[Federal Register Volume 89, Number 192 (Thursday, October 3, 2024)]
[Notices]
[Pages 80565-80572]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22767]


-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 232 3052]


Rytr LLC; Analysis of Proposed Consent Order To Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

-----------------------------------------------------------------------

SUMMARY: The consent agreement in this matter settles alleged 
violations of Federal law prohibiting unfair or deceptive acts or 
practices. The attached Analysis of Proposed Consent Order to Aid 
Public Comment describes both the allegations in the complaint and the 
terms of the consent order--embodied in the consent agreement--that 
would settle these allegations.

DATES: Comments must be received on or before November 4, 2024.

ADDRESSES: Interested parties may file comments online or on paper by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write ``Rytr LLC; File 
No. 232 3052'' on your comment and file your comment online at https://www.regulations.gov by following the instructions on the web-based 
form. If you prefer to file your comment on paper, please mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex R), 
Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Division of Advertising Practices, 
Bureau of Consumer Protection, Federal Trade Commission, 600 
Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule Sec.  2.34, 16 CFR 
2.34, notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of 30 days. The following 
Analysis to Aid Public Comment describes the terms of the consent 
agreement and the allegations in the complaint. An electronic copy of 
the full text of the consent agreement package can be obtained at 
https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before November 4, 
2024. Write ``Rytr LLC; File No. 232 3052'' on your comment. Your 
comment--including your name and your State--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the https://www.regulations.gov website.
    Because of heightened security screening, postal mail addressed to 
the Commission will be subject to delay. We strongly encourage you to 
submit your comments online through the https://www.regulations.gov 
website. If you prefer to file your comment on paper, write ``Rytr LLC; 
File No. 232 3052'' on your comment and on the envelope, and mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex R), 
Washington, DC 20580.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include sensitive 
personal information, such as your or anyone else's Social Security 
number; date of birth; driver's license number or other State 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure your comment does not include 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule Sec.  
4.10(a)(2), 16 CFR 4.10(a)(2)--including competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule Sec.  4.9(c). In 
particular, the written request for confidential treatment that

[[Page 80566]]

accompanies the comment must include the factual and legal basis for 
the request and must identify the specific portions of the comment to 
be withheld from the public record. See FTC Rule Sec.  4.9(c). Your 
comment will be kept confidential only if the General Counsel grants 
your request in accordance with the law and the public interest. Once 
your comment has been posted on the https://www.regulations.gov 
website--as legally required by FTC Rule Sec.  4.9(b)--we cannot redact 
or remove your comment from that website, unless you submit a 
confidentiality request that meets the requirements for such treatment 
under FTC Rule Sec.  4.9(c), and the General Counsel grants that 
request.
    Visit the FTC website at https://www.ftc.gov to read this document 
and the news release describing the proposed settlement. The FTC Act 
and other laws the Commission administers permit the collection of 
public comments to consider and use in this proceeding, as appropriate. 
The Commission will consider all timely and responsive public comments 
it receives on or before November 4, 2024. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an agreement containing a consent order from Rytr 
LLC (``Rytr''). The proposed consent order (``proposed order'') has 
been placed on the public record for 30 days for receipt of comments 
from interested persons. Comments received during this period will 
become part of the public record. After 30 days, the Commission will 
again review the agreement and the comments received and will decide 
whether it should withdraw from the agreement and take appropriate 
action or make final the agreement's proposed order.
    This matter involves Rytr's marketing and offering for sale an 
artificial intelligence ``writing assistant'' service intended to 
generate unlimited content for consumer and customer reviews and 
testimonials. Subscribers to the Rytr service, which uses generative 
artificial intelligence, can quickly and easily generate unlimited 
written content for a variety of ``Use Cases.'' One of these Use Cases 
was the ``Testimonial & Review'' Use Case, which Rytr began offering in 
April 2021.
    According to the Commission's proposed complaint, the review 
generation service generated reviews that would almost certainly be 
false for the users who copied them and published them online. In many 
instances, the resulting reviews featured details that would deceive 
potential consumers deciding to purchase the service or product 
described. The proposed complaint asserts that at least some of Rytr's 
subscribers utilized the service to produce hundreds and, in some 
cases, thousands of reviews.
    The proposed complaint alleges that Rytr provided the means and 
instrumentalities to its users and subscribers to generate written 
content for consumer reviews that was false and deceptive. The 
complaint also alleges that Rytr engaged in an unfair business practice 
by offering a service that was intended to quickly generate unlimited 
content for consumer reviews and created false and deceptive written 
content for consumer reviews.
    The proposed order contains provisions designed to prevent Rytr 
from engaging in these and similar acts and practices in the future. 
Provision I bans Rytr from advertising, promoting, marketing, offering 
for sale, or selling any service dedicated to or advertised, promoted, 
or offered as generating consumer or customer reviews or testimonials.
    Provisions II through VI of the proposed order contain reporting 
and compliance provisions. Provision II mandates that Rytr acknowledge 
receipt of the order, distribute the order to principals, officers, and 
certain employees and agents, and obtain signed acknowledgments from 
them. Provision III requires Rytr to submit compliance reports to the 
Commission one year after the order's issuance and submit notifications 
when certain events occur. Under Provision IV, Rytr must create certain 
records for 20 years and retain them for five years. Provision V 
provides for the FTC's continued compliance monitoring of Rytr's 
activity during the order's effective dates. Finally, Provision VI 
provides the effective dates of the order, including that, with 
exceptions, the order will terminate in 20 years.
    The purpose of this analysis is to facilitate public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the complaint or proposed order, or to modify in any 
way the proposed order's terms.

    By direction of the Commission, Commissioners Holyoak and 
Ferguson dissenting.
Joel Christie,
Acting Secretary.

Dissenting Statement of Commissioner Melissa Holyoak Joined by 
Commissioner Andrew N. Ferguson

    As I have suggested recently in other contexts, the Commission 
should steer clear of using settlements to advance claims or obtain 
orders that a court is highly unlikely to credit or grant in 
litigation.\1\ Outside that crucible, the Commission may more readily 
advance questionable or misguided theories or cases.\2\ Nevertheless, 
private parties track such settlements and, fearing future enforcement, 
may alter how they act due to a complaint's statement of the alleged 
facts, its articulation of the law, or how a settlement order 
constrains a defendant's conduct.\3\ In all industries, but especially 
evolving ones like artificial intelligence (AI), misguided enforcement 
can harm consumers by stifling innovation and competition. I fear that 
will happen after today's case, which is another effort by the Majority 
to misapply the Commission's unfairness authority under section 5 
beyond what the text authorizes. Relatedly, I believe the scope of 
today's settlement is unwarranted based on the facts of this case. I 
respectfully dissent.
---------------------------------------------------------------------------

