Altman has been generally well-received in Washington, with lawmakers commending his willingness to engage in discussions about AI and advocate for regulations. However, some experts caution that policymakers should remain aware that OpenAI has its own incentives when it comes to advocating for specific forms of regulation. They urge lawmakers to consider a broad range of voices in the regulatory process.

OpenAI has not yet provided a comment regarding the FTC investigation.

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Conclusion: Potential Implications for New Businesses in the AI Industry

The ongoing FTC investigation into OpenAI for possible violations of consumer protection laws underscores the increasing scrutiny and regulatory challenges faced by businesses in the AI industry. For new businesses entering this space, it is essential to understand the potential impact of such investigations and how they could shape the regulatory landscape going forward.

Regulatory Environment and Compliance

The investigation reflects the growing importance of AI technologies in Washington, as regulators seek to ensure adequate safeguards for consumer privacy and data security. New businesses must recognize the need for proactive compliance with consumer protection laws to avoid regulatory scrutiny and potential penalties. This includes implementing robust privacy practices, data security measures, and risk assessments of AI systems to minimize the risk of unfair or deceptive practices.

Transparency and Accountability

OpenAI's previous incident involving user data serves as a reminder that even established companies can face challenges related to privacy and data breaches. As a new business in the AI industry, maintaining transparency and fostering accountability are crucial. Clearly communicating data handling policies and regularly assessing and improving security measures can help build trust with consumers and regulators alike.

Engaging in Regulatory Discussions

OpenAI's CEO, Sam Altman, has been praised for his willingness to engage policymakers in discussions about AI regulations. This highlights the importance of active participation by new businesses in shaping the regulatory landscape. By actively engaging with regulators, contributing to policy discussions, and advocating for balanced and fair regulations, new businesses can have a voice in shaping the rules that govern their industry.

In conclusion, the FTC investigation into OpenAI serves as a crucial reminder for new businesses in the AI industry to prioritize compliance, transparency, and engagement with regulators. By taking early proactive steps and aligning their practices with consumer protection laws, new businesses can position themselves for success in this rapidly evolving and highly regulated landscape.

Article First Published at: https://www.cnbc.com/2023/07/13/chatgpt-owner-openai-is-being-investigated-by-ftc.html

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