The FTC to AI Marketers: Show Me the Data
How will AI be regulated? We have seen how state regulators want to regulate AI, but very little from federal regulators. The Federal Trade Commission has given us a clear glimpse into the future, and for any high-growth company leveraging AI, it's time to pay close attention. And while it may seem like the FTC is breaking new ground, it's the same application of tried-and-true FTC guidelines.
The FTC recently a final order with "Content At Scale" (now Workado, LLC), a company that offered an AI content detection tool. The agency charged that Workado made false and unsubstantiated claims that its tool could predict with 98% accuracy whether text was AI-generated. The resulting order is more than a simple slap on the wrist; it is a strategic blueprint for how the FTC will scrutinize and enforce performance claims in the AI era.
The New Table Stakes: Substantiating AI Claims with "Competent and Reliable Evidence"
The core of the FTC's order is a high bar for proof for substantiation of claims. The agency is prohibiting Workado from making any effectiveness claims unless they possess and rely upon "competent and reliable evidence" to back them up.
The FTC goes on to define this standard with exacting detail. It is not your internal marketing data or beta-testing results. It must be "tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results".
For any leader in the tech or lead generation space, this is a critical strategic signal. The FTC has effectively handed you a checklist for building a defensible marketing claim. The order specifies the exact types of records you must preserve to prove your claims, including:
- Testing protocols and the rationale for the methodologies used.
- Documentation of data sources and steps taken to avoid overlap between training and testing datasets.
- The reasoning for why your evaluation data is sufficient and appropriate for your expected use cases.
- All statistical analyses of test data, including intermediary work like confusion matrices.
This isn't a burden; it's an opportunity. While your competitors are forced to rely on vague marketing promises, your company can build the internal processes to generate this level of proof. By operationalizing these standards, you create a competitive advantage that allows you to make powerful, specific, and fearless claims about your product's effectiveness.
The Real Cost of Non-Compliance: Weaponized Reputational Damage
Perhaps the most telling part of the FTC's strategy is the nature of the penalty. The order goes beyond fines and focuses on direct, mandated reputational damage.
Workado is required to email every single customer who subscribed to its AI detector to notify them of the settlement. The order even dictates the exact language of the email, which includes the devastatingly frank admission: "The FTC says we didn't have proof to back up those claims".
From a business perspective, the damage from this forced admission could far exceed any monetary penalty. It sows distrust, invites customer churn, and provides powerful ammunition for competitors. Reputational risk is a huge risk, especially for companies such as an agency where reputation is everything.
The FTC has weaponized reputation, making it a key enforcement tool.
Key Takeaways For the Early Innings of the AI Era
The message from the FTC is clear: as AI tools become more integrated into business, so will the scrutiny on their performance claims just like any other marketing claims. "Move fast and break things" won't fly when it comes to advertising. This regulatory clarity provides the blueprint for durable, long-term growth.
Operationalize Your Proof. Don't wait for a regulatory inquiry. Build the internal systems to test, validate, and document your performance claims according to the high standards outlined in this order. The ability to substantiate claims with actual data is invaluable for answering regulatory inquiries.
Treat Marketing Claims Like Legal Disclosures. Every quantifiable claim on your website, in your sales deck, or in an ad must be treated with the same rigor as a legal statement. If you can't back it up with "competent and reliable evidence," don't say it.
Recognize That Reputation is a Regulatory Tool. The FTC has shown it is willing to compel public admissions of failure. The best defense is a proactive offense built on transparency and irrefutable proof.
In the AI era, the companies that win will not be those with the boldest claims, but those with the strongest proof. By turning compliance from a checklist into a core business strategy, you build the foundation for fearless, sustainable growth.