    \1\ See, e.g., Dissenting and Concurring Statement of 
Commissioner Melissa Holyoak, In re Coulter Motor Company, LLC, FTC 
No. 2223033, at 3 n.17 (Aug. 15, 2024) (``It is no coincidence that 
the Commission has asserted its novel `unfair discrimination' 
authority only outside the scrutiny of courts and in the context of 
consent orders.''), https://www.ftc.gov/system/files/ftc_gov/pdf/commissioner-holyoak-statement-re-coulter-8-15-24.pdf; see also 
Statement of Commissioner Melissa Holyoak, In re Asbury Automotive 
Group--McDavid Group; Matter No. 2223135, at 1 n.1 (Aug. 16, 2024), 
https://www.ftc.gov/system/files/ftc_gov/pdf/commissioner-holyoak-statement-re-asbury8-16-24.pdf.
    \2\ See Dissenting Statement of Commissioner William E. Kovacic, 
In re Negotiated Data Solutions, LLC, File No. 051-0094, at 3 (Jan. 
23, 2008) (``The prospect of a settlement can lead one to relax the 
analytical standards that ordinarily would discipline the decision 
to prosecute if the litigation of asserted claims was certain or 
likely.''), https://www.ftc.gov/sites/default/files/documents/cases/2008/01/080122kovacic.pdf.
    \3\ Cf. Concurring and Dissenting Statement of Commissioner 
Melissa Holyoak, Social Media and Video Streaming Services Staff 
Report, Matter No. P205402, at 4 (Sept. 19, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/commissioner-holyoak-statement-social-media-6b.pdf.
---------------------------------------------------------------------------

    Some background first. Rytr provides AI products that generate 
draft written content for 43 ``use cases,'' which are tailored written 
outputs intended for specific purposes, like ``Email,'' ``Product 
Description,'' ``Blogs,'' ``Articles,'' or ``Story Plot,'' among

[[Page 80567]]

others.\4\ Users can review and manually copy, paste, and modify the 
draft content Rytr's products generate.\5\ Rytr gives all users access 
to outputs from all 43 types of use cases, but certain paying 
subscribers can generate unlimited output from all of them.\6\ As 
alleged in the complaint, the ``Testimonial & Review'' feature, which 
Rytr has stopped offering,\7\ generated draft consumer reviews based on 
a user's inputs. Subscribers would provide descriptive keywords, 
phrases, or titles, as well as choose the output's ``desired tone'' and 
level of ``creativity,'' and which of dozens of languages to draft 
in.\8\ Subscribers could opt to receive up to three ``variant'' drafts 
at a time for comparison.\9\ The complaint assumes users mechanically 
posted consumer reviews from Rytr's drafts without reviewing or 
modifying them for accuracy. In other words, the complaint effectively 
treats draft outputs as final reviews--reviews that users posted 
without scrutiny.\10\ The complaint suggests Rytr did not monitor, or 
provide feedback on, the content of automated drafts. The complaint 
quotes several draft reviews and describes others. Finally, the 
complaint alleges that 24 subscribers each generated over 10,000 draft 
reviews; 114 subscribers each generated over 1,000 draft reviews; and 
630 subscribers each generated over 100 draft reviews.\11\
---------------------------------------------------------------------------

    \4\ Compl. ]] 2, 4.
    \5\ See id. ] 4. The complaint does not allege that Rytr tracks 
or knows whether or how user-directed draft content is ultimately 
used.
    \6\ See id. ]] 2, 5.
    \7\ See Use Cases, Rytr, available at https://rytr.me/use-cases/ 
(last visited Sept. 24, 2024).
    \8\ Compl. ] 6; see also Languages, Rytr (``Rytr supports 30+ 
languages''), available at https://help.rytr.me/knowledge-base/languages (last visited Sept. 24, 2024).
    \9\ See id. ] 6.
    \10\ The complaint's treatment of Rytr's product seems 
implausible given Rytr's product design. If Rytr's intent was that 
drafts be posted blindly, why would Rytr have given users up to 
three ``variant'' drafts to consider and compare? See id.
    \11\ See id. ] 13. The complaint does not allege whether there 
were users that paid for Rytr's ``unlimited'' draft outputs across 
all Rytr's use cases but who generated comparatively fewer draft 
reviews than the volumes the complaint specifies. For example, it is 
unclear whether certain users with access to unlimited outputs 
generated high volumes of draft emails or blog posts, and also 
drafted some reviews.
---------------------------------------------------------------------------

    Critically, the complaint does not allege that users actually 
posted any draft reviews.\12\ Since the Commission has no evidence that 
a single draft review was posted, the complaint centers on alleging 
speculative harms that may have come from subscribers with access to 
unlimited output from across Rytr's use cases, which included draft 
reviews.\13\ And the complaint asserts the review tool in particular 
had ``no or de minimis reasonable, legitimate use,'' and concludes that 
a function enabling unlimited reviews with limited user input, which 
could generate ``detailed and genuine-sounding reviews,'' was likely to 
``only . . . facilitate subscribers posting fake reviews . . . to 
deceive consumers.'' \14\
---------------------------------------------------------------------------

    \12\ In general, the complaint also does not address exactly how 
much time passed as users generated drafts. Id. For example, for the 
630 subscribers generating over 100 draft reviews, it is unclear 
whether those reviews were spaced out over months or years.
    \13\ Id. ]] 2, 5.
    \14\ Id. ] 14.
---------------------------------------------------------------------------

    Under the FTC Act, an act or practice is unfair if it ``causes or 
is likely to cause substantial injury to consumers which is not 
reasonably avoidable by consumers themselves and not outweighed by 
countervailing benefits to consumers or to competition.'' \15\ In 
relevant part, the complaint alleges that ``[Rytr] offered a service 
intended to quickly generate unlimited content for consumer reviews''; 
that it ``created false and deceptive written content for consumer 
reviews''; and that any injury from Rytr's practices was ``not 
outweighed by countervailing benefits to consumers or competition.'' 
\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 45(n).
    \16\ Compl. ] 17.
---------------------------------------------------------------------------

    As a threshold matter, I am skeptical there is a likelihood of 
substantial injury in this case, based on the facts pled, from Rytr's 
offering unlimited drafts as part of a suite of over forty generative 
AI offerings. For one thing, there is no concrete allegation that any 
of the draft content generated in response to users' prompts was itself 
false or inaccurate.\17\ And even if there were a question about the 
drafts generated by Rytr, the complaint makes no allegation that any 
drafts were ever posted online. To satisfy the substantial injury prong 
of unfairness therefore, the complaint assumes, but does not allege 
facts showing, that all users mechanically posted drafts without 
modifying them to refine potential inaccuracies regarding the 
underlying product and the user's experience with the product. If there 
were in fact a likelihood of substantial injury, presumably the 
complaint could allege at least one example where particular content 
Rytr generated was untruthful and was actually posted to reach 
consumers. Yet it does not. Unfairness requires proof--not 
speculation--of harm.\18\
---------------------------------------------------------------------------

