FTC Archives - The National Law Forum

Kroger/Albertsons Ruling Provides Lessons for Merger Remedy Divestitures

On December 10, a federal court in Oregon issued a preliminary injunction against Kroger’s proposed $24.6 billion acquisition of Albertsons, which would have been the largest supermarket merger in US history (Albertsons terminated the merger agreement after the ruling).¹ The Federal Trade Commission, the District of Columbia, and eight States filed the suit in February 2024, alleging that the transaction would substantially lessen competition in violation of Section 7 of the Clayton Act. The opinion by Judge Adrienne Nelson tackled a number of interesting antitrust issues, including the government’s allegation that the merger would reduce competition not only for grocery store sales but also for union grocery store labor. However, one of the most instructive aspects of the opinion is the court’s rejection of the defendants’ proposed divestiture package.

We have outlined the scope of the competitive problem that the divestiture needed to mitigate, the parameters of the proposed divestiture, and the deficiencies the court found. Companies assuming that divestitures will eliminate regulatory concerns about the anticompetitive impact of a transaction should examine whether there is a divestiture package that is commercially acceptable and that can account for the concerns Judge Nelson highlighted. The antitrust agencies and courts will almost certainly use this latest judicial decision as guidance when evaluating such proposals.

Competitive Problem

The government’s economic expert offered what the court found to be a persuasive market concentration analysis showing the merger would be presumptively anticompetitive in 1,574 local geographic markets for “supermarkets” and 1,785 local geographic markets for “large format stores” (i.e., traditional supermarkets and supercenters, natural and gourmet food stores, club stores, and limited assortment stores). The court also found evidence (ordinary course documents and witness testimony) of substantial head-to-head competition between the merging firms bolstered the government’s case. Finally, the court credited the government’s expert’s analysis showing that the loss of head-to-head competition would lead to price increases at numerous stores. The government thus put forth a multiprong prima facie showing that the merger would lessen competition substantially. On rebuttal, the defendants first sought to establish that competitive entry and merger efficiencies would mitigate the merger’s anticompetitive effects, but the court was not convinced. The defendants then attempted to show that their proposed divestiture remedy would solve the competitive concerns.

Divestiture Proposal

Defendants entered into an agreement — contingent on the merger closing — to divest 96 Kroger stores and 483 Albertsons stores to a third party. The proposed third-party divestiture buyer is primarily a wholesaler but has acquired retail chains in the past and currently operates approximately 25 stores. The divestiture package also included ownership of four store banners, a license to use two other banners in certain states, ownership of five private label brands, a temporary license to use two other brands, six distribution centers, and one dairy manufacturing plant. A transition services agreement provided the divestiture buyer the right to use certain of the defendants’ services, technology, and data for periods ranging from six months to four years.

Deficiencies

The court explained numerous ways in which the Kroger-Albertsons divestiture package was inadequate to sufficiently mitigate the anticompetitive effects of the merger and overcome the government’s showing of a substantial lessening of competition:

Many markets unaddressed – The court noted that 113 of the presumptively unlawful markets did not contain even a single store to be divested, meaning the divestiture would have done nothing to change the merger’s anticompetitive effects in those markets. (The high number of unaddressed markets was in part a function of the fact that the defendants’ economic expert utilized a market definition method and applied market concentration presumption thresholds that differed from those the government advanced and the court adopted.)
Many markets insufficiently addressed – Other markets contained divestiture stores, but those divestitures were insufficient to take away a presumption of harm. Crediting the government’s economic expert, the court noted that even if all the proposed divestitures were perfectly successful, the merger would still have been presumptively unlawful in 1,002 local supermarket markets and 551 large format store markets based on market concentration levels.
Risk of unsuccessful divestitures – The court also agreed with the government’s analysis showing that if divested stores were to lose sales or close, the number of presumptively problematic markets would rise significantly. For example, if the divested supermarkets were to lose 10 percent of their sales, the number of presumptively unlawful markets would increase from 1,002 to 1,035. If they lose 30 percent of their sales, the number would increase to 1,276.
Mixed and matched assets – The divestiture package did not represent an existing, standalone, fully functioning company but rather a mix of stores, banners, private labels, and other assets. This meant the buyer would have had to rebanner 286 of the 579 divested stores (and for some of these stores, the buyer would not be acquiring any banner currently used in the state). The court cited testimony from the government’s expert in retail operations and consumer shopping behavior, as well as other witnesses, explaining that rebannering is complicated and risky. The divestiture buyer also would have eventually lost access to many Kroger and Albertsons private label brands that customers are familiar with and would need to replace those with new private label products. The court noted witness testimony emphasizing the importance of private label brand equity and recounting the time required to launch a new private label brand.
Divestiture size – The court expressed concern that with only 604 total stores (25 existing stores plus the 579 divested stores), the divestiture buyer may not have replaced the competitive intensity lost from Kroger and Albertsons, each of which had thousands of stores.
Divestiture buyer’s experience – The court was concerned that the divestiture buyer had no experience running a large portfolio of retail grocery stores. The 579 divestiture stores included hundreds of pharmacies and fuel centers, whereas the buyer’s current 25 stores include only one pharmacy and no fuel centers. The court also noted that the buyer’s experience offering private label products was much more limited than what the divestiture stores demand and that the buyer currently lacks any retail media capabilities, which would have taken three years to set up.
Divestiture buyer’s track record – The buyer has made divestiture purchases in the past, which the court noted have not been successful. Specifically, the buyer acquired 334 retail grocery stores between 2001 and 2012, but only three remained under its operation by the end of 2012 (the rest were closed or sold off). The court also cited evidence that the buyer’s current stores are performing below expectations.
Transfer of employees – Approximately 1,000 Albertsons employees agreed to transfer to the divestiture buyer, including Albertsons’ current Chief Operating Officer, who had experience with prior divestiture integrations. The court found, however, that these transfers would not have fully mitigated the buyer’s inexperience and lack of success in grocery retail and could not overcome difficulties inherent in the selection of assets and structure of the transition services agreement in the divestiture package.
Divestiture buyer’s independence – The court viewed the transition services agreement as broad in services and time. It noted that the buyer would remain interdependent with the merged firm for many years. The court expressed particular concern over the fact that Kroger would have provided sales forecasting data and a base pricing plan to the buyer, which the buyer could have adjusted only by communicating with Kroger’s “clean room.”

1 Federal Trade Commission v. Kroger Co. & Albertsons Cos., Inc., 2024 WL 5053016, No. 3:24-cv-00347 (D. Or. Dec. 10, 2024).

FTC Closely Monitoring Healthcare Lead Generators As Open Enrollment Begins

The Federal Trade Commission is watching the healthcare lead generation industry closely.

On December 10, 2024, the Federal Trade Commission announced that it has sent warning letters to 21 companies that market or generate leads for healthcare plans. The letters were sent as open enrollment season for healthcare plans is ongoing. They provide guidance and provide about deceptive or unfair claims that likely violate laws enforced by the FTC.

