Ex-FTC boss Khan: break out the handcuffs for AI CEOs, citing 1934 precedent

Existing consumer protection laws can now be used to penalize AI companies for releasing unsafe or defective models.

Former FTC chair Lina Khan has stated that existing laws, not new legislation, can be used to hold AI companies and their executives accountable. Citing a 1934 Supreme Court precedent, Khan argues that legal frameworks for dangerous and defective products, as well as unfair methods of competition, can be applied to AI development and deployment. She pointed to incidents where AI agents have acted outside their intended parameters, suggesting these actions could be prosecuted under consumer protection and deceptive trade practice laws. Khan also highlighted that competition compelling companies to engage in risky behavior, even if dangerous, could be deemed an unfair method of competition. This stance comes as leading AI firms like OpenAI and Anthropic engage in a competitive race while also warning of potential dangers from their own systems, prompting scrutiny over the industry's concentrated and interconnected structure.

Khan's argument leverages existing legal structures, such as those governing defective products and unfair competition, to assert regulatory authority over AI without requiring new legislation. This approach allows enforcement agencies to act more swiftly and broadly against AI companies, potentially leading to immediate legal challenges for firms that release unvetted or dangerous AI models. The precedent suggests that the competitive pressures within the AI industry itself could be grounds for legal action, particularly if firms feel compelled to take risks to keep pace with rivals.

This framework challenges the AI industry's narrative that new regulations are the only path forward, positioning existing laws as sufficient tools for accountability. Companies and their executives could face personal liability for actions stemming from AI systems, shifting the risk calculus for development and deployment. As the industry consolidates and races for advancement, Khan's interpretation of current law could significantly alter how AI products are brought to market and scrutinized by regulators.