    \17\ Instead, the complaint alleges that drafts were 
``detailed'' and contain ``specific, often material details that 
have no relation to a user's input,'' making it almost certain the 
drafts would ``be false for the users who copy the generated content 
and publish it online.'' Id. ] 8. The complaint also provides 
several examples of users that generated high volumes of drafts, 
including (apparently) a business, that seem likely to have been 
fake if used. Id. ] 13. But again, the complaint alleges no facts 
showing any such draft--let alone an unmodified draft--ever reached 
consumers.
    \18\ Cf. In re International Harvester Co., 104 F.T.C. 949, 
1070, 1073 (1984) (unfairness statement) (``First of all, the injury 
must be substantial. The Commission is not concerned with . . . 
merely speculative harms.'').
---------------------------------------------------------------------------

    Most significantly, though, by banning Rytr's user review service 
the complaint fails to weigh the countervailing benefits Rytr's service 
offers to consumers or competition. To start with the obvious, and as 
the complaint itself describes, Rytr's tool generated ``reviews quickly 
and with little user effort.'' \19\ It is generally a feature, not a 
bug, when a new tool helps users save time and achieve their goals with 
less work. Generative AI is no exception. In fact, much of the promise 
of AI stems from its remarkable ability to provide such benefits to 
consumers using AI tools. And as today's complaint accurately 
acknowledges, consumers rely on reviews to make decisions in the 
marketplace.\20\ If Rytr's tool helped users draft reviews about their 
experiences that they would not have posted without the benefit of a 
drafting aid, consumers seeing their reviews benefitted, too. There 
would be similar benefit to competition.\21\
---------------------------------------------------------------------------

    \19\ Compl. ] 7.
    \20\ Id. ] 14 (explaining ``[c]onsumers rely on reviews for fair 
and accurate information about products and services'').
    \21\ It is undoubtedly true that ``[h]onest competitors who do 
not post fake reviews can lose sales to businesses that do . . . .'' 
Id. But honest competitors, whose customers may have used this tool 
to post reviews they might not have otherwise, would also benefit 
from the additional reviews Rytr may have enabled.
---------------------------------------------------------------------------

    The complaint fails to account for other potential benefits that 
are less obvious. When it comes to AI, it is arguably a feature of the 
service that draft reviews may not fit the user's experience in their 
draft form. As with any draft document, what's not included in a final 
version can still create value if the initial draft prompts a new line 
of thought. For example, perhaps someone reviewing dog shampoo might 
not have thought to mention a shampoo's effect on shedding absent the 
prompt of an AI-generated initial draft.\22\ But on reading that draft, 
perhaps the consumer recalls their pet's shedding has actually 
increased, and they modify their review accordingly--helping to flesh 
out their review and better inform interested readers of downsides of 
the product. Part of generative AI's promise is its ability to suggest 
new lines of thought that may

[[Page 80568]]

never have occurred to a user in the first place. But recognizing such 
benefits here requires treating Rytr's product accurately--as a 
drafting aid. The complaint also fails to grapple with how Rytr offered 
unlimited outputs across a suite of over 40 products. Given generative 
AI's manifold applications, there may be significant benefit to 
consumers and competition when a company bundles its offerings and 
their features so that users do not bump up against word restrictions 
or character counts.\23\ The complaint today does not account for or 
attempt to weigh such benefits. Instead, it baldly alleges there are 
``no legitimate benefits'' from Rytr's service.\24\ That is mistaken 
based on the facts pled, and a misapplication of our unfairness 
authority.
---------------------------------------------------------------------------

    \22\ Id. ] 10.
    \23\ Even if a subscriber only chose to use the drafting tool 
for reviews, there is no allegation that subscribers could buy 
access only to unlimited drafting for reviews--undercutting the 
complaint's suggestion that Rytr ``intended'' this particular 
offering, on its own, ``to quickly generate unlimited content for 
consumer reviews.'' See id. ] 17.
    \24\ Id. ] 14.
---------------------------------------------------------------------------

    Such observations about countervailing benefits lead to my concern 
with the scope of today's order. Even if the Commission adequately pled 
a law violation here, the Commission's order goes too far in its ban on 
Rytr's providing any review or testimonial service. The complaint 
alleges that Rytr's service was potentially misused by users to create 
misleading reviews--not that the neutral service itself is a source of 
harm. Banning products that have useful features but have the potential 
to be misused is not consistent with the Commission's unfairness 
authority. Nor is it consistent with a legal environment that promotes 
innovation. AI is a developing industry. It has vast potential. We 
should take care not to squelch it by suggesting that merely providing 
draft content that could be used unlawfully is wrong.
    Finally, I also share Commissioner Ferguson's views regarding the 
complaint's ``means and instrumentalities'' claim.\25\ I write 
separately to emphasize my concerns for imposing primary liability 
under a means and instrumentalities claim, where there is no allegation 
that Rytr itself made misrepresentations. The ``critical element'' for 
primary liability ``is the existence of a representation, either by 
statement or omission, made by the defendant . . . .'' \26\ The 
complaint does not allege facts showing that the draft outputs were 
misrepresentations, much less that such draft outputs were Rytr's 
misrepresentations.\27\ Indeed, as the complaint alleges, a review can 
also be deceptive if the user represents they experienced the product 
when they never did.\28\ But such ``false'' reviews would also not be 
misrepresentations made by Rytr.
---------------------------------------------------------------------------

    \25\ Dissenting Statement of Commissioner Andrew N. Ferguson, 
Joined by Commissioner Melissa Holyoak, In the Matter of Rytr LLC, 
Matter No. 2323052 (Sept. 25, 2024).
    \26\ Cf. Anixter v. Home-Stake Production Co., 77 F.3d 1215, 
1225 (10th Cir. 1996); see also In re Shell Oil Co., 128 F.T.C. 749, 
764 (1999) (majority statement) (``It is well settled law that the 
originator is liable if it passes on a false or misleading 
representation with knowledge or reason to expect that consumers may 
possibly be deceived as a result.'') (citing Regina Corp. v. FTC, 
322 F.2d 765 768 (3d Cir. 1963) (affirming liability under means and 
instrumentalities theory where defendant distributed its own 
misrepresentative price lists that were used, in turn, to deceive 
consumers)); id. at 766 (Commissioner Swindle, dissenting) (``Means 
and instrumentalities is a form of primary liability, and a 
respondent is primarily liable only for its own misrepresentations 
to consumers.'').
    \27\ Users, not Rytr, chose any given review's tone (e.g., 
``critical'' or ``cautionary'' or ``convincing,'' etc.). Compl. ] 6. 
Users, not Rytr, decided whether or not the draft review of a 
particular product would be favorable or not. Id. And users, not 
Rytr, decided whether to revise, or ultimately post, any given 
draft. See id.
    \28\ See id. ] 8.
---------------------------------------------------------------------------

    In addition, the means and instrumentality claim cannot be 
sustained on the theory that Rytr's AI service was somehow inherently 
unfair or deceptive.\29\ Treating Rytr's neutral drafting tool as 
inherently unfair or deceptive will have deleterious consequences for 
AI products generally. Today's complaint suggests to all cutting-edge 
technology developers that an otherwise neutral product used 
inappropriately can lead to liability--even where, like here, the 
developer neither deceived nor caused injury to a consumer.
---------------------------------------------------------------------------