The letters were sent to companies that provide marketing or advertising, including lead generation, related to Affordable Care Act Marketplace health insurance and healthcare-related products, such as limited benefit plans and medical discount programs.

“It is critical for consumers’ health and financial well-being that marketers of health plans be honest about the plans they and their partners are offering,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC has been watching this important sector closely, especially during open enrollment season, and these warning letters put companies on notice that unlawfully marketing or advertising health plans to consumers can result in serious legal consequences.”

Based on information collected by FTC staff and the agency’s enforcement experience in this area, the types of claims FTC staff has warned about include those that may:

misrepresent the benefits included in a healthcare plan, including any insurance benefits;
misrepresent that a healthcare plan is major or comprehensive medical health insurance or the equivalent of such health insurance;
misrepresent the costs of healthcare plan; and
falsely claim that consumers who enroll in a healthcare plan will receive free offers, cash rewards, rebates, or other incentives.

Consult with a season FTC defense lawyer if you are a lead generator or marketer of health insurance leads in order to minimize risk of government scrutiny.

The letters provide examples of prior relevant FTC actions against marketers and lead generators that operate in this field, including Simple Health, Benefytt Technologies, Partners in Healthcare Association, and Consumer Health Benefits Association.

While the letters do not allege any wrongdoing by any of the recipients, they encourage the companies to conduct a thorough review of their advertisements to ensure they are complying with applicable laws and rules, and the letters note that the FTC is closely monitoring this marketplace for unlawful conduct that is harming consumers.

What to Expect in 2025: AI Legal Tech and Regulation (65 Expert Predictions)

Oliver Roberts is Editor-in-Chief of AI and the Law at The National Law Review, Co-Head of the AI Practice Group at Holtzman Vogel, and CEO/Founder of Wickard.ai

As 2024 comes to a close, it’s time to look ahead to how AI will shape the law and legal practice in 2025. Over the past year, we’ve witnessed growing adoption of AI across the legal sector, substantial investments in legal AI startups, and a rise in state-level AI regulations. While the future of 2025 remains uncertain, industry leaders are already sharing their insights.

Along with 2025 predictions from The National Law Review’s Editor-in-Chief Oliver Roberts, this article presents 68 expert predictions on AI and the law in 2025 from federal judges, startup founders, CEOs, and leaders of AI practice groups at global law firms.

Predictions from The National Law Review’s Editor-in-Chief Oliver Roberts

Oliver’s Predictions for AI Regulation: In 2025, I do not expect Congress to pass any comprehensive federal legislation that limits or prohibits the use or development of AI. However, I expect more federal investment in AI research and education and the imposition of more restrictive export controls on the export of AI technologies to adversarial nations.

While plaintiff publishers battle AI companies in court over alleged copyright infringement, I do not expect Congress to step into this copyright debate in 2025. Even though copyright law falls within Congress’s purview in the U.S. Constitution, I predict that Congress will let the cases play out in court before Congress steps in. Still, Congress will likely monitor this situation in 2025 because an adverse ruling for AI companies could significantly impair the LLM training and development process in the U.S. and have harmful downstream effects for U.S. innovation and national security.

I predict that President-elect Donald Trump will fulfill his campaign promises by revoking President Biden’s Executive Order on AI (E.O. 14110) in January 2025 and replacing it with an order prioritizing AI innovation and investment. President Trump’s appointment of David Sacks as “White House AI & Crypto Czar” also portends a free market approach to AI in the coming year.

Similarly, I do not expect any federal agencies to issue regulations restricting AI use or development in 2025. During the Biden Administration, the Federal Communications Commission (FCC), Federal Election Commission (FEC), and Federal Trade Commission (FTC) refrained from issuing new regulations on AI. Under the Trump Administration, I predict the same inaction—with one caveat. Despite his restrained approach to AI regulation, incoming FCC Chairman Brendan Carr has supported FCC rulemaking requiring callers to disclose their use of AI-generated calls and text messages. With public comment completed and this proposed rule still pending, it is possible that the FCC issues final rulemaking in 2025—although I find it unlikely that the FCC would ultimately deviate from the Trump Administration’s laissez-faire approach to AI regulation.

In the absence of federal legislative activity, I expect states to be very active in AI regulation. At least 33 states formed AI committees or task forces in 2024, so I expect the issuance of many AI reports and recommendations, leading to more legislative activity. I expect at least a majority of states to pass laws banning, limiting, or requiring watermarking on AI-generated deepfakes, especially in elections and in the creation of sexually explicit content.

To date, the only state to pass comprehensive AI legislation is Colorado with the Colorado AI Act, which will take effect in February 2026. Given rapid advancements in AI and the bill’s heavy-handed approach, I predict that Colorado will be forced to amend the Colorado AI Act to reduce regulatory obligations on developers prior to its implementation. I

Further, I predict that many state legislators will copy the “risk-based” approach to AI regulation, which is at the core of the European Union AI Act and the Colorado AI Act. One example of this is the draft Texas Responsible AI Governance Act (“TRAIGA”), which is set to be introduced by Republican Texas State Rep. Giovanni Capriglione in January 2025. If enacted, TRAIGA would become the nation’s most restrictive state AI bill. However, given Texas’s pro-business political climate, I anticipate that this bill will fail to pass.

I also believe that many legislatures will come to recognize the illogical and overreaching nature of these “risk-based” regulatory approaches. For instance, TRAIGA prohibits the use of AI systems for “social scoring,” yet it does not ban social scoring conducted without AI. This discrepancy highlights a fundamental flaw in such frameworks: they penalize the use of AI broadly without fully addressing the underlying harmful behavior. This approach not only stifles innovation and burdens smaller businesses but also focuses on speculative risks rather than addressing actual harms, creating a fragmented and overly restrictive regulatory landscape. As AI rapidly develops, I expect legislatures to eventually ditch this approach.

Oliver’s Predictions for AI Technology: In 2025, I predict that lawyers and law firms will realize that AI will replace lawyers in the coming years. Since the release of ChatGPT in November 2022, we’ve heard the adage, “AI won’t replace lawyers, but lawyers who use AI will replace those who don’t.” I’ve always thought this was overoptimistic, and perhaps defensive thinking from legal practitioners. Whether you’re reading this article now, in 2025, in 2026, or 2050, AI technology is at its weakest point at this very moment. It is only improving.

Given rapid advancements in LLM reasoning capabilities and improving agentic and multimodal functionalities, I believe that AI will replace entry-level lawyers within the next 5 years. Along with improvements in LLM capabilities, Google’s recent breakthrough with its quantum computing chip Willow portends a quicker timeline for the commercialization of quantum computing technology, which will provide even stronger computational power and “be the most revolutionary technology in human history,” as I previously wrote about in June. For perspective, Willow was able to “perform[] a computation in under five minutes that would take one of today’s fastest supercomputers 1025 or 10 septillion years,” according to Google Quantum AI Founder Hartmut Neven.

