On February 13, the Federal Trade Commission (FTC) released a blog post warning companies that it could be deemed an unfair or deceptive practice for a company to adopt more permissive data practices and to only inform consumers of such changes through retroactive amendments to its terms of service or privacy policy.

In the blog post, entitled “AI (and other) Companies: Quietly Changing Your Terms of Service Could Be Unfair or Deceptive,” the FTC described the increasing need companies have for raw data to drive AI product innovation. It also pointed out that many of these companies have access to the data they need in their userbase. However, the FTC notes that these companies, while incentivized to convert user data into fuel for their AI products, also have existing commitments to protect their users’ privacy.

The FTC believes that this stance is consistent with its past enforcement actions and makes clear that a business that collects user data based on one set of privacy commitments cannot then unilaterally change those commitments after collecting the data. The FTC cautioned that it “will continue to bring actions against companies that engage in unfair or deceptive practices — including those that try to switch up the ‘rules of the game’ on consumers by surreptitiously re-writing their privacy policies or terms of service to allow themselves free rein to use consumer data for product development.”

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Photo of Kim Phan Kim Phan

Kim is a privacy and data security lawyer who counsels companies in federal and state privacy and data security statutes and regulations. Her work encompasses strategic planning and guidance for companies to incorporate privacy and data security considerations throughout product development, marketing, and

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Photo of Chris Capurso Chris Capurso

Chris’ practice focuses on consumer financial services law, primarily on federal and state law compliance matters. Chris regularly advises financial institutions, lenders, and sales finance companies in the development and maintenance of closed-end and open-end lending, automobile finance, fintech, point-of-sale, small dollar, and…

Chris’ practice focuses on consumer financial services law, primarily on federal and state law compliance matters. Chris regularly advises financial institutions, lenders, and sales finance companies in the development and maintenance of closed-end and open-end lending, automobile finance, fintech, point-of-sale, small dollar, and other credit programs. He provides guidance on federal consumer protection laws and regulations, including TILA, ECOA, ESIGN, and GLBA.

Photo of Ethan G. Ostroff Ethan G. Ostroff

Ethan specializes in the defense of consumer actions, including class and mass actions, general business litigation, as well as regulatory compliance.