FTC Signals Tough Line In First AI Discrimination Case Under Section 5

The Federal Trade Commission (FTC) announced its first enforcement action alleging that discriminatory use of artificial intelligence (AI) was an unfair practice under Section 5 of the FTC Act on December 19, 2023. According to the FTC's complaint against Rite Aid, when the retail pharmacy chain implemented facial recognition technology in a subset of its stores as an anti-shoplifting and security tool, it failed to implement reasonable safeguards to prevent false positives, i.e., instances where the technology misidentified customers as individuals who had previously engaged in shoplifting or other problematic behavior, including by failing to take steps to assess or address the disproportionate risks of misidentification based on a customer's race or gender. The FTC also alleges that Rite Aid failed to use reasonable steps to select and retain service providers capable of appropriately safeguarding consumers' personal information they received from Rite Aid,