But similar to the ever-changing definition of Artificial General Intelligence (“AGI”), I do not believe there will ever be a clear demarcation for when we achieve fully operational legal intelligence (“FOLI”), which is the point at which an LLM can perform legal tasks with the proficiency of a lawyer. Rather, I expect this to be an evolving debate with practical manifestations in the form of law firms downsizing staff or reassigning lawyers to quality control, while AI agents execute full workflows autonomously and semi-autonomously. And even if we achieve FOLI, I believe there will always be managing attorneys and associates reviewing the final work product and incorporating human judgment as needed. I predict that these discussions will become more prevalent in 2025.

In 2025, I also expect an internal movement within “big law” firms to better document their internal knowledge and processes, so this data can be leveraged to fine-tune and customize in-house LLMs, as I detailed previously here.

Finally, I predict that in 2025, legal AI companies will enter into licensing agreements with legal-specific publishers to secure access to high-quality legal analysis for training their models. Thus far, OpenAI has already demonstrated this approach by licensing content from mainstream publishers. And legal AI startups have begun hiring former “big law” lawyers to enhance the performance of their systems through human-in-the-loop feedback. Establishing a steady pipeline of training data directly from legal professionals via legal publications could significantly improve the fine-tuning of legal-specific LLMs, paving the way for more accurate and reliable applications in the legal field.

Predictions from 65 Industry Leaders

In addition to my predictions, I asked 65 industry leaders about their predictions for legal AI in 2025. Here’s what they had to say:

Hon. Allison H. Goddard | Magistrate Judge, U.S. District Court for the Southern District of California

2025 Prediction: Federal courts will begin to leverage the benefits of GenAI in their workflow. The law school graduates who begin federal clerkships will have used GenAI for legal research and writing, and federal courts will benefit from that experience. The “robots” won’t be making decisions for the courts, but they can help improve the efficiency and accuracy of our work.

Biggest Surprise 2025: GenAI will improve access to justice by making the legal system more accessible and understandable to pro se litigants.

Kirk Nahra | Partner, Co-Chair Cybersecurity and Privacy Practice and Artificial Intelligence Practice, WilmerHale

2025 Prediction: We will continue to see regulatory enforcement of false representations about AI, but will also see new investigations into misuse of AI. There will be an emphasis on specific consumer harms that will be driven by anecdotes, which will threaten the broader regulatory structure for AI. Much of this will be driven at the state level, and will create real tensions with appropriate development of AI as a useful tool benefiting both industry and consumers.

Biggest Surprise 2025: I am watching two things. I think we will see aggressive investigations in AI that will over-value specific examples of problems in a way that threatens the appropriate development of AI. I also think we will see situational legislation at the state level specifically addressing individual situations, leading to a chaotic development of legislation on these issues.

Kathi Vidal | Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office

2025 Prediction: In an increasingly global economy, AI challenges traditional notions of responsibility and ownership (including intellectual property), demanding a global framework that balances innovation, creativity, equity, and protection. In 2025, we may see countries diverge on regulations and legal frameworks, highlighting the need for international cooperation and a harmonized approach. As AI research encounters limits to scaling training data alone, new paradigms such as retrieval-augmented generation and inference-time scale will be needed to advance progress in AI – the implication of which the legal community has yet to fully explore. We will also likely see market-driven solutions that address both data limitations and copyright owners’ concerns related to the use of their copyright-protected works in training.

Biggest Surprise 2025: Though I wouldn’t characterize it as a surprise, we will see a rise in companies and product offerings performing certain legal tasks with AI, and we’ll see reactions from the judiciary and government bodies to ensure submissions comply with traditional and evolving standards for accuracy, veracity and trustworthiness.

Bridget McCormack | CEO and President, American Arbitration Association

2025 Prediction: AI is not slowing down, it will continue to grow exponentially. We haven’t witnessed an asymptote in the technology and I expect we will continue to see order of magnitude improvements. Adoption will not slow down either. According to Andreessen Horowitz AI budgets for enterprise companies grew 2.5x from $7 million in 2023 to 18 million in 2024 and I expect to see AI spending ramp up even more in 2025. Lawyer adoption will continue to skyrocket as well.

Biggest Surprise 2025: Despite AI’s growth, lawyers will find themselves busier than ever. Like WebMD which led to an increase in doctor visits, GenAI tools like EvenUp are already leading to an increase in claims filed.

Danny Tobey | Partner, Global Co-Chair, and Chair of DLA Piper Americas AI and Data Analytics Practice

2025 Prediction: Organizations are waking up to the massive potential of AI—and the risks it brings if not properly managed. One of the biggest hurdles for organizations is keeping up with the surge of new laws and standards and understanding how they all fit together. I believe the future belongs to organizations that take a proactive approach to compliance, leveraging advanced technology-based solutions to navigate these complexities, all while ensuring they have the right legal expertise to stay ahead.

Cassandra Gaedt-Sheckter | Partner, Gibson, Dunn & Crutcher

2025 Prediction: There are likely to be many predictions on the growth of AI development, adoption by companies, and reading tea leaves on regulation. All are very possible. Importantly with these developments, I believe the transactional considerations from a privacy, IP, and data protection perspective, are bound to grow, regardless of how any of those topics pan out, and that AI will be an increasingly significant target for PE and business growth. The focus on these areas in M&A transactions–whether analyzing the risks associated with deploying AI (use and implementation), or AI developers–of which there will be increasingly more where the line is blurry, and many will be both; the outsourcing and services agreements; and the related corporate governance issues; will grow. AI in 2025 from a transactional perspective is likely to be what privacy was in 2016-2020, in many ways, including with respect to regulatory compliance, emerging to receive nuanced attention as a topic in transactions, and DPAs. DPAs will no longer focus mostly on data privacy, but rather focus on data processing more generally.

Biggest Surprise 2025: A comprehensive AI law would be a huge surprise.

Jill Holtzman Vogel | Managing Partner, Holtzman Vogel PLLC | Virginia State Senator (2008-24)

2025 Prediction: Like Holtzman Vogel, I expect every competitive law firm in the tech space to launch an AI Practice Group by the end of 2025. As AI is becoming integrated in all aspects of business, the dual need for legal and technical expertise has never been more important. I believe tech companies greatly value this dual expertise, and law firms will adapt accordingly in the new year.

Mark McCreary | Partner, Chief AI & Information Security Officer, Fox Rothschild LLP

2025 Prediction: I believe that there will be two major trends in 2025, the first being legal generative AI tools will likely feature more robust natural language capabilities, enabling advanced drafting, real-time analysis, and predictive litigation outcomes. What I mean is that prompting will become less relevant and less likely to lead to results that vary in quality based on the prompt itself, and the tool will be more successful in understanding what the user needs. Second, I believe that product development will focus on domain-specific AI, tailored to niche legal areas like family law or tax compliance. The idea of having one tool that can handle dozens of tasks will become less relevant, partly because of the exorbitant costs we have seen, and partly because practitioners generally need laser-focused tools to help with tasks for which generative AI is well-suited.