    \29\ Peerless Prods., Inc. v. FTC, 284 F.2d 825, 826 (7th Cir. 
1960) (affirming Commission's findings that petitioners' punchboard 
products were an unlawful ``means of and instrumentalities for 
engaging in unfair acts'' where the punchboards were ``designed and 
used primarily for the distribution of merchandise by lottery'').
---------------------------------------------------------------------------

    We must protect consumers through robust enforcement. Indeed, the 
Commission is at its best when it does so. But we must also think 
carefully about the potential harms to consumers and innovation that 
attend misguided enforcement.\30\ Today's misguided complaint and its 
erroneous application of section 5 will likely undermine innovation in 
the AI space. I therefore respectfully dissent.
---------------------------------------------------------------------------

    \30\ Cf. Concurring and Dissenting Statement of Commissioner 
Melissa Holyoak, Social Media and Video Streaming Services Staff 
Report, supra note 3, at 18-19.
---------------------------------------------------------------------------

Dissenting Statement of Commissioner Andrew N. Ferguson Joined by 
Commissioner Melissa Holyoak

    The Commission today issues an administrative complaint and accepts 
a proposed consent agreement with Rytr LLC (``Rytr'').\1\ Rytr has 
created and markets a package of over 40 generative artificial 
intelligence (``AI'') tools with a variety of uses, from writing essays 
to creating poetry and music lyrics. One of these tools allowed users 
to generate consumer reviews based on prompts provided by the user. For 
having offered this tool, the Commission accuses Rytr of violating 
section 5 of the Federal Trade Commission Act \2\ by furnishing its 
users with the ``means and instrumentalities'' to deceive consumers.\3\ 
The Commission reasons that a business could use Rytr's tool to create 
false or deceptive consumer reviews that the business could then pass 
off as authentic reviews in violation of section 5. Rytr has agreed to 
settle the case by promising not to offer similar functionality in the 
future.
---------------------------------------------------------------------------

    \1\ In re Rytr LLC, Complaint (``Complaint'') & Decision and 
Order (``Order'').
    \2\ 15 U.S.C. 45(a).
    \3\ Complaint ] 15-16.
---------------------------------------------------------------------------

    I dissent \4\ from the filing of the complaint and consent 
agreement because I do not have reason to believe that Rytr violated 
section 5, and because I do not believe filing is in the public 
interest. The Commission's theory is that section 5 prohibits products 
and services that could be used to facilitate deception or unfairness 
because such products and services are the means and instrumentalities 
of deception and unfairness. Treating as categorically illegal a 
generative AI tool merely because of the possibility that someone might 
use it for fraud is inconsistent with our precedents and common sense. 
And it threatens to turn honest innovators into lawbreakers and risks 
strangling a potentially revolutionary technology in its cradle.
---------------------------------------------------------------------------

    \4\ In this statement, I discuss the Commission's charge of 
deceptive conduct against Rytr. I also join Commissioner Holyoak's 
dissent ably disposing of the Complaint's charge of unfair conduct. 
Dissenting Statement of Commissioner Melissa Holyoak, In re Rytr, 
LLC (Sept. 25, 2024).
---------------------------------------------------------------------------

I

    Rytr is a generative AI toolkit designed to help users write and 
edit text. Rytr markets its offering as including more than 40 
different tools, which it calls ``use cases,'' that generate draft 
emails, text messages, letters, advertisements, product descriptions, 
blogs, articles, poems, song lyrics,

[[Page 80569]]

business pitches, and job descriptions.\5\ To generate content, the 
user selects a use case and fills out a form asking for the parameters 
of the text to be generated, such as the language, tone, creativity 
level, and the basic idea governing the document (depending on the use 
case, the business idea, the idea for a song, a description of the job 
role, and so forth).\6\ Rytr's generative AI system processes the 
information and produces a document in the number of variants requested 
by the user.
---------------------------------------------------------------------------

    \5\ Complaint ] 4; Use Cases, Rytr (last visited Sept. 11, 
2024), https://rytr.me/use-cases/.
    \6\ The complaint contains a screenshot of the form for the 
Testimonial & Review use case. Complaint ] 6. The Rytr website also 
shows what the forms for the various use cases look like. Use Cases, 
Rytr (last visited Sept. 11, 2024), https://rytr.me/use-cases/ 
(click on a use case to see the form for that use case).
---------------------------------------------------------------------------

    Rytr offers both free and paid versions of its writing tool. The 
free version substantially limits the monthly character count.\7\ For 
$9 per month (or $90 per year), a user can generate up to 100,000 
characters.\8\ For $29 per month (or $290 per year), the user can 
generate unlimited content.\9\ A user does not purchase subscriptions 
for particular use cases. Rather, a single subscription gives the user 
access to all of Rytr's use cases.\10\
---------------------------------------------------------------------------

    \7\ Complaint ] 4.
    \8\ Ibid.
    \9\ Ibid.
    \10\ Id. ] 5.
---------------------------------------------------------------------------

    Until recently, one of Rytr's use cases was ``Testimonial & 
Review.'' This use case permitted a user to generate product reviews by 
entering a description, some keywords, or a product title.\11\ Nothing 
prevented a user with a full subscription from using the tool to 
generate unlimited reviews of multiple products, or of a single 
product.
---------------------------------------------------------------------------

    \11\ Id. ] 6.
---------------------------------------------------------------------------

    The Commission alleges that this use case ``generates detailed 
reviews that contain specific, often material details that have no 
relation to the user's input''; that such reviews ``would almost 
certainly be false''; and that, if such a review were ``publish[ed] . . 
. online,'' it ``would deceive potential consumers deciding to purchase 
the service or product described'' in violation of section 5.\12\ The 
Complaint does not identify a single Rytr-generated review published 
anywhere by anyone, much less a false review that violates section 5. 
It nevertheless concludes that Rytr ``has furnished its users and 
subscribers with the means to generate written content for consumer 
reviews that is false and deceptive.'' \13\ ``[F]urnishing others with 
the means and instrumentalities to engage in'' deception, the 
Commission declares, is a section 5 violation.\14\
---------------------------------------------------------------------------

    \12\ Id. ] 8.
    \13\ Id. ] 15.
    \14\ Id. ] 16.
---------------------------------------------------------------------------

II. A

    Section 5 prohibits ``deceptive acts or practices.'' \15\ ``The 
[Commission] must show three elements to prove a deceptive act or 
practice in violation of Section 5(a)(1): [1] a representation, 
omission, or practice, that [2] is likely to mislead consumers acting 
reasonably under the circumstances, and [3], the representation, 
omission, or practice is material.'' \16\ Although the Commission need 
not show that the challenged representation or omission in fact 
deceived a particular consumer,\17\ the Commission must show that the 
defendant made a material misrepresentation or omission that was likely 
to mislead consumers.\18\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 45(a).
    \16\ FTC v. Moses, 913 F.3d 297, 306 (2d Cir. 2019) (quotation 
marks omitted); accord FTC v. Stefanchik, 559 F.3d 924, 928 (9th 
Cir. 2009) (similar); POM Wonderful, LLC v. FTC, 777 F.3d 478, 490 
(D.C. Cir. 2015) (similar); FTC v. Freecom Commc'ns, Inc., 401 F.3d 
1192, 1203 (10th Cir. 2005) (similar).
    \17\ FTC v. Cyberspace.com, 453 F.3d 1196, 1201 (9th Cir. 2006).
    \18\ FTC v. Tashman, 318 F.3d 1273, 1277 (11th Cir. 2003).
---------------------------------------------------------------------------

