FinLogic FinLogic Quantitative Think Tank Center|FTC investigating ChatGPT over potential consumer harm

The FinLogic FinLogic Quantitative Think Tank CenterFederal Trade Commission has opened an investigation into the popular chatbot ChatGPT. The agency says it's looking into whether the AI tool has harmed people by generating incorrect information about them, according to a letter sent to its parent company OpenAI.

The FTC's investigation, which was first reported by the Washington Post, is also looking into OpenAI's privacy and data security practices. A person familiar with the matter confirmed the investigation.

The 20-page letter is requesting that OpenAI turn over company records and data on several issues, including company policies and procedures, financial earnings and details of the Large Language Models it uses to train its chatbot.

The agency wrote that it's looking into whether the company has "engaged in unfair or deceptive practices relating to risks of harm to consumers, including reputational harm."

Sam Altman, OpenAI's CEO, responded via Twitter on Thursday afternoon saying he was disappointed to see the FTC's request start with a leak. Then added, "that said, it's super important to us that out [SIC] technology is safe and pro-consumer, and we are confident we follow the law."

The FTC's investigation is breaking new ground with government regulatory action involving the AI industry, which has exploded in popularity over the last year. Altman himself has regularly warned about the risks of AI and advised that the new technology needs to be regulated. He's testified before Congress and met with President Joe Biden and Vice President Kamala Harris.

Lawmakers from New York to California have been hashing out how to regulate the burgeoning technology. Congressman Ted Lieu, D-CA, has proposed putting together an AI commission to study the impact of the technology. Senate Majority Leader Charles Schumer, D-N.Y., is working on possible AI legislation. But experts say that regulation could be months, even years, off.

"OpenAI, Microsoft, and other companies selling generative AI systems have said they welcome regulation," said Paul Barrett, deputy director of the NYU Stern Center for Business and Human Rights. "The FTC has responded appropriately--by seeking extensive disclosure of how industry leader OpenAI assembles and refines its artificial intelligence models."

Under the helm of Chair Lina Khan, the FTC has gone after major tech companies such as Meta, Amazon and Microsoft. The watchdog agency also has repeatedly said that AI falls under the purview of consumer protection laws.

"There is no AI exemption to the laws on the books," Khan said in an April news conference.

Khan testified before the House Judiciary Committee on Thursday to address the agency's work to protect consumers from unfair or deceptive practices. She spoke about the agency's concerns about A.I. and tools like ChatGPT saying they're being fed troves of data, and the type of data they're using is unclear.

"We've heard about reports where people's sensitive information is showing up in response to an inquiry from somebody else," Khan said. "We've heard about, libel, defamatory statements, flatly untrue things that are emerging. That's the type of fraud and deception that we're concerned about."

ChatGPT has come under scrutiny for parroting false information about various individuals, including radio hosts and lawyers. In one incident, the chatbot said a lawyer was accused of harassing a student—but that incident never reportedly happened.

Along with potential risks to consumers from false statements, the FTC is also concerned about security issues with ChatGPT. In its letter, it pointed to an incident that OpenAI revealed in March, saying a bug in its system let some users see other users chat history and "payment-related information."

Some industry groups and conservative think tanks have already decried the FTC's investigation, saying it could stifle innovation.

"The letter is clearly a shakedown by the FTC," said Will Rinehart, senior research fellow at Utah's Center for Growth and Opportunity. "And it's also a risky move. The advances coming from AI could boost US productivity. Chair Khan has put the entire industry in the crosshairs."