Biggest Surprise 2025: The biggest surprise in legal AI in 2025 is likely not a surprise to many people, but it will be that bar associations, legal groups, and courts will continue to try and put hard and fast rules around attorney use of AI. Creating black and white requirements, such as when client-specific consent to use AI is required (beyond what is already required and prohibited under current ethical rules), or disclosures of court filings when an AI tool is used, will create unnecessary impediments and negative inferences that will slow the adoption and use of legal AI tools.

Mark Williams | Co-founder & Co-Director, Vanderbilt AI Law Lab (VAILL)

2025 Prediction: All roads lead to agents, whether it’s legal-specific products, frontier models or anything in between, agentic AI and moving beyond the chatbot interface will be the theme. That goes for governance frameworks as well which up to now generally don’t seem to account for this form of deployment in an in-depth way.

Biggest Surprise 2025: What won’t be a surprise! With a new federal regime, I think unpredictability in AI regulation could be the norm.

Fred Lederer | Chancellor Professor of Law and Director, Center for Legal & Court Technology, William & Mary Law School

2025 Prediction: As at least claimed AI use and benefits increasingly penetrate the legal world, particularly low cost open source applications, lawyer misunderstanding of AI will become ever more evident, leading to error and confusion. Multi-jurisdiction attempts to regulate AI, many of which will lack sufficient specificity for lawyers, will create conflicting rules yielding concerns about jurisdiction and liability. Meanwhile, most law schools will continue to largely ignore AI implications. Hopefully, we will survive the confusion and concentrate on forging useful guidance and controls.

Biggest Surprise 2025: The degree to which relatively inexpensive AI products will penetrate the legal profession’s day-to-day operations.

Julian Nyarko | Professor of Law, Stanford Law School; Associate Director, Stanford Human-Centered AI Institute

2025 Prediction: As the legal industry grapples with artificial intelligence’s potential, I hope and expect 2025 to see a crucial shift toward more rigorous and systematic evaluation frameworks for legal AI tools, moving beyond the current state of limited understanding and ad-hoc assessments. Combined with the emergence of more “hybrid experts” – professionals equally versed in both legal practice and AI technology – this could drive incremental yet meaningful improvements in legal AI applications. Rather than dramatic advancements, I expect 2025 to be characterized by steady, measured progress as the industry focuses on refining existing technologies and establishing better standards for their use.

Biggest Surprise 2025: I would be particularly excited to see creative uses of multimodal models (those that work not only with text, but also audio, video etc.) in the legal domain, e.g. for AI assisted coaching.

James Ding | CEO & Co-founder, DraftWise

2025 Prediction: As the pace of AI model progress begins to slow, the focus will shift towards building value on top of existing model capabilities. We’re already seeing this — AI providers are increasingly productizing advancements (e.g., OpenAI’s chain-of-thought reasoning and Claude’s desktop automation), which offer tangible applications to users. Vertical AI solutions, once dependent on foundational models, are now accelerating through active usage and deployment, providing real-world feedback that helps refine future models. While we may be reaching the end of a rapid growth curve, we will see a move toward more refined, applied versions of Generative AI that prioritize practical integration over groundbreaking leaps.

Biggest Surprise 2025: We’ll continue to be surprised by the rate at which lawyer willing and excitedly adopt AI and readily use AI in their day to day.

Daryl Lim | H. Laddie Montague Jr. Chair in Law; Associate Dean for Research and Innovation; Founding Director, Intellectual Property Law and Innovation Initiative; Co-hire, Institute for Computational and Data Sciences and Affiliate, Center for Socially Responsible Artificial Intelligence, Penn State University

2025 Prediction: Law firms will increasingly adopt sophisticated generative AI tools to streamline drafting, contract analysis, and predicting litigation outcomes, boosting both efficiency and access to legal services. Workflows will evolve to integrate AI into routine tasks like discovery and billing, allowing lawyers to concentrate on strategic and client-focused responsibilities. There will also be a growing emphasis on ethical AI certifications and compliance audits as firms and corporations prioritize responsible AI usage. Additionally, legal AI will revolutionize dispute resolution, with AI-powered platforms facilitating mediation, arbitration, and early case assessments online.

Biggest Surprise 2025: A black swan event could involve a crisis where AI systems are weaponized to manipulate legal proceedings—fabricating evidence, falsifying contracts, or influencing arbitration decisions in high-stakes cases. This could force rapid, coordinated action among global legal and regulatory bodies, highlighting vulnerabilities in the reliance on AI and prompting a reevaluation of digital trust and cybersecurity standards in international legal practice.

Andrew Perlman | Dean, Suffolk University Law School

2025 Prediction: As Bill Gates and others frequently say, we overestimate the amount of change in two years and underestimate it over ten. We are still only 2 years into the generative AI era, so I predict that 2025 will not bring about a fundamental transformation of the legal industry. Rather, we will continue to see a steady and material increase in the adoption of such tools as part of a trend toward a seismic shift in how legal services are delivered in the long term

Biggest Surprise 2025: Some lawyers may be surprised by their clients’ enthusiasm for generative AI. Far from being skeptical about these tools, clients will recognize that generative AI, when properly and ethically deployed, can improve the efficiency and cost-effectiveness of legal services.

Dennis Kennedy | Director, Center for Law, Technology & Innovation, Michigan State University

2025 Prediction: The real battle for the future of legal services will happen in the middle market in 2025, not in BigLaw, as corporate clients demand AI-driven efficiency and alternative providers and mid-sized and small firms demonstrate better ways to meet client needs. Look for signals from corporate law departments bypassing their traditional large outside counsel firms to work directly with firms and providers who better leverage AI with fair pricing models. Corporate legal departments will accelerate this trend by building sophisticated internal AI capabilities, expanding legal operations teams and partnering with legal tech companies rather than paying law firm premiums for routine work. Big firms will face an existential choice between becoming technology companies that practice law or slowly losing relevance as their traditional client base erodes.

Biggest Surprise 2025: In 2025, the legal profession’s retrenchment on AI initiatives and defensive approaches to AI regulations and adoption will accelerate its own decline by giving alternative providers room to innovate while lawyers remain stuck. Like the Maginot Line, the legal profession’s elaborate defenses of the guild will prove useless as clients and other providers using AI simply route around them.

Bonnie Shucha | Associate Dean, University of Wisconsin Law School

2025 Prediction: The critical thinking skills that law schools have always instilled in students will become even more essential in 2025 under ABA Formal Opinion 512, as lawyers must make informed decisions about whether and how to use generative AI in their practice. As these technologies become standard features within legal software and practice management systems, more law schools will respond by offering foundational instruction to ensure all students understand AI basics and specialized electives that delve deeper into AI implementation and ethics. The core skills of critical thinking, legal analysis, and professional judgment will become even more crucial as lawyers learn to ethically and effectively navigate an increasingly AI-augmented practice environment.

Biggest Surprise 2025: The biggest surprise in legal AI in 2025 may be how smaller, rural communities creatively leverage generative AI to address critical shortages of legal personnel, potentially transforming how these jurisdictions deliver essential legal services.