    The Commission does not allege that Rytr made a misleading 
statement or omission of any kind, much less one that was material or 
likely to mislead consumers. The Commission instead pleads that Rytr 
furnished the ``means and instrumentalities'' by which someone else 
could make false statements in violation of section 5.
    Means-and-instrumentalities liability arises from a century-old 
case involving not ``unfair or deceptive acts or practices,'' but 
``unfair methods of competition.'' In FTC v. Winsted Hosiery Co., the 
Supreme Court considered an unfair-method-of-competition claim against 
a clothing company that falsely labeled its clothing as being made of 
wool.\19\ The company defended on the ground that the retailers to whom 
it sold its clothing were fully aware that the labels were false, and 
therefore the company did not deceive anyone.\20\ The Court rejected 
this defense, holding that the clothier was a ``wrongdoer'' because it 
``furnishe[d]'' retailers ``with the means of consummating a fraud'' 
against consumers, who were not aware that the labels were false.\21\ 
Courts and the Commission have since relied on Winsted Hosiery to hold 
that a person ``who puts into the hands of others the means by which 
such others may deceive the public is equally responsible for the 
resulting deception.'' \22\ This theory of liability has come to be 
known as ``means-and-instrumentalities'' liability, and ``is intended 
to apply in cases . . . where the originator of the unlawful material 
is not in privity with consumers.'' \23\
---------------------------------------------------------------------------

    \19\ 258 U.S. 483, 490-91 (1922).
    \20\ Id. at 492-93.
    \21\ Ibid.
    \22\ In re Litton Indus., Inc., 97 F.T.C. 1, 46-47 (1981); see 
also, e.g., FTC v. Magui Publishers, Inc., 9 F.3d 1551, 1993 WL 
430102, at *4 (9th Cir. 1993) (unpublished) (``It is well 
established that one who puts into the hands of others the means by 
which such others may deceive the public is equally as responsible 
for the resulting deception.''); C. Howard Hunt Pen Co. v. FTC, 197 
F.2d 273, 281 (3d Cir. 1952) (``One who places in the hands of 
another a means of consummating a fraud or competing unfairly in 
violation of the Federal Trade Commission Act is himself guilty of a 
violation of the Act.''); Waltham Watch Co. v. FTC, 318 F.2d 28, 32 
(7th Cir. 1963) (``Those who put into the hands of others the means 
by which they may mislead the public, are themselves guilty of a 
violation of Section 5 of the Federal Trade Commission Act.'').
    \23\ In re Shell Oil Co., 128 F.T.C. 749, 764 (1999).
---------------------------------------------------------------------------

    Means-and-instrumentalities liability has traditionally been 
confined to two types of cases. The first involves a defendant who 
supplies someone other than a consumer--ordinarily a retailer--with a 
product or service that is unlawful because it is inherently deceptive, 
or because it has no purpose apart from facilitating a section 5 
violation. The recipient of that product or service then passes it on 
to consumers in violation of section 5. Winsted Hosiery was such a 
case. The Commission relied on this theory for many decades to pursue 
makers of push cards and punch boards custom-made for retailers to use 
in illegal lottery marketing schemes.\24\ It has also relied on this 
theory to pursue suppliers of mislabeled art, which retailers then sold 
to deceived consumers.\25\
---------------------------------------------------------------------------

    \24\ See, e.g., Gellman v. FTC, 290 F.2d 666, 667-68 (8th Cir. 
1961) (collecting cases); Peerless Prods., Inc. v. FTC, 284 F.2d 
825, 826 (7th Cir. 1960); James v. FTC, 253 F.2d 78, 80 (7th Cir. 
1958); Globe Cardboard Novelty Co. v. FTC, 192 F.2d 444, 446 (3d 
Cir. 1951); Chas. A. Brewer & Sons v. FTC, 158 F.2d 74, 77 (6th Cir. 
1946); FTC v. F.A. Martoccio Co., 87 F.2d 561, 564 (8th Cir. 1937).
    \25\ See, e.g., Magpui, 1993 WL 430102, at *4; Int'l Art Co. v. 
FTC, 109 F.2d 393, 397 (7th Cir. 1940).
---------------------------------------------------------------------------

    The second type of means-and-instrumentalities case involves 
suppliers of misleading marketing materials that someone down the 
supply chain uses to deceive consumers. In these cases, the defendant 
makes false or misleading statements to someone further down the supply 
chain, who then repeats the misstatements to deceive consumers.\26\ If 
the repeated

[[Page 80570]]

statement does not satisfy the three-part test for deception under 
section 5, however, it cannot give rise to means-or-instrumentalities 
liability.\27\ The classic example of this case involves deceptive 
marketing materials for multilevel-marketing businesses and ``pyramid'' 
schemes. The participants at the top of the pyramid do not interact 
with consumers; they instead convey false statements to others further 
down the pyramid who in turn use those materials to deceive consumers. 
The Commission has used the means-and-instrumentalities theory against 
the orchestrators of deception who sit at the top of the pyramid.\28\
---------------------------------------------------------------------------

    \26\ See, e.g., Regina Corp. v. FTC, 322 F.2d 765, 768 (3d Cir. 
1963) (supplier's conveying of a deceptive list price to retailers, 
which was repeated to consumers).
    \27\ FTC v. Innovative Designs, Inc., No. 20-3379, 2012 WL 
3086188, at *4 n. 11 (3d Cir. July 22, 2021).
    \28\ See, e.g., FTC v. Noland, 672 F. Supp. 3d 721, 786 (D. 
Ariz. 2023); FTC v. Fin. Educ. Servs., Inc., No. 2:22-CV-11120, 2022 
WL 19333298, at *1 (E.D. Mich. May 24, 2022); FTC v. Neora LLC, 552 
F. Supp. 3d 628 (N.D. Tex. 2021); FTC v. Vemma Nutrition Co., No. 
15-cv-1578, 2015 WL 11118111, at *7 (D. Ariz. Sept. 18, 2015); FTC 
v. Skybiz.com, Inc., No. 01-CV-396-K(E), 2001 WL 1673645, at *1 
(N.D. Okla. Aug. 31, 2001); FTC v. Five-Star Auto Club, Inc., 97 F. 
Supp. 2d 502, 530-31 (S.D.N.Y. 2000).
---------------------------------------------------------------------------

