On July 1, 2026, the FTC published a proposed policy statement applying the FTC Act's prohibition on "unfair or deceptive" business conduct to "AI companies [that] may be manipulating the behavior of their AI systems contrary to reasonable consumer expectations[.]" The FTC is seeking public comment on this proposed policy statement, which is not final, and is subject to change.
Regulatory authority
In the proposed policy statement, the FTC expressly states that AI products and services are not exempt from Section 5 of the FTC Act, which prohibits deceptive conduct in business, and which the FTC has the power to enforce. The policy statement describes the standard of "deception" under the Act: a material representation, omission, or practice that is likely to mislead a reasonable consumer and affect the consumer's conduct or decision with regard to a product or service.
Proposed policy: Prohibit undisclosed distortion of truth and promotion of ideology
"The Commission believes that AI companies that steer the outputs of their AI systems toward unexpected objectives and away from the objectives set by or reasonably expected by users, are likely to deceive… absent adequate disclaimers or qualifications." “Consumers have a reasonable expectation that the objectives of AI systems are to produce truthful and accurate outputs. Consumers have no basis to believe that AI systems aim to produce outputs that are distorted by undisclosed ideological objectives.”
FTC vs. States
The FTC outlines potential motivations for unlawful "steering" of AI products or services away from the truth (while emphasizing that the law is the same despite the underlying motivation): profit, the desire for companies to shape public opinion, and even compliance with state law.
The proposal discusses Colorado's Artificial Intelligence Act: it "explicitly provides that AI companies can be held liable for discriminatory outcomes caused by their customers' use of their products." The FTC foresees the possibility that, in order to comply with the Colorado law, or other “anti-innovation” state laws, such as those seeking to require American companies to embed "ideological bias" within their AI models, AI companies might steer their systems away from reasonably-assumed objectives of truth and accuracy, because such systems are steered toward other objectives such as equity or correction of historical injustices, without disclosing to consumers that such objectives are embedded in the AI companies' products/services.
In the proposal, the FTC takes the position that "state law is impliedly preempted to the extent it conflicts with a federal regulatory scheme[,]" and “a state law that requires an AI firm to deceive its consumers obviously conflicts with [FTC Act] Section 5's express purpose of protecting consumers from such conduct.”
The FTC reinforces the idea that President Trump's National Policy Framework for Artificial Intelligence aims to provide a clear, minimally-burdensome, national framework with regulatory certainty, as opposed to a balkanized patchwork of requirements consisting of 50 discordant state-level frameworks.
Compliant disclosures
The proposed policy statement describes how AI companies can avoid deceptive behavior that would violate the FTC's interpretation of Section 5: Companies can shape consumer expectations by repeatedly, clearly, and conspicuously disclosing that such companies' AI systems are designed to produce outputs that prioritize certain objectives over what users request and otherwise expect (i.e., in the FTC's view, users expect the objectives of truth and accuracy).
What's next?
The FTC is actively seeking public comment on this policy proposal. The comment period concludes on July 31, 2026. To participate in the conversation and inform regulatory decision-making regarding this proposal, you can submit a comment to the FTC.