Artificial intelligence has transformed advertising from an art into a science, and a potential legal minefield. AI systems now write ad copy, generate images, target consumers with unprecedented precision, and even create synthetic spokespersons that never existed. This power comes with significant legal risk: the FTC has made clear that AI-generated deception is still deception, and traditional advertising law applies with full force to automated campaigns.
The standard of care for AI in advertising is evolving rapidly, but the foundation is clear: AI does not provide immunity from advertising law. Advertisers, agencies, platforms, and AI tool providers all face potential liability when AI-powered campaigns deceive consumers, violate privacy, or cause other legally cognizable harms.
AI Applications in Advertising & Marketing#
Programmatic Advertising#
AI drives the real-time bidding systems that dominate digital advertising:
| Component | AI Function | Legal Considerations |
|---|---|---|
| Real-time bidding | Millisecond ad placement decisions | Brand safety, context appropriateness |
| Audience targeting | Identify high-value consumers | Discrimination, privacy, manipulation |
| Dynamic pricing | Adjust bids based on predicted value | Price discrimination concerns |
| Attribution modeling | Credit conversions to touchpoints | Accuracy of performance claims |
| Fraud detection | Identify invalid traffic | Advertiser protection duties |
Programmatic systems make billions of decisions daily without human review, each one potentially creating liability.
Generative AI Content Creation#
Large language models and image generators now create advertising content at scale:
Text generation:
- Ad copy and headlines
- Email marketing campaigns
- Social media posts
- Product descriptions
- Landing page content
Image generation:
- Product imagery
- Lifestyle photographs
- Background and composite images
- Social media graphics
- Banner advertisements
Video generation:
- Synthetic spokesperson videos
- Product demonstrations
- Animated advertisements
- Social media content
Personalization and Targeting#
AI enables hyper-personalized advertising that raises legal questions:
- Behavioral targeting based on browsing history
- Predictive modeling of consumer preferences
- Lookalike audiences derived from existing customers
- Dynamic creative optimization showing different ads to different users
- Contextual targeting based on content consumption
AI-Powered Customer Interactions#
AI increasingly handles direct consumer communications:
- Chatbots providing product information
- Virtual assistants answering questions
- Automated email responses
- AI phone systems handling inquiries
- Social media bots engaging with consumers
FTC Regulatory Framework#
Section 5 Unfair and Deceptive Acts#
The FTC Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” This applies fully to AI-powered advertising:
Deception standard:
- Material representation, omission, or practice
- Likely to mislead consumers acting reasonably
- Representation must be material (affects purchasing decision)
AI-specific applications:
- AI-generated fake testimonials are deceptive
- Undisclosed AI personas deceive consumers
- Synthetic media creating false impressions violates Section 5
- AI-optimized dark patterns may constitute unfair practices
FTC AI Guidance and Enforcement Signals#
The FTC has issued extensive guidance on AI in advertising:
April 2023 - “Keep your AI claims in check”:
- Warned against making false or unsubstantiated AI capability claims
- Applies to marketing AI products and using AI in marketing
- Established that “AI” claims require substantiation
February 2024 - Synthetic media guidance:
- AI-generated images must not deceive consumers
- Fake reviews and testimonials violate existing law
- Deepfakes in advertising face enhanced scrutiny
August 2024 - Final Rule on fake reviews:
- Explicitly prohibits AI-generated fake reviews and testimonials
- Bans buying or selling fake reviews
- Civil penalties up to $50,000 per violation
Endorsement and Testimonial Guidelines#
The FTC’s Endorsement Guides apply directly to AI-generated endorsements:
Requirements:
- Endorsements must reflect honest opinions
- Material connections must be disclosed
- Results must be typical or atypical results disclosed
- Fake endorsers, including AI personas, violate the Guidelines
AI-specific considerations:
- AI-generated “customer testimonials” must reflect real customer experiences
- Synthetic influencers must disclose their artificial nature
- AI personas cannot endorse products they haven’t “used”
Health and Safety Claims#
The FTC applies heightened scrutiny to health and safety advertising:
- AI cannot generate unsubstantiated health claims
- Medical AI advertising must meet rigorous proof standards
- Safety claims require competent and reliable scientific evidence
- “AI-powered” health products face particular scrutiny
Deepfake Advertising Liability#
The Deepfake Advertising Problem#
AI now enables creation of synthetic video featuring real people or entirely fabricated personas:
Deepfake applications in advertising:
- Celebrity endorsements without consent
- Synthetic spokespersons that appear real
- Manipulated product demonstrations
- Fake user-generated content campaigns
- Fraudulent influencer content
Legal Theories for Deepfake Liability#
Multiple legal theories apply to deepfake advertising:
| Legal Theory | Application | Potential Plaintiffs |
|---|---|---|
| Right of publicity | Unauthorized use of likeness | Celebrities, public figures |
| False endorsement (Lanham Act) | Misleading about endorsement | Depicted individuals |
| Consumer protection | Deceiving consumers | State AGs, consumers, FTC |
| Defamation | False statements harming reputation | Depicted individuals |
| Fraud | Intentional deception for gain | Consumers, competitors |
State Deepfake Laws#
States have enacted specific deepfake legislation:
Texas (2019):
- Criminalizes deepfakes intended to influence elections
- Private right of action for depicted individuals
California (2019-2020):
- AB 730: Election-related deepfakes
- AB 602: Non-consensual deepfake pornography
- Civil and criminal penalties
New York (2023):
- Extended right of publicity to digital replicas
- Includes AI-generated likenesses
Federal proposals:
- DEEPFAKES Accountability Act (proposed)
- NO FAKES Act (proposed, 2024)
- Bipartisan momentum for federal regulation
Case Study: Tom Hanks AI Dental Ad#
In October 2023, Tom Hanks posted on Instagram warning fans about an AI-generated advertisement using his likeness to promote a dental plan, without his authorization. While no lawsuit was filed publicly, the incident highlighted:
- AI can create convincing celebrity endorsements
- Brands may use (or enable use of) unauthorized deepfakes
- Even famous individuals struggle to prevent misuse
- Consumer deception is immediate and widespread
TCPA and AI Communications#
Telephone Consumer Protection Act Framework#
The TCPA regulates automated calls and texts, directly implicating AI communications:
TCPA prohibitions:
- Robocalls to cell phones without consent
- Prerecorded messages to residential lines without consent
- Texts via auto-dialer without consent
- Fax advertising without consent
AI applications:
- AI-generated voice calls (synthetic voices)
- AI chatbot text campaigns
- Automated text message marketing
- AI-powered customer outreach
FCC AI Voice Ruling (February 2024)#
In February 2024, the FCC ruled that AI-generated voice calls are “artificial” under the TCPA:
Key holdings:
- AI-cloned voices constitute “artificial” prerecorded voices
- TCPA’s robocall restrictions apply to AI voice technology
- Consent requirements unchanged
- Violations subject to $500-$1,500 per call penalties
AI Chatbot Compliance#
AI chatbots in marketing must comply with:
- TCPA text messaging rules, Consent required for marketing texts
- CAN-SPAM, Commercial email requirements apply to AI
- State laws, Many states have additional consent requirements
- Platform rules, Social media platforms have bot disclosure requirements
Targeted Advertising Discrimination#
Civil Rights Implications#
AI-powered ad targeting can violate civil rights laws:
Housing advertising (Fair Housing Act):
- Cannot exclude based on race, color, religion, sex, familial status, national origin, disability
- AI targeting that achieves same effect as intentional exclusion violates FHA
- Facebook settled for $5M+ over discriminatory housing ad targeting
Employment advertising (Title VII):
- Job ads cannot target/exclude based on protected characteristics
- AI optimization may inadvertently discriminate
- EEOC has signaled enforcement interest
Credit advertising (ECOA):
- Equal Credit Opportunity Act prohibits discrimination
- Targeted credit ads that exclude protected groups face liability
Meta/Facebook Settlement Precedent#
The Department of Justice settlement with Meta over housing ad discrimination established:
- AI ad targeting can violate civil rights laws
- Advertisers and platforms face liability
- “Lookalike audiences” can perpetuate discrimination
- Compliance requires affirmative testing for disparate impact
Digital Redlining in Advertising#
AI systems trained on historical data may perpetuate advertising exclusion:
- Ads for opportunities may not reach minority communities
- “Optimization” for engagement may exclude older/disabled users
- Lookalike modeling from biased data reproduces bias
- Geographic targeting can serve as proxy for race
Influencer Marketing and AI#
Virtual Influencers#
AI-generated “influencers” with no human behind them raise novel questions:
Disclosure requirements:
- Must virtual influencers disclose they’re AI?
- What constitutes adequate disclosure?
- Can AI “authentically” recommend products?
Examples:
- Lil Miquela (AI influencer with millions of followers)
- Various brand-created AI personas
- AI-generated “employees” and spokespersons
FTC position: Material information that would affect consumer decisions must be disclosed. If an influencer’s artificial nature is material, which it often is, disclosure is required.