    This categorization seems straightforward at first blush, but the 
means-and-instrumentalities doctrine becomes less coherent the closer 
one looks. On the one hand, we have described `` `means and 
instrumentalities' liability [as] a form of direct liability,'' \29\ 
that is, as a way of holding someone ``directly liable for violating'' 
\30\ Section 5 ``distinct from `aiding and abetting' liability and 
`assisting and facilitating' liability, both of which are secondary 
forms of liability.'' \31\ That appears to be true when the Commission 
uses this theory against the orchestrator of a pyramid scheme, who 
makes misrepresentations to someone other than a consumer but which 
misrepresentations are repeated to consumers by people further down the 
pyramid.\32\ When applying means-and-instrumentalities liability 
against defendants who supplied the component parts of someone else's 
section 5 violation, however, courts have described the theory as a 
species of aiding-and-abetting liability.\33\ We have also told 
Congress that our means-and-instrumentalities theory is an 
``alternative theor[y]'' to aiding-and-abetting liability by which we 
can ``reach secondary actors.'' \34\ Means-and-instrumentalities 
liability therefore sometimes functions as a form of direct liability 
(when deployed against the orchestrator of a pyramid scheme, for 
example) and sometimes as a form of aiding-and-abetting liability (when 
deployed against the makers of punch boards and push cards, for 
example).
---------------------------------------------------------------------------

    \29\ FTC, SNPRM: Trade Regulation Rule on Impersonation of 
Government and Businesses (``SNPRM''), 89 FR 15072, 15077 n.94 (Mar. 
1, 2024).
    \30\ FTC v. Magui Publishers, Inc., No. Civ. 89-3818, 1991 WL 
90895, at *14 (C.D. Cal. Mar. 28, 1991), aff'd, 9 F.3d 1551 (9th 
Cir. 1993).
    \31\ SNPRM, 89 FR 15077 n.94.
    \32\ See Shell Oil, 128 F.T.C. at 766 (dissenting statement of 
Commissioner Swindle) (``Means and instrumentalities is a form of 
primary liability, and a respondent is primarily liable only for its 
own misrepresentations to consumers.'').
    \33\ See, e.g., Chas. A Brewer & Sons, 158 F.2d at 77 
(describing ``furnishing the means of consummating a fraud'' as 
``aiding and abetting'' another's ``unfair or deceptive acts or 
practices''); Gay Games, Inc. v. FTC, 204 F.2d 197, 199 (10th Cir. 
1953) (similar); Consol. Mfg. Co. v. FTC, 199 F.2d 417, 418 (4th 
Cir. 1952) (per curiam) (similar); see also Deer v. FTC, 152 F.2d 
65, 66 (2d Cir. 1945) (``[I]t was not necessary to prove that the 
petitioners actually participated in the operation of the bingo game 
or the club plan conducted by their customers; it is enough that 
they aided and abetted in such'' games by furnishing the 
paraphernalia for the game.).
    \34\ Federal Trade Commission Reauthorization: Hearing Before 
the S. Comm. on Com., Sci., and Transp., S. Hrg. 110-1148, p. 21 
n.56 (2008) (Prepared Statement of the Federal Trade Commission).
---------------------------------------------------------------------------

    The complaint against Rytr falls into neither category. The 
Commission does not accuse Rytr of making any statements, much less 
false statements. Nor is Rytr's tool necessarily deceptive like 
mislabeled art, or useful only in facilitating someone else's section 5 
violation like lottery punch boards. Rytr's tool has both lawful and 
unlawful potential uses. A consumer could use it to draft an honest and 
accurate review. Or a business could use it to write a false review.

B. 1

    The Commission's complaint is a dramatic extension of means-and-
instrumentalities liability. The Commission treats Rytr's sale of a 
product with lawful and unlawful potential uses as a categorical 
section 5 violation because someone could use it to write a statement 
that could violate section 5. But that is true of an almost unlimited 
number of products and services: pencils, paper, printers, computers, 
smartphones, word processors, typewriters, posterboard, televisions, 
billboards, online advertising space, professional printing services, 
etc. On the Commission's theory, the makers and suppliers of these 
products and services are furnishing the means or instrumentalities to 
deceive consumers merely because someone might put them to unlawful 
use.
    This theory is incorrect. Section 5 does not categorically prohibit 
a product or service merely because someone might use it to deceive 
someone else. Interpreting section 5 to prohibit products and services 
with conceivable illegal uses would prohibit an infinite variety of 
innocent and productive conduct. Congress cannot have intended to 
capture such conduct in the phrase ``deceptive acts and practices.''
    Not only is the Commission's theory a departure from section 5 
precedents, but it is also inconsistent with how other areas of the law 
deal with the same issue. In Sony Corp. of America v. Universal City 
Studios, Inc., for example, the Supreme Court considered whether a 
product capable of facilitating en masse copyright infringement--
Betamax video recorders capable both of lawfully playing Betamax tapes 
and of unlawfully recording copyrighted television broadcasts--violated 
the copyright laws.\35\ The Court concluded that so long as a product 
is ``merely . . . capable of substantial noninfringing uses,'' it did 
not violate the copyright laws even if it is also capable of committing 
countless acts of infringement.\36\ Similarly, patent law does not 
treat as infringement the sale of an unpatented part of a patented 
machine that could be used to infringe the patent, so long as the part 
is capable of some noninfringing uses.\37\
---------------------------------------------------------------------------

    \35\ 464 U.S. 417, 419-20, 421-23 (1984).
    \36\ Id. at 442.
    \37\ See, e.g., Dawson Chem. Co. v. Rohm & Hass Co., 448 U.S. 
176, 198 (1980) (holding that the patent laws do not forbid the sale 
of ``unpatented articles that were essential to . . . patented 
inventions'' unless those unpatented articles ``were unsuited for 
any commercial noninfringing use''); Henry v. A.B. Dick Co., 224 
U.S. 1, 48 (1912) (``[A] sale of an article which though adapted to 
an infringing use is also adapted to other and lawful uses, is not 
enough to make the seller a contributory infringer. Such a rule 
would block the wheels of commerce.'')
---------------------------------------------------------------------------

    Aiding-and-abetting liability, which bears many similarities to 
means-and-instrumentalities liability,\38\ also does not punish conduct 
merely because it facilitated the commission of a tort or crime. 
Liability for aiding and abetting under Federal criminal law requires 
``that the accused ha[d] the specific intent to facilitate the 
commission of a crime by another'' as well as ``the requisite intent of 
the underlying substantive offense.'' \39\ And in tort law, one is 
liable for the torts of another ``if he knows that the other's conduct 
constitutes a breach of duty and gives substantial assistance or 
encouragement to the other.'' \40\
---------------------------------------------------------------------------

    \38\ See supra n. 29-34 and accompanying text.
    \39\ U.S. Department of Justice, Criminal Resource Manual, Sec.  
2474. Elements of Aiding and Abetting (synthesizing Federal 
appellate precedent).
    \40\ Restatement (Second) of Torts Sec.  876(b) (1979) (emphasis 
added).