Amy J Schmitz | Professor & John Deaver Drinko-Baker & Hostetler Chair in Law Director, JusticeTech Co-Director, Translational Data Analytics Institute Responsible Data Science CoP Michael E. Moritz College of Law, The Ohio State University

2025 Prediction: Legal RAG systems will gain even greater prominence, and law schools will ramp up education around use of AI in the practice of law. Meanwhile, we will see further proliferation of regulations and guidance around use of AI — leading to a legal patchwork on a global level.

Biggest Surprise 2025: The bubble will burst with respect to general LLMs, and neurosymbolic AI will emerge as a new “shiny thing” in the AI space.

Bradley Collins | CEO – LegalTechTalk

2025 Prediction: I believe LegalTech is where FinTech was 15 years ago and Insurtech was 8 years ago from an investment (& adoption) perspective, expect to see an accelerated number of startup unicorns arising in this space, both from B2B SaaS startups, as well as ALSPs that will start to compete with law firms. We will see more and more law firms and legal departments investing big into legal AI platform roll outs, now that we have tried and tested learnings from ‘early movers’. We will also see many more law firms trailing more ‘pilot’ campaigns with vendors as they test and learn new products that continue to enter the market.

Biggest Surprise 2025: The biggest surprise (yet a real possibility) will be that the Netflix of legal is born, i.e. a tech startup that competes with the big firms (of course not without hurdles and challenges to get through). We’ve seen big disruption from the likes of Revolut, AirBnb, Uber, Netflix, Amazon to name a few in other industries over the years – is Legal the next to be disrupted in a similar way?

Jonathan Askin | Professor of Clinical Law, Brooklyn Law Incubator & Policy Clinic

2025 Prediction: I predict we’ll see a flood of AI-created inventions. Because patents require human inventors (at least in the United States), many of these inventions will be open-sourced to the world. On the virtuous side, many new medicines designed by AI to target various illnesses will be cheaply available without pharmaceutical company gatekeepers. On the nefarious side, some designer drugs (and other illicit products like weapons) will also be invented, open-sourced, and readily self-manufactured (or available through cryptocurrency payments) and widely available without any government oversight.

Biggest Surprise 2025: We’ll see multiple failed attempts for international treaties attempting to develop an international framework to govern the use and misuse of AI systems.

Ross Guberman | Founder and CEO, BriefCatch

2025 Prediction: Many attorneys and judges will be shocked at how effectively GenAI products and agents begin to think strategically about cases and transactions and predict outcomes.

Biggest Surprise 2025: It will become commonplace for clients to ask law firms why they’re not using legal tech to reduce bills and avoid errors.

Blake Rooney | Chief Information Officer, Husch Blackwell

2025 Prediction: Artificial intelligence in 2025 will begin to transform legal work through intelligent process chains – where one AI task naturally flows into the next. Imagine an AI that doesn’t just summarize a deposition but automatically extracts action items, drafts follow-up requests, and perhaps even takes on more of the process. For attorneys, this progression from sequential manual steps to fluid, interlinked AI assistance could dramatically boost their daily productivity. The key will be AI that understands the natural flow of knowledge work rather than just handling isolated tasks.

Biggest Surprise 2025: Advances in document generation via AI will start to mature and accelerate attorney productivity in 2025. Several products and the large language models themselves are becoming far more capable.

Ted Theodoropoulos | CEO, Infodash

2025 Prediction: In the two years since ChatGPT’s release there has been a lot of fear, excitement, uncertainty and experimentation. There has been very little true transformation up to this point in how legal work gets done. 2024 has largely been a year of experimentation as evidenced by the dozens of academic studies evaluating the capabilities of both the frontier models and legal specific vendor platforms. That trend will continue through the first half of next year as we continue to separate the wheat from the chaff; however, we should see real progress towards transformation as implementation efforts gain traction in the second half of 2025.

Biggest Surprise 2025: Prompt engineering will die a slow death in the next 12 months. AI systems will provide more structured interfaces than an empty text box for users to communicate what they want and will ask the necessary clarifying questions when necessary.

Manny Griffiths | Co-Founder & CEO, Hona

2025 Prediction: The cream for document-producing AI companies will rise to the top. So many companies have gotten funding, but only a handful will make it. Tools that are built within Case Management Software are going to be the most highly adopted. It makes sense to have the tools directly in the system of record.

Biggest Surprise 2025: Non-document or summary-related AI products will get hot. You will see more voice AI and automation AI tools take off in the legal market.

Gabe Teninbaum | Asst. Dean of Innovation, Strategic Initiatives, and Distance Education and Professor of Legal Writing at Suffolk University Law School

2025 Prediction: By 2025, legal AI will shift from supporting tools to decision-making partners, with agentic systems managing tasks like compliance monitoring and preliminary dispute resolution. The surprise won’t be AI’s capability—it will be the speed at which clients demand its adoption. Regulation will likely lag behind, forcing the profession to navigate uncharted ethical and practical territory. The lawyers who thrive will be those who embrace AI as an ally rather than resist it.

Biggest Surprise 2025: The biggest surprise in legal AI in 2025 will be the emergence of agentic AI—systems capable of taking autonomous, goal-driven actions within set parameters. These tools won’t just assist lawyers but will independently draft contracts, conduct negotiations, and even manage compliance, pushing the profession to redefine what it means to “practice law.”

Mike Swarz | Director of Marketing @ Trellis

2025 Prediction: 2025 will see heightened demand for a legal productivity solution – leveraging AI and state court data to automate legal tasks! Legal teams will discover a solution, harnessing the largest repository of state court data, to help them: evaluate cases, automate brief drafting, suggest winning strategies, and more. Win rates will be boosted, and playing fields leveled, for those who engage and capitalize on this new legal tech.

Biggest Surprise 2025: ‘Google’-searching state trial court records – across the country – to uncover key intelligence (& analytics!) on: judges, verdicts, opposing counsel, motions, rulings, dockets and other legal issues. This is now the norm.

Jeremy Ben-Meir | Co-Founder & COO at PointOne

2025 Prediction: The integration of AI into cloud-based platforms will continue to push large firms toward cloud technology. However, to access the latest AI advancements, these firms must balance the benefits of cloud adoption against the familiarity of maintaining their on-premise systems. Through this process, they will have to develop new methods to evaluate these new hybrid solutions.

Biggest Surprise 2025: As industry adoption of AI solutions increases, expectations and enthusiasm will encounter real-world challenges (e.g. reliability and consistency). For certain product categories, this will put downward pressure on demand as buyers become more discerning and focus on solutions that demonstrably enhance efficiency and reduce costs.

Daniel Lewis | CEO, LegalOn Technologies

2025 Prediction: In-house legal teams will take center stage. They’ll showcase the successful adoption of AI tools and demonstrate big efficiencies in contract review, redlining, and answering questions from across the business.

Biggest Surprise 2025: Legal AI will not upend law firms’ billable hour, but it will continue to enable and accelerate the flow of legal work moving in-house.

