Member Article

From chatbots to ChatGPT, AI is transforming the way that businesses interact with consumers. Businesses should be mindful of the risks surrounding the use of AI when interacting with consumers. In this article, we offer practical guidance for businesses seeking to utilise this fast-emerging technology.

AI and consumer law: the pros and the cons

AI and consumer protection is not a one-sided story. AI can have both positive and negative effects on consumers and businesses, depending on how it is designed, deployed and regulated. 

On the one hand, AI has the potential to harm consumers by making unfair, biased and erroneous decisions. It can also be used to make dark patterns (the manipulation of consumers into making decisions that they may not have otherwise made) even more effective and sophisticated, which means it can be more difficult for consumers to realise they are being manipulated.   

“Without guardrails, it may be just as likely that AI will be used to generate more fake reviews, more quickly, which are more convincing than ever.”[2]

On the other hand, AI can assist regulators in identifying and monitoring consumer harm more easily (including breaches of the CAP code) by providing advanced data analysis of text and advertisements to detect misleading or false claims in online advertisements. This will likely increase the number of investigations, fines and enforcement actions levied by regulators in this space.

The regulatory landscape: keeping pace with the evolution of AI

In the UK, there is a myriad of legislation which is designed to protect consumers from unfair, misleading and aggressive practices by traders. However, the application of the current legislation to AI-based products and services is not straightforward. For instance, how can consumers assess the quality and fitness for purpose of a product that is constantly learning and evolving? How can traders ensure that the information they provide to consumers regarding AI-based products and services is accurate, complete and transparent? How can they respond to consumer complaints or claims if they are not fully aware of how the AI model made a decision?  

It is promising to see that the recent review of the Digital Markets, Competition and Consumers Bill (which seeks to regulate digital markets) undertaken at Committee stage in the House of Lords has proposed the following amendments, which will need to be considered before the Bill is passed later this year:

“Consumer protection: artificial intelligence labelling: Any person supplying a product or service involving artificial intelligence must give consumers clear and unambiguous information regarding any relevant health warnings and opportunities to give or withhold their informed consent to use of artificial intelligence in advance of consuming any product or service.” [3]

However, while this proposal demonstrates a desire by Government members to keep up with the rapid developments in AI, the Government has continued to adopt a laissez-faire approach to AI regulation with a reliance on existing laws such as intellectual property, data protection and anti-discrimination. It was apparent in the Government’s response to the AI White Paper consultation[4] that they do not intend to put their published AI principles on a statutory footing. Rather, they will delegate regulatory oversight to existing sector regulatory bodies, who will undertake a review of how AI impacts existing regulatory regimes in their space. The Government has confirmed plans to undertake a gap analysis to identify areas where there is no regulatory cover or areas that need more regulation and where existing regulatory powers can be enhanced. In addition, funding of £10 million has been announced to upskill regulators to help address the potential risks and opportunities AI poses. The key regulators Ofcom and the CMA have been asked to publish their approach to managing AI by the end of April 2024. 

Practical guidance for businesses   

Continuous monitoring and management of the use and deployment of AI within businesses will be crucial in the coming months, particularly given the regulators are starting to use AI to regulate compliance. Businesses, particularly those who are actively deploying AI, should wait for the outcome of the Ofcom and CMA reviews in the spring to see how these might impact existing regulatory obligations. Businesses should also follow the developments of the Digital Markets, Competition and Consumers Bill to ensure timely compliance with consumer protection laws, or else risk getting caught out!

How we can help

If you have any questions or would like to talk to us about how we can help your business comply with consumer laws,  whilst also navigating the risks of developing, procuring or implementing AI , and how the different regulations are set to evolve, please get in touch.

 

Resources

1. The Bletchley Declaration - the enigma of global AI standards (shoosmiths.com)
2. Consumers, Competition and Artificial Intelligence - GOV.UK (www.gov.uk)
3. Digital Markets, Competition and Consumers Bill concludes Lords line by line scrutiny - UK Parliament Amendment 200 
4. UK signals step change for regulators to strengthen AI leadership - GOV.UK (www.gov.uk)

 

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