Snap shares fall as FTC refers MyAI chatbot complaint to DOJ

Snap Shares fell 5% on Thursday after the Federal Trade Commission said it would refer a complaint against the company to the Justice Department.

The FTC’s non-public complaint includes allegations that Snapchat’s My AI chatbot poses “risks and harms to young users,” the commission said in a statement. The complaint stems from the FTC’s compliance audits of Snap since 2014 settlement regarding allegations of public deception related to data collection by the company.

As part of the FTC’s compliance inspections of Snap, the agency said it found it likely that the company “has violated or is about to violate the law.”

“Litigation is in the public interest,” the FTC said in a statement.

The FTC did not say what its complaint about the My AI chatbot was about, but the chatbot has been scrutinized before.

A Snap spokesperson disputed the FTC’s allegations in a statement to CNBC.

“Unfortunately, on the last day of this Administration, a divided FTC has decided to vote down a proposed complaint that ignores any of these efforts, is based on inaccuracies, and lacks concrete evidence,” a Snap spokesperson said. “It also fails to establish any pecuniary damage and is subject to serious First Amendment concerns.”

The spokesperson added that while the company shares the FTC’s “focus on ensuring the thoughtful development of generative artificial intelligence,” Snap believes the “complaint will stifle innovation and competition in a critical and growing sector of the economy.”

Snap made his debut My AI chatbot in 2023. This is getting stronger With OpenAI and Google’s big language models, it enables it to answer user questions and provide tips and suggestions similar to ChatGPT and other AI-powered chat tools.

The chatbot has been flagged for providing problematic responses. In one case, while talking to a reporter pretending to be a teenager, the chatbot answered, How to hide the smell of alcohol and marijuana, The Washington Post informed In 2023. Snap during the chatbot’s initial release he said My AI, like other AI chatbots, is “prone to hallucinating and delusional and anything. Please be aware of its many shortcomings, and we apologize in advance!”

In October 2013, the UK Information Commissioner released A preliminary enforcement notice against Snap, claims that the company’s My AI risk assessment “does not adequately assess the data protection risks posed by generative AI technology, particularly for children.”

The FTC said it voted during a closed session to issue a public statement about its lawsuit against Snap and its referral to the DOJ, but noted that FTC Commissioners Melissa Holyoak and Andrew Ferguson were absent.

The FTC also noted different statement President-elect Donald Trump by Ferguson was named in December to replace Lina Khan as the next FTC chair.

Ferguson noted that such requests “are not disclosed unless a complaint is filed by the Department or the Commission.”

“I was not present at the ridiculous closed-door meeting where this matter was approved,” he said.

Ferguson added that he opposes the FTC’s complaint against Snap, but “cannot publish a detailed analysis of its many problems” because the case is not open. Ferguson wrote that the complaint’s interpretations of the FTC law are “false” and “in direct conflict with the protections of the First Amendment.”

If the DOJ appeals, Ferguson said he will “further explain this affront to the Constitution and the rule of law.”

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