#HelloWorld. Spring has sprung. While the EU AI Act receives wall-to-wall coverage in other outlets, this issue highlights recent rules, warnings, and legislative enactments here in the U.S. And it ends on a personal, meditative note from an AI user, worth a read. Let’s stay smart together. (Subscribe to the mailing list to receive future issues.)
The SEC has entered into settlements on charges with two investment advisers based on misleading statements in their SEC filings regarding their use of Artificial Intelligence technology. Late last year, the Chair of the SEC had warned against overstating use of AI technology so as to mislead investors, and the settlements this week show an intent to follow-through with this priority. The SEC’s efforts to protect investors dovetail with the FTC’s warnings and enforcement actions against misleading consumers by overstating AI capabilities. Companies in the AI space, particularly those with SEC filing obligations, should be aware of this enforcement activity when making claims regarding their technology.
In light of the EU’s AI legislation, Duane Morris partner Agatha Liu tells Vogue Business that fashion brands to adopt a customer-centric approach, prioritizing transparency and providing consumers with comprehensive insights into AI-driven processes. The Act’s focus on eradicating bias underscores the importance of inclusive AI models within the fashion industry. Read the full article on the Vogue Business website.
#HelloWorld. Much to catch up on from February and the first half of March. In this issue, we cover the latest AI activity from Europe, as well as a bevy of guidance and updates from U.S. agencies. Off to the races. Let’s stay smart together. (Subscribe to the mailing list to receive future issues.)
Kelly Bonner and Agatha Liu of Duane Morris LLP shared their insights and experience with CosmeticsDesign on the risks of incorporating AI technology into business practices, and how can beauty companies protect themselves.
Common uses for AI in beauty & associated risks
One of the most common uses for AI technology is personalizing products and offering personalized product recommendations. “As beauty has become increasingly personalized,” Bonner explained, “companies are increasingly deploying AI technologies to enable customers to visualize new looks (virtual try-on tech) or communicate with customers via chatbots that act as virtual assistants and offer personalized product recommendations.”
With the advent of generative AI models like Med-PaLM and ChatGPT, providers can now type complex medical questions into a chat box and receive sophisticated (and hopefully accurate) answers. This ability surpasses previous AI applications in the potential to serve patients, but also in the potential to run afoul of laws like corporate practice of medicine (CPOM) rules, the False Claims Act (FCA), and FDA regulations. These concerns — on top of the risk of a generative AI model fabricating answers, known as “hallucinations” — mean that providers should proceed with extreme caution before implementing generative AI tools into their practices.
Read the full article by Matthew Mousley on the Wharton Healthcare Quarterly website.
Duane Morris’ Agatha Liu and Kelly Bonner were interviewed by Personal Care Insights about the challenges and opportunities beauty companies face while using AI to appeal to younger consumer demographics. Below is an excerpt of the article.
How does the competitive landscape of the beauty industry impact businesses’ use of AI technologies, especially when it comes to targeting younger consumer segments?
Bonner: The highly competitive nature of the beauty industry, with its desire to appeal to younger consumers, is certainly a key driver in beauty brands embracing AI tools to offer enhanced customer shopping experiences.
Can you provide some context about US AI regulations that the beauty industry should know? What do you expect is coming, especially considering the AI Act in the EU?
Liu: The EU AI Act imposes specific obligations on the providers and deployers of so-called high-risk AI systems, including testing, documentation, transparency and notification duties.
To read the full interview, please visit the Personal Care Insights page.
Duane Morris partner Agatha Liu spoke with Personal Care Insights on potential risks, including personalization, appearance bias and regulatory compliance, as beauty companies integrate AI technologies.
How do you perceive the potential risks associated with integrating AI technologies to enhance customer experiences in the beauty industry?
Liu: In the beauty context, it’s important for companies to be aware of potential pitfalls in integrating AI technologies like virtual try-on technology (VTO), automated product or service applications or chatbots that act as virtual assistants and offer real-time, responsive product recommendations. These risks can include a lack of accuracy, lack of propriety (possibly giving offense), invasion of consumer privacy or possible IP infringement.
Read the full interview on the Personal Care Insights website.
Several Democratic senators introduced a bill intended to stop companies from utilizing predictive technology to raise prices. Businesses are increasingly delegating important competitive decisions, including price-setting power, to artificial intelligence, algorithms, and other predictive technology software. The new bill, titled Preventing Algorithmic Collusion Act, is intended to ensure that such conduct by direct competitors to raise prices does not avoid scrutiny under the antitrust laws. The proposed bill includes several important aspects. First, it would presume a price-fixing agreement exists whenever direct competitors raise prices by sharing competitively sensitive information through pricing algorithm software. Second, it would require businesses to disclose the use of algorithms in setting prices and allow antitrust enforcers to audit the algorithm. Third, it would prohibit companies from using competitively sensitive information from direct competitors in developing a pricing algorithm, and fourth, it directs the FTC to study the impact on competition from pricing algorithms. Businesses utilizing technology to help with pricing and other competitive decisions should monitor these enforcement efforts.
Privacy and data breach class action litigation, as well as AI issues, are among the key issues that keep businesses and corporate counsel up at night. There was over $1 billion procured in settlements and jury verdicts over the last year for these types of “bet-the-company” cases. At the ALM Law.com Legalweek 2024 conference in New York City, Duane Morris partner Alex W. Karasik was a panelist at the session “Trends in US Data Privacy Laws and Enforcement.” The conference, which had over 6,000 attendees, produced excellent dialogues on how cutting-edge technologies can potentially lead to class action litigation.