AI-Enhanced Human Influencers#
AI also assists human influencers in ways requiring disclosure:
- AI-generated portions of content
- AI-written scripts and captions
- AI-enhanced images and videos
- AI-managed engagement and responses
Platform and Advertiser Liability#
Advertiser Primary Liability#
Advertisers bear primary responsibility for AI-powered campaigns:
Due diligence requirements:
- Verify AI-generated claims are truthful
- Ensure AI content doesn’t deceive consumers
- Test targeting for discriminatory effects
- Maintain records of AI-generated materials
Agency Liability#
Advertising agencies face potential liability for:
- Recommending AI tools that generate deceptive content
- Failing to review AI-generated materials
- Negligent implementation of AI campaigns
- Knowing participation in deceptive practices
Platform Liability#
Ad platforms have potential exposure:
Section 230 protection:
- Generally protects platforms from liability for user content
- Does not protect platforms’ own advertising products
- Algorithmic amplification may not be protected
Direct liability:
- Platforms’ targeting tools can create direct liability
- Knowledge of discriminatory patterns creates duty
- FTC has pursued platforms directly
Compliance Framework for AI Marketing#
Pre-Campaign Requirements#
Before launching AI-powered advertising:
- Substantiate all claims, AI-generated claims need the same substantiation as human-created claims
- Review for deception, Manual review of AI-generated content before publication
- Test for discrimination, Analyze targeting for disparate impact
- Verify endorsements, Ensure any endorsements reflect real opinions
- Obtain proper consent, TCPA and state law compliance for communications
- Document AI use, Maintain records of what AI generated
Ongoing Monitoring#
During campaigns:
- Monitor for drift, AI systems may generate problematic content over time
- Track complaints, Consumer complaints may signal problems
- Audit targeting, Regularly test for discriminatory delivery
- Update consent, Ensure consent remains valid as campaigns evolve
Disclosure Best Practices#
When disclosure is required:
- Clear and conspicuous, Consumers must actually notice disclosure
- Plain language, Avoid jargon and legalese
- Proximity, Disclosure near the claim it modifies
- Unavoidable, Cannot be hidden or easily missed
For AI-generated content specifically:
- Disclose when reasonable consumer would want to know
- Consider disclosing AI involvement in image/video creation
- Virtual influencers should disclose artificial nature
- AI-written testimonials should not be presented as human-written
State and International Requirements#
State Consumer Protection Laws#
State attorneys general actively enforce against AI advertising:
California:
- Unfair Competition Law (Bus. & Prof. Code § 17200)
- Consumer Legal Remedies Act
- Automatic Renewal Law (applicable to AI-sold subscriptions)
- Bot Disclosure Law (requiring bot identification online)
New York:
- General Business Law § 349-350
- Active AG enforcement on digital advertising
Multiple states:
- Mini-FTC Acts in all 50 states
- State AG consumer protection divisions
- Coordination through NAAG (National Association of Attorneys General)
GDPR and International#
For companies advertising internationally:
EU GDPR:
- Consent requirements for targeted advertising
- Profiling restrictions and right to opt out
- Data minimization requirements
- Right to explanation of automated decisions
EU AI Act:
- High-risk classification for certain AI systems
- Transparency requirements for AI-generated content
- Upcoming requirements for emotion recognition and biometric AI
UK, Canada, Australia:
- Similar consumer protection frameworks
- Increasing focus on AI advertising
Frequently Asked Questions#
Can I use AI to generate customer testimonials?
Do I need to disclose that ad copy was AI-generated?
Can AI-targeted advertising violate civil rights laws?
What are the rules for AI robocalls and text messages?
Can I create an AI influencer to promote my products?
Who is liable if AI generates a defamatory or false advertisement?
Related Resources#
On This Site#
- Financial AI Standard of Care, SEC AI-washing enforcement
- AI Product Liability, When AI tools are defective
- Algorithmic Bias & Discrimination, AI discrimination liability
External Resources#
- FTC Business Guidance, Official advertising compliance resources
- FCC TCPA Resources, Robocall and text compliance
- NAD (National Advertising Division), Industry self-regulation
Navigating AI Advertising Compliance?
From FTC enforcement against AI-generated content to TCPA liability for AI voice calls to civil rights implications of targeted advertising, AI marketing faces unprecedented legal complexity. Whether you're an advertiser deploying AI tools, an agency implementing AI campaigns, or a platform providing AI advertising technology, understanding the evolving standard of care is essential. Connect with professionals who understand the intersection of advertising law, AI technology, and consumer protection.
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