FTC Shifts AI Enforcement Amid Trump Administration’s Innovation Push
The Federal Trade Commission (FTC) is entering a transformative phase in regulating artificial intelligence (AI), aligning with the Trump Administration’s agenda to prioritize AI development and reduce regulatory barriers. In a notable move, the FTC set aside a final consent order against Rytr, an AI company accused of enabling deceptive customer reviews. The decision, made on December 22, 2025, reflects the Commission’s evolving approach to AI enforcement—balancing innovation promotion with consumer protection.
Rytr’s case became a benchmark in understanding this shift. Previously, the FTC alleged that Rytr’s AI tool allowed users to create thousands of realistic-looking but fake customer reviews. While the original complaint labeled this capability as deceptive, the FTC’s new stance emphasizes that the mere potential misuse of AI tools should not automatically render them illegal.
Trump Administration’s AI Action Plan Guides FTC Policy
President Trump’s second term began with a strong commitment to bolstering America’s leadership in AI. In January 2025, an executive order directed all federal agencies to revisit regulations potentially hindering AI progress. This led to the release of the AI Action Plan in July 2025, which instructed agencies like the FTC to review and potentially roll back enforcement actions that “unduly burden AI innovation.”
The FTC responded by reassessing ongoing investigations and past orders. The Rytr case was among the first to be reevaluated under this directive. The Commission concluded that the original order could stifle legitimate AI development, aligning with Chairman Andrew N. Ferguson’s dissenting view that regulators must not penalize innovation because of hypothetical misuse.
Dual Approach to AI Oversight Emerges
While the FTC is reducing enforcement related to AI product capabilities, it continues to target false claims about AI. This bifurcated approach distinguishes between the actual functionality of AI tools and misleading advertising about those tools. The latter remains squarely within the FTC’s traditional oversight under Section 5 of the FTC Act, which prohibits deceptive business practices.
In congressional testimony delivered in May 2025, Chairman Ferguson emphasized a “circumspect and appropriate enforcement” strategy. He noted that while the FTC supports AI innovation, companies that exaggerate the capabilities of their AI systems or mislead consumers will still face consequences.
Recent Enforcement Actions Reflect the FTC’s New Focus
Several enforcement actions taken in 2025 underscore this revised regulatory scope. In April, accessiBe settled for $1 million after allegedly misrepresenting the effectiveness of its AI tools in ensuring web accessibility. In August, Click Profit and its affiliates faced over $20 million in penalties for falsely claiming to use advanced AI technologies. That same month, Workado entered a consent agreement with the FTC over claims about the precision of its AI-detection software, although it avoided a monetary penalty by agreeing to substantiate its claims.
These cases highlight that while the FTC may be stepping back from regulating the technical use of AI, it remains vigilant in policing deceptive marketing practices.
FTC’s Reassessment of Legacy Orders
The Commission’s willingness to revisit and retract previous consent orders, such as the one against Rytr, is unusual and significant. It reflects a broader policy shift under the AI Action Plan. The FTC stated that the original complaint against Rytr failed to meet Section 5 standards and was not in the public interest. The Commission emphasized that tools with potential for misuse should not be outlawed by default, as doing so could stifle beneficial innovation.
“Treating as categorically illegal a generative AI tool merely because of the possibility that someone might use it for fraud… threatens to turn honest innovators into lawbreakers,” the FTC noted, quoting Chairman Ferguson’s dissent.
Continued Oversight in Specific AI Areas
Despite the more lenient stance on AI capabilities, the FTC is not abandoning oversight altogether. The agency is monitoring areas where AI intersects with consumer safety and legal violations. For example, it has launched investigations into AI chatbots, particularly concerning child safety, and is pursuing enforcement against the use of deepfakes under the Take It Down Act.
This suggests that while AI companies can expect fewer restrictions on product capabilities, they must remain cautious about how they market those capabilities. Misleading claims will continue to attract regulatory scrutiny.
Conclusion: A Balanced Future for AI Regulation
The FTC’s evolving approach to AI enforcement represents a nuanced balance between fostering innovation and protecting consumers. Companies developing AI tools may benefit from reduced regulatory burdens, but they must remain transparent and truthful in their claims. The dual strategy—relaxing enforcement on capabilities while maintaining strict oversight on misleading statements—could shape the regulatory landscape for years to come.
As FTC Chairman Ferguson stated, enforcement will target those who use AI to deceive consumers, not those who develop tools with the potential for both good and bad use. Companies in the AI space should stay informed and ensure their marketing and product descriptions align with FTC standards to avoid legal pitfalls.
This article is inspired by content from Original Source. It has been rephrased for originality. Images are credited to the original source.