Colin Levy | Director of Legal and Evangelist, Malbek

2025 Prediction: I envision a proliferation in multi-modality models, e.g. more powerful models capable of Models capable of integrating text, image, audio, video. 2) Further evolution of Generative AI solutions from simply being tools to being autonomous agents capable of decision-making and executing tasks in constrained environments.

Biggest Surprise 2025: Likely further debate over detecting real vs created imagery and video as well as further debate around use of Gen AI in education and at what levels of education.

Jon M. Garon Professor of Law and Director of the Goodwin Program for Society, Technology, and the Law @ Nova Southeastern University Shepard Broad College of Law

2025 Prediction: As predictive AI systems drop in price, they are going to become essential for many legal business operations, including e-discovery and legal informatics. The hype around retrieval-augmented generation will fade as hallucinations continue to limit AI’s use in legal research. Instead, the largest potential use will be for forum shopping and the use of predictive AI to anticipate the tendencies of sitting judges, a practice that will also raise ethical concerns.

Biggest Surprise 2025: The potential for user-operated agents will grow exponentially as these apps create the power to automate calendaring, meeting coordination, note-taking, work-out buddies, and much more, becoming true personal assistants. Lawyers will need to be careful that the agents do not disclose personal or client data, but with that problem solved, these will grow into a significant new market.

Sateesh Nori | Senior Legal Innovation Strategist

2025 Prediction: In 2025, we will begin to see consumer-facing legal AI tools hit the market. The “unauthorized practice of law” rules will be relaxed in many more states. Finally, my elderly parents will be using AI in their everyday activities.

Biggest Surprise 2025: We will see the demise of UPL restrictions.

Isaac Rutenberg | Associate Professor of ICT Policy and Innovation, Strathmore University (Kenya)

2025 Prediction: I expect that the mainstream news media will start saying (loudly) that an “AI winter” is here, and that AI has been overhyped. At the same time, a majority of people in the tech industry will not agree, and will (relatively quietly) push forward with new products and technologies. I also predict that major advances will be made in language translation and preservation (including both human and animal languages).

Biggest Surprise 2025: The frequency of product liability lawsuits involving AI systems will see a large increase – people claiming they have been damaged by an AI tool (chatbot, etc.).

Kathleen (Katie) Brown | Associate Dean for Information Resources, Charleston School of Law

2025 Prediction: In the coming year, law librarians will emerge as the leaders of AI and generative AI instruction within the legal academy. Their unique blend of technological savvy and deep understanding of legal research positions them perfectly to guide this critical educational shift. We’ll see law librarians developing innovative curricula, curating AI tools, and providing hands-on training that bridges the gap between traditional legal education and cutting-edge AI applications. This leadership from law librarians will be instrumental in preparing the next generation of lawyers to thrive in an AI-enhanced legal landscape.

Biggest Surprise 2025: Despite the crucial need for advanced AI-powered verification tools, the rapid evolution of generative AI will continue to outpace our ability to reliably detect and authenticate AI-created materials.

Paul H. McVoy | Shareholder, Repario

2025 Prediction: I think that law firms and companies will continue to show a great interest in using AI in their work, but in the short term, will spend as much time and money, or more, vetting the output than if they had not used AI at all. Further, I believe that parties will challenge the use of AI, especially for discovery purposes, and courts will require detailed validation in order to endorse the use of AI tools. I am not sure that developers will be able to provide the information Judges will want to make them comfortable.

Biggest Surprise 2025: I think by the end of 2025, AI expertise will be a highly valued asset among employers in the legal field. Those who master the art of using AI will be sought after as next-gen assets and will be compensated accordingly.

Arunim Samat CEO, TrueLaw

2025 Prediction: By 2025, law firms will increasingly adopt proprietary AI models to scale expertise and improve services like investigations, compliance, and due diligence. The push from clients to leverage AI for better cost and quality outcomes will intensify. AI will primarily augment lawyers, enabling them to handle more work efficiently while streamlining workflows. We’ll also likely see clearer regulatory frameworks for AI, ensuring greater transparency and accountability in its use within legal practice.

Biggest Surprise 2025: The biggest surprise in legal AI in 2025 will be how law firms begin to adopt product-focused mindsets, moving beyond traditional services. This shift, driven by the potential of AI to scale expertise and create innovative tools, could fundamentally change how legal value is delivered and perceived.

Yonathan Arbel | University of Alabama, School of Law

2025 Prediction: Courts increasingly embrace “generative interpretation” (Arbel & Hoffman, 2024) to assist legal interpretation. The rise of the “x10 lawyer” – legal professionals who masterfully wield AI to multiply their capabilities – will reshape competitive dynamics. Strong, but somewhat ambiguous, dis-employment effects for lawyers. Rising pressure to regulate AI in legal practice will accelerate adoption of the Uniform Artificial Practice of Law (UAPL) framework.

Biggest Surprise 2025: The pace of adoption will be surprising to those who still hold a skeptical view of AI in legal practice.

Dana Neacsu | Director, Ken Gormley Law Library | Associate Professor of Legal Skills, Thomas R. Kline School of Law

2025 Prediction: These are personal opinions, informed by my research and writing, and they do not reflect my institution’s: By 2025, legal AI will likely see widespread adoption of generative AI tools tailored to drafting, contract review, and predictive analytics. Productivity will be a wash because of the need for critical review of the content, data security, bias, accountability, and client confidentiality. Responsible automation will become a buzzphrase, though few will really understand what that entails. Finally, there will be a clear bifurcation of AI-free-of-charge and AI-for-a-fee.

Biggest Surprise 2025: The U.S. will refuse to regulate AI at the federal level.

Cat Casey | Chief Growth Officer, Reveal

2025 Prediction: AI has gone from the fringes to the forefront and is transforming the legal industry faster than you can say “ChatGPT.” By 2025, it’ll go from shiny new toy to must have—seamlessly woven into legal workflows, becoming the backbone of smarter, faster, and sharper decision-making. In 2025 there will be no more endless debates and “what-if” scenarios; AI will begin to be fully embedded in the tools you use daily. This isn’t just evolution; it’s revolution. The era of AI-driven law is here, and it’s reshaping everything—from how we work to how we win. AI isn’t just along for the ride; it’s driving the future of law.

Biggest Surprise 2025: In 2025, I think we may begin to speak about AI less because it will begin the shift from novelty to normality. The what if questions will be replaced with practical tech evaluation and integration in a meaningful way. And the hype will not slow, but the hyperbole will start to fade.

Rose J. Hunter Jones | Partner, Hilgers Graben

2025 Prediction: While non-U.S. jurisdictions will likely lead the way in AI regulation, focusing on transparency and accountability, the U.S. may lag behind, leaving firms to navigate a patchwork of evolving guidelines. On the product development front, emerging AI technologies will face challenges in integrating with established industry-standard tools, forcing lawyers to weigh the benefits of sticking with familiar systems versus adopting new, potentially transformative solutions. Generative AI will continue to push boundaries, reshaping how lawyers research, draft, and strategize while amplifying their expertise.

