FTC Proposes Rules Banning Hidden AI Output Steering, Mandating Transparency
In-house counsel overseeing consumer-facing AI, marketing automation, and customer service systems must monitor this proposal, as it would ban hidden AI output steering and require transparency disclosures, with noncompliance exposing organizations to FTC enforcement.
The FTC has issued a proposed rule targeting hidden 'output steering' in artificial intelligence systems, a practice where AI tools subtly direct users toward specific products, services, or viewpoints without clear disclosure. The proposal would require companies to disclose when AI generates or curates consumer-facing content, and prohibit manipulative steering that occurs without informed user consent. Open for public comment now, the rule would apply to customer service chatbots, product recommendation engines, and AI-powered marketing tools. In-house counsel should audit current AI deployment practices to identify gaps against the proposed requirements, and consider submitting comments if the rule impacts their organization’s operations.