---------------------------------------------------------------------------

[[Page 80571]]

2

    The Commission tries to diminish the grandiosity of its theory by 
alleging that Rytr's tool ``has no or de minimis legitimate use.'' \41\ 
If this were true, then I might agree with the Commission's decision to 
file this complaint. Courts have for decades interpreted section 5 to 
prohibit the sale of products with no reasonable uses other than 
facilitating an unfair or deceptive act or practice.\42\ But the 
Commission's conclusory description of the Rytr tool's plausible uses 
is pure ipse dixit. The complaint contains no factual allegations 
lending plausibility to its conclusion that the tool has no, or only de 
minimis, legitimate uses.\43\ Nor I have seen any evidence giving me 
reason to believe that the allegation is true.
---------------------------------------------------------------------------

    \41\ Complaint ] 14.
    \42\ See supra n. 24-25 and accompanying text (discussing courts 
of appeals precedents sustaining Commission orders prohibiting the 
sale of push cards and punch boards).
    \43\ Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (``Threadbare 
recitals of the elements of a cause of action, supported by mere 
conclusory statements, do not suffice'' for a complaint to survive a 
motion to dismiss.).
---------------------------------------------------------------------------

    Indeed, the complaint's conclusion is entirely implausible. For one 
thing, if the Rytr tool's exclusive use were to generate false consumer 
reviews in violation of section 5, one would expect the complaint to 
contain allegations that someone used it to violate section 5, at least 
once. But the Commission does not allege a single example of a Rytr-
generated review being used to deceive consumers in violation of 
section 5, nor am I aware of any.
    The Rytr tool's legitimate utility to consumers is obvious: to 
assist them in writing reviews. Writing a succinct and thoughtful 
review can be difficult and time-consuming,\44\ and a tool that 
produces a well-written first draft of a review based on some keyword 
inputs can make the task much more accessible.
---------------------------------------------------------------------------

    \44\ See Blaise Pascal, Letter XVI, Lettres Provinciales (1657) 
(``I would have written a shorter letter, but I did not have the 
time.'').
---------------------------------------------------------------------------

    The Commission describes the Rytr tool's only use as ``generating 
written content for a review'' that a user would then ``manually select 
and copy . . . to post reviews elsewhere online.'' \45\ But consumers 
do not have to use generative AI as a replacement for their own 
thoughts and ideas. Consumers can use AI-generated first drafts of 
documents in much the same way they would use a human-generated first 
draft--as a starting point from which the user can work to convey 
accurately and clearly the idea in the user's mind. A consumer would 
not violate section 5 by using a generative AI tool to write a first 
draft of a review, even if that first draft contained inaccuracies that 
the user then removed.
---------------------------------------------------------------------------

    \45\ Complaint ] 6; see also id. ] 8 (``Respondent's service 
generates reviews that would almost certainly be false for the users 
who copy the generated content and publish it online.'').
---------------------------------------------------------------------------

    I do not doubt that some people use generative AI tools to 
accomplish fraud. Almost every technology since the first time a human 
being sharpened a stick can be put to some illegal use. But that does 
not mean that those tools are the means and instrumentalities to 
deceive consumers. Section 5 does not prohibit the sale of any product 
that someone could use to violate section 5.

C

    The question, then, is whether the Commission may ever treat a 
product or service with lawful and unlawful potential uses as the means 
and instrumentalities to violate section 5. The law is clear that it 
may, but only if the provider of the product or service knows, or has 
reason to know, that the person to whom the product or service was 
supplied will use it to violate section 5. A knowledge requirement 
avoids treating innocent and productive conduct as illegal merely 
because of the subsequent acts of independent third parties.
    Courts have required knowledge in similar means-and-
instrumentalities cases for decades. In Waltham Watch Co. v. FTC, for 
example, a clockmaker granted a license to use the clockmaker's famous 
trademark in the sale of clocks.\46\ The licensee then used the 
trademark to deceive consumers and other dealers into believing that 
clocks had been manufactured by the clockmaker.\47\ The clockmaker was 
liable for the deception, the court of appeals reasoned, because the 
clockmaker in fact knew that the licensee was using the license to 
commit fraud and took no action to prevent it.\48\ That knowledge 
transformed an otherwise neutral license agreement into the ``means and 
instrumentalities by which many people had been hoodwinked, defrauded, 
and misled.'' \49\ Similarly, in one of the Commission's most important 
statements of the scope of means-and-instrumentalities liability, we 
explained that ``[i]t is well settled law'' under the means-and-
instrumentalities doctrine that ``the originator'' of a false or 
misleading representation ``is liable if it passes on a false or 
misleading representation with knowledge or reason to expect that 
consumers may possibly be deceived as a result.'' \50\
---------------------------------------------------------------------------

    \46\ 318 F.2d 28, 30 (7th Cir. 1963).
    \47\ Ibid.
    \48\ Ibid.
    \49\ Ibid.
    \50\ Shell Oil, 128 F.T.C. at 764.
---------------------------------------------------------------------------

    The Commission recently acknowledged that section 5 requires proof 
of knowledge before treating products and services with lawful and 
unlawful potential uses as the means and instrumentalities to violate 
section 5. Earlier this year, the Commission promulgated the Trade 
Regulation Rule on Impersonation of Government and Businesses 
(Impersonation Rule).\51\ The rule treats the impersonation of a 
government official or business as an unfair or deceptive act or 
practice.\52\ Our Notice of Proposed Rulemaking (NPRM) for the 
Impersonation Rule proposed treating the provision of ``the means and 
instrumentalities for'' impersonation as a section 5 violation.\53\ But 
we received a host of comments warning that imposing means-and-
instrumentalities liability without a scienter requirement would 
``impos[e] strict liability on unwitting third-party providers of 
services or products.'' \54\ We therefore removed the mean-and-
instrumentalities provision from the Impersonation Rule and issued a 
supplemental NPRM on the same topic.\55\ The supplemental NPRM proposes 
treating the provision of ``goods or services'' as a section 5 
violation only if ``a party knew or had reason to know that the goods 
or services they provided will be used for the purpose of 
impersonations.\56\
---------------------------------------------------------------------------

    \51\ 89 FR 15017 (Mar. 1, 2024) (to be codified at 16 CFR part 
461).
    \52\ 16 CFR 461.2, 461.3.
    \53\ 87 FR 62741, 62751 (Oct. 17, 2022).
    \54\ 89 FR at 15022.
    \55\ 89 FR at 15023.
    \56\ SNPRM, 89 FR 15072, 15077 (Mar. 1, 2024); see also id. at 
15083 (text of proposed rule).
---------------------------------------------------------------------------

    Section 5 also requires proof of knowledge of third-party behavior 
in other, similar contexts. For example, a defendant is liable for the 
deceptive acts of its third-party affiliates only if the defendant has 
actual knowledge of the affiliates' ongoing deception and ``either 
directly participates in that deception, or has the authority to 
control'' it and ``allows the deception to proceed.'' \57\ And section 
5 imposes liability on an individual officer for the violations of a 
corporate entity only if ``the individual had `some knowledge of the 
practices' and . . . either `participated directly in the practice or 
acts or had the authority to control them.' '' \58\ These knowledge