Biggest Surprise 2025: The biggest surprise in legal AI in 2025 will be the slow pace of adoption, despite the technology’s potential to significantly reduce legal fees while maintaining or even improving accuracy. The legal industry’s inherent risk aversion will continue to stymie widespread implementation, leaving many firms hesitant to fully embrace the transformative potential of AI.

Tali Green | Co-Founder & CEO of Goodfact

2025 Prediction: Litigation lawyers will become disillusioned with the LLM-powered chronology tools that flooded the market after the arrival of ChatGPT in November 2022. Litigators will recognize that an effective AI summary requires first having a solid handle on each of the granular facts in a case. Litigators will continue to search for a tool that provides both a high level overview of their case as well as detailed and accurate depiction of each underlying fact.

Biggest Surprise 2025: Judges will start to use AI to automate a lot of their work flows, including to review and build chronologies of parties’ documents. Courts will also start to encourage or even require litigants to use AI-powered tools to more clearly and succintly convey information to the Courts.

Chris Williams | Legal Tech Expert at Leya

2025 Prediction: Legal AI products will continue to improve rapidly, with enhanced features and foundational model capabilities. However, market penetration will remain modest, and 2025 won’t be the year of a major revolution. Clients will grow more comfortable with AI use in law firms, making adoption easier. The Jevons Paradox will likely come into play, as lawyers become exponentially more productive, they will simply do more, and law firm revenues will increase.

Biggest Surprise 2025: The most surprising aspect might be that foundational models don’t change as much as anticipated. While many are looking for groundbreaking advancements like GPT-5, the real changes in value are likely to come from how people use the technology, integrate with existing solutions and apply it to create meaningful and scalable workflows tailored to specific industries.

Agbo Obinnaya | Founder & CEO, Case Radar (Nigeria)

2025 Prediction: The products will get better and with more marketing, there will be mass adoption of legal AI products.

Biggest Surprise 2025: VCs will pay more attention to the legal tech generative AI industry, especially in Africa where the legal industry is experiencing conflicting decisions by the courts.

Evan Shenkman | Chief Knowledge and Innovation Officer, Fisher Phillips

2025 Prediction: By late 2025 we will see the greatest AI value from powerful GenAI tools that don’t require user-provided prompts, but which offer powerful, real-time assistance to attorneys nonetheless. Think about tools that can listen in on depositions, trials, or client intake meetings, and provide the attorney — in real-time — with AI-powered guidance and assistance (issue spotting, identifying inconsistencies or falsehoods, etc.) based on the tool’s prior review and analysis of the entire case file. Or tools that can continually review the case docket, and then unilaterally alert the attorney of what just happened, what now needs to be done, and include GenAI-created proposed drafts based on prior firm samples. These tools are already in the works, and will be mainstream soon enough.

Biggest Surprise 2025: Litigation funding will grow significantly in 2025, lured by GenAI’s promise of more powerful and accurate case valuation and assessment models than ever before. This will bring about an unexpected increase in new case filings, more protracted lawsuits, and greater judicial backlogs.

Ken Withers | Executive Director, The Sedona Conference

2025 Prediction: I predict that starting in 2025, AI application developers will coalesce around a common foundational or “constitutional” LLMs that act like an operating system, built on trusted sources with tested built-in controls to minimize or eliminate biases, hallucinations, or malicious uses (granted, criminals will always think up some new way to extort victims or create chaos). This might take some time to come to fruition, but things happen quickly when markets pressure is brought to bear – enterprise or subject-specific AI applications built on a widely respected foundational LLM would presumptively enjoy much greater market and legal acceptance. I’m hoping that more technically sophisticated readers will say, “Oh, that’s already in the works…”

Biggest Surprise 2025: I’ve been fascinated to see the use of AI by archaeologists to re-examine ancient artifacts, especially the use of GenAI to translate previously inaccessible or undecipherable ancient texts. This will alter our understanding of the past, and while this may not have immediate “practical” application in business or government, it may have a more profound impact on history (and therefore the future).

Mitchell Kossoris | Co-Founder and CEO, Deposely

2025 Prediction: As we move into 2025, AI is positioned to increasingly bridge gaps in areas like depositions, contract negotiation, and litigation strategy. Platforms like Deposely are demonstrating how AI can transform traditionally convoluted workflows and reduce the reliance on costly experts while maintaining high-quality outcomes. These advancements will continue to empower leaner firms to leverage sophisticated legal strategies previously accessible only to BigLaw. In this sense, 2025 will see AI level the playing field — more small and mid-sized practices will reclaim their “good lawyer time” and operate more efficiently than ever.

Biggest Surprise 2025: Biggest surprise? Look for document drafting/templating to surpass legal research as lawyers’ most common use of AI in 2025. AI is being promoted from legal assistant to co-counsel, and acting more and more as a force multiplier for legal professionals, making the practice of law more proactive and data-driven.

David Moncure | Principal, Crowe LLP

2025 Prediction: Technology will continue to outpace the law. In the United States, they will continue to be a growing patchwork of state level regulation as we’ve seen in the privacy arena over the last few years. Companies will begin to reevaluate their information governance programs to account for the data proliferation that results from the use of AI.

Biggest Surprise 2025: The use of AI-assisted technology for eDiscovery document review will become readily accepted, like current uses of TAR and CAL.

Annie Lespérance | Head of Americas at Jus Mundi

2025 Prediction: The automation of legal operations will increase in 2025 thanks to genAI. While adaptation to and adoption of this new technology will remain very gradual, the development of solutions tailored to the legal sector will accelerate. The process of strengthening adoption will make it possible to really distinguish the most relevant use cases, as well as the data to be exploited as a priority. Law firms will also have to choose between generalist, turnkey solutions and those developed in-house. This choice will have an impact on their investments, and is likely to put the brakes on the development of generative AI products, which is currently ongoing.

Biggest Surprise 2025: While the number of regulations surrounding the development of AI and the tech industry is increasing in Europe ( DSA, DMA, AI ACT, DORA), the 2024 U.S. elections result point in a different direction when it comes to possible AI regulation in the U.S. market. Admittedly, law firms and legal tech companies operating on a global scale will still need to be compliant to the more stringent regulations in effect.

Nicola Shaver | CEO, Legaltech Hub

2025 Prediction: Agentic AI, with the capability to automate legal workflows end-to-end, will become more prevalent in 2025, as will AI-enabled workflows generally. We will see a move away from the chatbot model to generative AI that is built in to the systems where lawyers work and that mimics the way lawyers work, making it easier to adopt. Lawyers should expect to access custom apps for their legal practice areas in places like their document management or practice management systems, and will adopt the tools that they like at a deeper level. In 2025, some lawyers will be using generative AI on a daily basis without even noticing it, since it will be an enabler of so many systems in the back end with less of the prompting burden sitting with end users.

Biggest Surprise 2025: For the legal industry, technology has been traditionally been considered either a boring support area or a niche area of innovative products that don’t work terribly well. In 2025, legal technology will start being a mainstream interest for lawyers who realize that AI has become a true partner to them, providing them with the ability to do better work faster.

