For Business Opportunity Sellers, FTC Says “AI” Stands for “Allegedly Inaccurate”

As we approach the end of the year, it’s already clear what the buzzword of 2023 will be: “artificial intelligence.” But while this cutting-edge technology holds immense potential, some marketers have been using it as a smokescreen for their deceptive practices. That’s the message from the Federal Trade Commission (FTC), which has recently filed a lawsuit against defendants Automators AI, formerly known as Empire Ecommerce and Onyx Distribution, along with Roman Cresto, John Cresto, and Andrew Chapman.

Deceptive Earnings Claims Disguised as AI

The FTC alleges that the defendants violated the Business Opportunity Rule and the FTC Act by making misleading earnings claims packaged in the terminology of the moment. Through various means such as websites, videos, email, and social media, the defendants have purported to be ecommerce experts who have helped thousands of consumers make significant profits by running third-party stores on platforms like Amazon, Walmart, and Facebook.

The claims made by the defendants are truly eye-popping. They boast about clients making “$4k-$6k consistently monthly net profit” and even claim that one store generated “$597k in 8 months.” To add credibility to their assertions, the defendants have strategically used the phrase “artificial intelligence,” suggesting that their use of AI machine learning can result in increased revenue and margins.

Furthermore, the defendants have relied on testimonials from supposedly satisfied customers to lure in potential buyers. One endorser even claimed that their store achieved $1 million in revenue in just four months. These claims, as impressive as they may seem, now face scrutiny from the FTC.

The Reality: Few Active Stores and Financial Losses

However, behind these flashy promises lies a stark truth. According to the complaint filed by the FTC, less than 10 percent of the stores managed by the defendants were active and generating sales in June 2022. By October 2022, most of these stores had either been suspended or terminated by Amazon due to policy violations. Additionally, the FTC alleges that the majority of Walmart.com stores the defendants attempted to open were never activated or were terminated for similar policy breaches.

It becomes evident that the defendants were well aware of the dissatisfaction among their customers. The head of customer service confirmed that they routinely received numerous complaints from buyers who were losing money because their stores failed to perform as advertised. Instead of offering refunds, the defendants offered an alternative solution: another ecommerce store in a different marketplace. However, this remedy came at a cost – customers were required to sign an agreement that included a clause threatening legal action if they spoke negatively about the defendants or harmed their reputation or goodwill.

Violating Rules and Restricting Consumer Reviews

The FTC’s complaint goes beyond false advertising. The defendants are also accused of violating the Business Opportunity Rule in various ways. They made misrepresentations about income or profits, failed to provide buyers with the required disclosure document, and omitted necessary information in their earnings claims and general media ads. Additionally, the FTC alleges that the defendants’ form contracts violated the Consumer Review Fairness Act by restricting customers’ ability to express their honest opinions about their experiences with the defendants.

Related Facts:

• The defendants operated under different names before rebranding as Automators AI.
• The defendants’ automated packages required an initial investment ranging from $10,000 to $125,000.
• Some social media posts by the defendants emphasized the “completely passive” nature of their business model, where customers would receive a passive income every month after paying an upfront fee.
• The defendants introduced a coaching program, costing thousands of dollars, in which they claimed to teach participants how to use AI and chatgpt tools for scaling an Amazon store to $10,000 a month and beyond.

Key Takeaway:

The FTC’s case against Automators AI and its associates serves as a stark reminder that the misuse and misrepresentation of hot industry trends like artificial intelligence can lead to significant harm for consumers. It highlights the importance of vigilance when evaluating business opportunities and the need for regulatory bodies to crack down on deceptive practices.

Conclusion:

The FTC’s allegations against Automators AI and its founders reveal a disturbing pattern of deceptive marketing tactics. By leveraging the buzz around artificial intelligence, the defendants allegedly misled consumers into investing substantial amounts of money in business opportunities that ultimately failed to deliver on their promises.

While artificial intelligence undoubtedly holds transformative potential, it’s crucial for consumers to remain cautious and discerning amidst the flurry of marketing hype. As technology continues to evolve, it’s up to regulatory bodies like the FTC to protect consumers from unscrupulous actors seeking to exploit their trust.