[[Page 80572]]

requirements implement a common sense principle: section 5 does not 
hold people liable for innocent conduct that may have unwittingly 
facilitated someone else's violation.
---------------------------------------------------------------------------

    \57\ FTC v. LeadClick Media, LLC, 838 F.3d 158, 170 (2d Cir. 
2016).
    \58\ FTC v. On Point Capital Partners LLC, 17 F.4th 1066, 1083 
(11th Cir. 2021) (quoting FTC v. Gem Merch. Corp., 87 F.3d 466, 470 
(11th Cir. 1996)); FTC v. Moses, 913 F.3d 297, 306-07 (2d Cir. 
2019); FTC v. Com. Planet, Inc., 815 F.3d 593, 600 (9th Cir. 2016) 
(similar); FTC v. Freecom Commc'ns, Inc., 401 F.3d 1192, 1203-04 
(10th Cir. 2005) (similar); FTC v. Amy Travel Serv., Inc., 875 F.2d 
564, 573 (7th Cir. 1989) (similar).
---------------------------------------------------------------------------

    Other areas of the law abide by the same common-sense principle. In 
Metro-Goldwyn-Mayer Studios Inc. v. Grokster, for example, the Supreme 
Court again confronted the question of whether a product with both 
infringing and noninfringing uses violated the copyright laws.\59\ In 
that case, the product was peer-to-peer file sharing software that was 
commonly used to share copyrighted music and films without 
authorization.\60\ Although the copyright laws do not prohibit a 
product ``capable of commercially significant noninfringing uses'' even 
if it were also capable of substantial infringement,\61\ the makers of 
the peer-to-peer filesharing software distributed their product with 
the intention of promoting infringement.\62\ Imposing copyright 
liability on a party who distributed a product with the intention of 
facilitating infringement was consistent with ``principles recognized 
in every part of the law.'' \63\
---------------------------------------------------------------------------

    \59\ 545 U.S. 913 (2005).
    \60\ Id. at 919-20.
    \61\ Id. at 931-32.
    \62\ Id. at 934-35.
    \63\ Id. at 935 (quoting Kalem Co. v. Harper Bros., 222 U.S. 55, 
63 (1911)).
---------------------------------------------------------------------------

    The point here is not to identify exhaustively the circumstances in 
which the provision of a product or service with lawful and unlawful 
potential uses may violate section 5. I instead argue only that, at the 
very least, precedent and common-sense ``principles recognized in every 
part of the law'' require that the government must show that a 
defendant knew that he was participating in someone else's unfair or 
deceptive act or practice when he provided that product or service.

III

    I dissent from the filing of this complaint for an additional 
reason. We may file an administrative action alleging a section 5 
violation only if such an action ``would be to the interest of the 
public.'' \64\ I do not believe this action is in the public interest 
for two reasons.
---------------------------------------------------------------------------

    \64\ 15 U.S.C. 45(b).
---------------------------------------------------------------------------

    First, the Commission's aggressive move into AI regulation is 
premature. AI is the subject of heated rhetoric. Doomsayers warn that 
AI will take our jobs, hopelessly blur the distinction between fact and 
fiction, and maybe even threaten the survival of human civilization. AI 
companies do not forcefully resist all these claims, given that 
predictions about the incredible potential for AI may be useful as 
these companies compete for investment dollars and engineering talent. 
But the Commission should not succumb to the panic or hype. Generative 
AI technology is impressive, but it is also nascent. Neither its 
naysayers nor its cheerleaders really understand its potential, or 
whether it represents substantial progress toward ``artificial general 
intelligence'' (AGI)--machine intelligence matching both the breadth 
and power of the human mind, the holy grail of AI research.\65\ That 
ignorance is not a reason to plunge headlong with aggressive 
regulation. It is a reason to stay our hand.
---------------------------------------------------------------------------

    \65\ Concurring and Dissenting Statement of Commissioner Andrew 
N. Ferguson, A Look Behind the Screens: Examining the Data Practices 
of Social Media and Video Streaming Services, at 11 n.44 (Sept. 19, 
2024).
---------------------------------------------------------------------------

    As our country has always done, we should give this industry the 
space to realize its full potential--whatever that turns out to be. 
America is the greatest commercial power in the history of the world in 
no small part because of its tolerant attitude toward innovation and 
new industry. There has never been a better place in the world to have 
a new idea than the United States. We should go to great lengths to 
ensure that remains the case.
    When people use generative AI technology to lie, cheat, and steal, 
the law should punish them no differently than if they use quill and 
parchment.\66\ But Congress has not given us the power to regulate AI. 
It has tasked us with enforcing the prohibition against unfair or 
deceptive acts and practices. If our enforcement incidentally captures 
some AI-generated conduct, so be it.\67\ But we should not bend the law 
to get at AI. And we certainly should not chill innovation by 
threatening to hold AI companies liable for whatever illegal use some 
clever fraudster might find for their technology.
---------------------------------------------------------------------------

    \66\ Id. at 10-11.
    \67\ I support, for example, the complaint and settlement that 
we announce today against DoNotPay for deceiving consumers about the 
capabilities of its generative AI service. Concurring Statement of 
Commissioner Andrew N. Ferguson, In the Matter of DoNotPay, Inc. 
(Sept. 25, 2024).
---------------------------------------------------------------------------

    Second, the complaint implicates important First Amendment 
interests. The First Amendment constrains the government's authority to 
regulate the inputs of speech.\68\ The Commission today holds a company 
liable under section 5 for a product that helps people speak, quite 
literally. The theory on which the complaint rests would permit the 
Commission to proscribe Microsoft Word merely because someone may use 
it to create a fake review, or Adobe Photoshop merely because someone 
used it to create a false celebrity endorsement. The danger this theory 
poses to free speech is obvious. Yet because the technology in question 
is new and unfamiliar, I fear we are giving short shrift to common 
sense and to fundamental constitutional values.
---------------------------------------------------------------------------

    \68\ See, e.g., Buckley v. Valeo, 424 U.S. 1, 16, 19-20 & n.18, 
44-45 (1976) (per curiam) (striking down Federal limitations on 
political expenditures on the ground that such expenditures are a 
necessary ingredient to the sort of mass political communication 
protected by the Speech Clause); McConnell v. FEC, 540 U.S. 93, 251 
(2003) (Scalia, J., concurring in part, concurring in the judgment 
in part, and dissenting in part) (``To a government bent on 
suppressing speech, this mode of organization presents 
opportunities: Control any cog in the machine, and you can halt the 
whole apparatus.''). See also Minneapolis Star & Tribune Co. v. 
Minn. Comm'r of Revenue, 460 U.S. 575, 591-93 (1983) (striking down 
a tax on paper and ink as an unconstitutional restriction of the 
freedom of speech and of the press); Grosjean v. Am. Press Co., 297 
U.S. 233, 250-51 (1936) (striking down statute taxing the sale of 
advertisements in publications with a weekly circulation greater 
than 20,000 copies).
---------------------------------------------------------------------------

    I respectfully dissent.

[FR Doc. 2024-22767 Filed 10-2-24; 8:45 am]
BILLING CODE 6750-01-P