FTC Resolves Another Case Involving “AI-washing”
On January 27, 2026, the Federal Trade Commission (FTC) announced the resolution of its case against Growth Cave, highlighting the agency’s ongoing scrutiny of artificial intelligence (AI)-related marketing practices. Despite significant changes within the FTC, its enforcement priorities remain consistent, particularly regarding the application of the FTC Act against companies making deceptive claims about AI products.
FTC’s Position on AI-Related Marketing Claims
In December 2025, FTC Chairman Andrew N. Ferguson stated that the agency discovered that representations made by AI companies are often “wildly inaccurate.” At an event in September 2025, Chris Mufarrige, Director of the FTC’s Bureau of Consumer Protection, reiterated the importance of trust in the marketplace for the broad adoption of AI:
“Just like everyday products and services will have difficulty being adopted in the presence of fraud or other unfair methods of competition, AI cannot be broadly adopted in the market without trust in the marketplace.” He emphasized that the FTC will enforce the law when companies deceive consumers about their AI products or the expected sales they will generate.
Since April 2025, the FTC has initiated three cases alleging deceptive marketing claims related to AI, including one case against Workado, which was resolved earlier in 2026, and another against Air AI, which remains pending.
Resolution of Growth Cave
In the case of Growth Cave, allegations included that the company misrepresented its “AI software,” GrowthBox, claiming it would “automate nearly 100% of the process” of setting up and running an online education course. However, the FTC found that the technology actually required users to manually upload advertisements, set appointments, and input messages for potential customers via text and email.
The proposed orders from the FTC include a provision that prohibits defendants from misrepresenting that a product or service will utilize AI to maximize revenues or enhance profitability, effectiveness, or efficiency. This language is significant as it aims to prevent:
- Misrepresentation of a product using AI when it does not;
- Misleading claims that AI will improve the product’s profitability or effectiveness.
The FTC has previously used similar language in orders filed to resolve AI-related business opportunity cases involving Ascend Eco, Empire Holdings Group, and FBA Machine. The agency is likely to continue utilizing this framework in future orders addressing similar marketing claims.
Looking Ahead
The FTC has consistently warned marketers of AI products to ensure the accuracy of their claims, backing these warnings with enforcement actions. Sellers are encouraged to substantiate claims made for AI products and avoid misleading consumers through AI references in their marketing materials.
As the marketplace evolves, the FTC’s stance on AI-related marketing practices serves as a crucial reminder for businesses to maintain transparency and integrity, fostering trust with consumers.
