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9 October 20234 minute read

Generative AI in the creative economy: FTC previews “powerful tools” for regulation of AI

On October 4, 2023, the Federal Trade Commission (FTC) hosted a roundtable discussion with panelists from creative fields – including screenwriters, artists, actors, musicians, and models – to discuss “how generative AI is affecting [their] work and livelihood.”

While the venue for this conversation is perhaps unexpected given the FTC’s focus on antitrust and consumer protection matters, the question of how generative AI will co-exist with human creativity is a topical one, particularly in light of the ongoing SAG-AFTRA strike (which involves, in part, a dispute over the use of generative AI in entertainment) and several litigations brought by artists and writers against AI developers for copyright infringement.

The roundtable discussion centered on the concerns that artists and other creators have regarding the use of generative AI in artistic fields, but themes emerge that apply equally to other creative and inventive endeavors in industry. Additionally, while the FTC was largely in listening mode during the hour-and-a-half long discussion, opening and closing remarks by Chair Lina Khan and Commissioners Rebecca Slaughter and Alvaro Bedoya gave valuable insight into how the FTC may approach generative AI regulation.

Key takeaways

  • The FTC views generative AI as a potential threat to fair competition. Chair Khan framed the conversation as in keeping with the FTC’s original mission in the wake of the industrial revolution to secure “fair dealing across markets” and combat monopolies. Chair Khan explained: “We’re in particular looking closely at how some of these tools could turbocharge fraud, entrench the dominance of firms that control the necessary raw inputs, like cloud services and computing power, and potentially lock in business models that incentivize the endless surveillance of our personal data.” In closing remarks, Commissioner Alvaro Bedoya stated that he was “profoundly worried about fraud in AI use” and expressed general concern about the use of AI in creative endeavors, citing the “fundamentally recursive nature” of AI as limiting the technology’s potential in that space.

  • Regulation will go beyond intellectual property protection. While the panelists were focused on issues relating to collective bargaining and intellectual property rights, licensing, and consent, the FTC’s commentary makes clear that copyright and other forms of IP protections are only one piece of the puzzle. In her opening remarks, Commissioner Rebecca Slaughter commented on the limitations of intellectual property rights to protect creators’ interests, adding “copyright is not and cannot be the only tool to address the deeply personal concerns creators hold about how their works are used.” Referring to prohibitions against unfair and deceptive business practices, Commissioner Slaughter noted, “[T]here are powerful tools we can use on behalf of creators, workers and consumers.”

  • Transparency and consumer rights are primary concerns. From the use of AI to generate customer-facing content – such as the use of AI-generated models in fashion or the use of a celebrity’s likeness to market a product – to transparency in software terms and conditions, panelists expressed concerns about transparency, and protecting consumers from deceptive practices. The FTC’s opening commentary suggest that the agency is thinking about AI regulation from a consumer protection perspective.

  • Consent, and potentially compensation, for GenAI inputs remains a key question. One of the most common concerns among panelists relates to obtaining affirmative, informed consent and providing compensation when an individual’s likeness, persona, or intellectual property is being used to generate content. “Data scraping,” the copyrightability of AI-generated content, and the extent to which the use of training data infringes upon intellectual property rights were primary areas of discussion. These unsettled legal questions are likely to remain at the forefront of conversations about generative AI.

  • Calls for regulatory guidance sooner rather than later. Across the panel, a common viewpoint was that regulation on the use of generative AI is needed sooner rather than later. Exactly how regulators will address these issues remains to be seen, but the FTC may be signaling that it will be the agency leading the charge with respect to consumer protections. The FTC would likely work with the US Copyright Office on copyright matters, as the Copyright Office is likely to take the lead on advising Congress on potential changes in law that concern copyright protections and exceptions. The US Copyright Office recently initiated a public policy study on many of these issues – see our alert for more information on that development.

Our cross-functional teams stand ready to help you navigate these complex emerging issues. Please reach out to the authors of this article for more information.