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The FTC’s “Algorithmic Intervention”: A New Era in AI Regulation

Watch out AI businesses! If you’re working in the expansive realm of artificial intelligence, you may want to sit up and pay attention. The Federal Trade Commission (FTC), the U.S. government’s chief watchdog for consumer protection, is unholstering one of its most formidable regulatory weapons against AI enterprises that play fast and loose with user privacy.

As Holland & Knight elucidates in a recent advisory, the FTC isn’t just blowing smoke. Their commitment to ensuring ethical data use in AI training is clear: Go rogue with user data and you’ll feel the burn. And this isn’t just a proverbial slap on the wrist – we’re talking the heavy-duty “algorithmic disgorgement.”

This might sound like a technical jargon-fest, but in layman’s terms, it made its mark back in 2019. Remember the high-profile Cambridge Analytica debacle? The FTC ordered them to wipe out not only the pilfered Facebook data but also any algorithmic entities crafted from it. Fast-forward to Commissioner Rebecca Slaughter’s 2021 piece in Yale Journal of Law & Technology, where she dubs it an “innovative remedy.” The ethos is straightforward: pocket data illicitly, and any algorithmic treasures you’ve built from it should be tossed to the wind.

Anthony DiResta from Holland & Knight stresses the intensity of this measure, hinting it’s reserved for the most audacious privacy offenders. And for firms weaving their business tapestries around AI, this spells potential calamity. As Cara Hughes of UnitedLex frames it, these algorithms are foundational. Nixing them? It’s like pulling the rug out from the entire product lineage.

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Reflecting on more recent applications of this corrective measure, the FTC got the photo storage app, Everalbum, to ditch models built from photos they sneakily held onto. The FTC’s rationale? A corrective response to past leniencies with tech giants like Google and YouTube. Spoiler alert: Everalbum’s app is now defunct.

Then there was WW International, which you might recognize from its former life as Weight Watchers. Their 2019 acquisition, Kurbo, faced the algorithmic axe after exploiting children’s data. The fallout? WW International bade adieu to Kurbo in 2022.

The driving spirit of these actions, as former FTC director DiResta emphasizes, reflects the FTC’s aspiration to steer the AI ship rightly. Drawing a parallel to tech behemoths’ unchecked rise, he likens the current AI landscape to a potential Frankenstein waiting to be unleashed. It’s a cautionary tale: unchecked technologies can morph into monsters.

But what’s the thread weaving these cases? It’s largely about trust. Many companies either sold a narrative they didn’t uphold or dropped the ball on data deletion commitments. Transparency, as Hughes advocates, is a cornerstone, but it’s merely the beginning. It’s not just about consent but a holistic approach to AI: understanding its intricacies, ensuring data fidelity, and discerning partnerships.

In the end, if the FTC’s assertive stance teaches us anything, it’s that in the age of burgeoning AI tech, genuine commitment to privacy isn’t just good ethics—it’s essential for survival.

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