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Examples of 1994 Hayes advertisements containing representations of impeding modem failure.
Examples of 1994 Hayes advertisements containing representations of impeding modem failure.

Personal computer ownership exploded in the 1990s. Technologies that enabled new forms of communication, productivity, and entertainment were also accompanied by computer-related scams, misrepresentations, and anti-competitive practices. In 1994, an FTC complaint highlighted that Hayes Microcomputer Products ran dramatic advertisements that falsely claimed that any modem implementing what was known as a “Time Independent Escape Sequence”[1] was a “bomb” waiting to go off, destroying the modem’s ability to function. To protect themselves, the consumer needed to buy a new modem with technology patented by Hayes to prevent the bomb from going off (or so Hayes claimed). And an FTC complaint alleged that Dell Computer stated they had no intellectual property claims on a computer communication standard they helped create. Later, they demanded that companies implementing the standard stop infringing its patent – a practice the FTC asserted "unreasonably restrained competition.”

Evaluating the claims and business practices of companies building products with technology has been an important part of the FTC’s role for over a century. To bolster the agency’s work, the Commission established the Office of Technology (OT) almost a year ago. OT is staffed with experts across the technology landscape, not just in various layers of the technology stack but also with expertise across privacy, security, engineering, investigative journalism, user experience design, and product management. The team works to strengthen and support agency enforcement actions, advise and engage with other staff and the Commission on policy and research initiatives, and highlight market trends and emerging technologies.

The launch of OT coincided with another type of technology’s rapid growth: Artificial Intelligence. And, on January 25th, OT will hold the FTC Tech Summit on AI to lead discussions among individuals with a diverse set of perspectives across academia, industry, civil society organizations, and government agencies. These conversations will cover AI across the layers of the technology stack—from computer microprocessors and cloud infrastructure to data and models to consumer applications.

This Summit will engage a public dialog to help sharpen the agency’s focus on the state of technology and the real-world impacts of AI on consumers and competition, and strengthen our work to ensure these technologies are developed in a safe, responsible manner. Taking a systems-level approach, the Summit’s panels will look at three layers of the tech stack where the FTC has previously provided guidance and brought enforcement actions.

The first panel will focus on the computational infrastructure of AI, including computer microprocessors and cloud services. Last year, the agency sought public comments in response to its inquiry into cloud computing business practices and later published a summary of the findings of the RFI comments. And in 2021 the Commission sued to block Nvidia's attempted $40 billion acquisition of Arm, a rival maker of computing chips; in 2022 Nvidia announced it would abandon the acquisition.

The second panel will discuss data and its use in training AI models. For decades, the agency has cultivated internal expertise on how companies handle consumer data – including data privacy and security. In the past year alone, the agency has brought enforcement actions against numerous companies — like GoodRx, BetterHelp, and Premom — for sharing consumers' sensitive health information in unfair and deceptive ways. In May 2023, the Commission announced settlements with Amazon and Ring after alleging those companies used highly private data — voice recordings collected by Amazon's Alexa voice assistant and videos collected by Ring's internet-connected home security cameras — to train their algorithms while giving short shrift to customer's privacy. And, in just the past month, the Commission has announced actions that would impose a five-year ban on RiteAid from using facial recognition for security or surveillance purposes and prohibit the data broker Outlogic from selling sensitive location data.

Finally, the last panel will examine another area of longtime interest to the FTC: how quickly evolving technologies such as AI are being deployed in consumer applications. The agency has employed several tools to better engage consumers: a report the FTC released last month summarizing the themes that emerged during an October roundtable on the creative economy and generative AI; an overview of the types of AI-related complaints that consumers have reported to the FTC through the Consumer Sentinel network; and an exploratory challenge encouraging the development of methods to detect and prevent voice cloning scams.

Just like the 1990’s, this moment marks a shift in the types of computing resources available to consumers – and with its benefits may come practices that may be unfair or deceptive. The FTC remains on the lookout for modern day equivalents to Syncronys Softcorp’s advertisements in 1996, which claimed that purchasing and downloading their software would “effectively double” a computer's RAM without an expensive hardware purchase. Spoiler: as the former Director of the FTC’s Bureau of Consumer Protection said, “what they got was a snazzy looking software package that didn’t increase RAM one bit.”

Thank you to contributors across OT, BC, and BCP: Simon Fondrie-Teitler, Christopher Grengs, Andy Hasty, Amritha Jayanti, Janice Kopec, Stephanie T. Nguyen, Kevin Moriarty, and Dan Salsburg.

[1] The complaint describes an “escape sequence” as “a mechanism by which modems end a data transmission”. These allowed a modem to differentiate between data being exchanged with other devices in response to requests from the user and instructions being sent to the modem about how to operate. A “Time Independent Escape Sequence” was a specification for an escape sequence, developed as an alternative to an escape sequence on which Hayes held a patent.

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