The US Federal Trade Commission on July 1 published a proposed policy statement warning that AI companies which secretly steer their systems’ outputs toward undisclosed objectives — including to comply with state anti-bias rules — may be engaging in a deceptive practice.
What the FTC is proposing
The agency argues that consumers reasonably expect AI systems marketed as accurate and objective to actually be accurate and objective, and that quietly redirecting outputs toward a different, undisclosed goal can violate Section 5 of the FTC Act, the same statute the agency has long used against false advertising. The FTC says more than 90% of users accept AI-generated answers without independently fact-checking them, a habit it argues makes hidden output manipulation especially harmful to consumers.
A push for a national framework
The statement was issued under Executive Order 14365, signed by President Trump in December 2025 to establish a national policy framework for AI and curb state-level rules the administration views as burdensome. The FTC singles out Colorado’s revised AI law, which restricts “algorithmic discrimination,” as an example of a state requirement that could pressure companies to alter otherwise accurate outputs to avoid disparate-impact liability. The agency suggests such state mandates could be impliedly preempted where they conflict with federal consumer-protection law.
Companies aren’t barred from tuning models toward particular objectives, the FTC says — they just have to disclose it. The statement outlines a safe harbor: clear, conspicuous and persistent disclosure that a system prioritizes something other than raw accuracy would shield a company from a Section 5 claim.
What happens next
The FTC is accepting public comments on the proposal through July 31. If finalized, it would give the agency a formal basis to investigate AI companies over undisclosed output steering, and to challenge state laws that regulators argue push companies toward the same behavior. The move follows a broader administration push — including a Justice Department AI Litigation Task Force — to establish federal primacy over the patchwork of state AI rules that has emerged over the past two years.