Heidi K. Brown | Associate Dean for Upper Level Writing, New York Law School

2025 Prediction: Innovative law schools will teach GenAI literacy in a way that ensures law students learn fundamental legal analytical and writing skills yet also understand how Large Language Models realistically function in the legal context. Innovative law firms will change their recruiting models to make space for law students who may not necessarily have the best grades or be enrolled at high-ranked schools but have invested dozens (perhaps hundreds) of hours experimenting with a variety of GenAI tools in learning and performing legal tasks, making GenAI-related mistakes in low-risk settings, and building knowledge about how to successfully partner with GenAI to research, write about, and apply law in increasingly complex client scenarios—effectively discerning good from mediocre/bad GenAI output.

Biggest Surprise 2025: The most successful legal writing-related AI tools in 2025 will stop touting speed as their top feature and instead (truthfully) demonstrate that their models understand the importance of accurate, nuanced, and methodical rule structure in legal analysis. Good legal writers structure legal analyses around rule components, such as (1) a checklist of required elements, (2) a set of factors the decision-maker must weigh, OR (3) a standard to apply, like the summary judgment standard, or the strict scrutiny standard; analytical legal AI models that reliably understand how to accurately structure pertinent legal rules, then methodically apply such rule structures to legally significant client facts, will be more valuable and desirable to real legal writers than velocity.

Dean Pelletier | Founder, Pelletier Law

2025 Prediction: Law firms and in-house legal departments will differentiate themselves through data in retrieval-augmented generation (RAG) systems that supplement foundation models (FMs). Curating high quality, up-to-date RAG data, i.e., data which can be described as external to an FM or proprietary to a firm or department, will involve a legal data point person in charge of executing a specific RAG data game plan. So, this is another example where experience, creativity and judgment of humans will still matter.

Biggest Surprise 2025: As law firms and in-house legal departments digest their AI use case data, AI-induced gaps in associates’ knowledge and skill bases will emerge. The result will be a renewed focus on in-person associate mentoring and training.

David W. Opderbeck | Professor of Law, Seton Hall University Law School

2025 Prediction: Court decision and settlements in some copyright lawsuits over training data; increased state-level regulation of safety and accountability; the FTC backing off AI enforcement initiatives

Biggest Surprise 2025: The wildcard is the budgetary and policy effect of the Musk-led “DOGE” initiative on both AI incentives and regulation at the federal level, which no one can predict.

Dorna Moini | CEO/Founder, Gavel

2025 Prediction: Hybrid lawyer/self-service legal platforms will become as ubiquitous as online banking. Consumers will complete complex processes like divorce or estate planning online through intelligent, adaptive workflows. These services will involve lawyer assistance at key touchpoints in the legal process, making legal services more affordable and allowing legal professionals to serve more consumers.

Biggest Surprise 2025: The first AI-drafted amicus brief could be cited in a Supreme Court ruling, setting a precedent for AI in high-stakes legal strategy.

Kipp Coddington | Professor of Practice, University of Wyoming College of Law

2025 Prediction: LLM’s based on Karl Friston’s Free Energy Principle will continue to advance towards broad commercialization. These systems learn like Homo sapiens do instead of vacuuming up large data sets from the Internet.

Biggest Surprise 2025: Peer-reviewed papers suggesting that AI systems can exhibit what Homo sapiens will perceive as “consciousness,” with uncertain legal outcomes.

Jordan Domash | Founder & CEO, Responsiv

2025 Prediction: AI won’t replace lawyers, but it will put pressure on the largest law firms as advanced tools become more widespread. In-house legal and compliance teams, empowered by AI, will handle more work internally before seeking outside counsel. At the same time, technology will enable experienced solo practitioners to offer a broader range of services than ever before, significantly expanding their capabilities and reach. While the expertise of a seasoned partner will always hold value, the threshold for what justifies a $1,000 to $2,000 per hour rate will be raised.

Biggest Surprise 2025: In 2025, we’ll come to recognize that while broad-based foundation models from OpenAI and Anthropic are powerful, they won’t provide a complete, end-to-end solution for legal work. Instead, legal innovation will be driven by applications built on these models that prioritize explainability, are grounded in authoritative content, and foster trust through a carefully curated user experience.

Michael Grupp | CEO, BRYTER

2025 Prediction: 2025 is the year of agents – and agents will become more powerful: more workflows, better integrations, better UX.

Biggest Surprise 2025: Boring use cases will be back, combining workflows and AI.

Kara Peterson | Co-Founder, Descrybe.ai

2025 Prediction: In 2025, legal tech will center on reasoning models capable of verifying their own work, offering significant value to the legal industry. By reducing the need for legal professionals to manually review every AI-generated output, these models will boost productivity, enhance trust, and drive faster adoption.

Biggest Surprise 2025: AI in legal tech is advancing so rapidly that by 2025, it will reach areas once considered untouchable. Small, agile teams will be able to challenge industry giants in ways previously unimaginable.

Saketh Kesiraju | CEO, SwiftLaw

2025 Prediction: Solo and small law firms are going to accelerate adoption of AI tools while big law firms are going to start critically evaluating the value of enterprise Legal AI solutions. As a result, I think tools that provide robust evaluation infrastructure for LLM-generated responses is going to be crucial. There will also be more online legal services for immigration, family law, personal injury, and other civil practices.

Biggest Surprise 2025: The biggest surprise will be that the largest company in this category will end up building and selling to court systems (the US government).

K.C. Halm and Filipp Kofman | Partners, Davis Wright Tremaine

2025 Prediction: In 2024, law firms experimented with generative AI through trials and proofs of concept, exploring its potential without committing to definitive solutions. We anticipate 2025 will be a turning point, as firms transition from experimentation to deploying best-in-class generative AI-powered legal tech in full-scale production, as law firms and their clients have found ways to adopt and operationalize generative AI in a safe and responsible manner.

Cecilia Ziniti | CEO & Founder, GC AI

2025 Prediction: Get ready – 2025 is when in-house legal teams insist on AI that gets them. Smart legal departments will expect their AI platforms to understand and act on their company’s preferences and risk tolerance. Early adopters are already using legal AI for every kind of task, and this trend will expand as entire legal teams increasingly embrace that spirit even more. They will ask “How can I do this better or faster or more strategically with AI?” – while using great prompts as the new great templates.

Biggest Surprise 2025: In 2025, GCs and CLOs will embrace how helpful legal AI is now. The collective “aha moment” will inspire AI adoption among corporate counsel across industries. In-house teams are leading the way here and that will continue.

Jason Torchinsky | Partner & Co-Head of the AI Practice Group, Holtzman Vogel PLLC

2025 Prediction: In the AI Practice Group at Holtzman Vogel, we expect to see a sharp increase in AI regulation at the state and, possibly, the federal level, which will require many tech companies to navigate a maze of AI regulations and statutes. In our work advising members of Congress and political organizations on AI, we’ve seen a growing interest in regulations requiring water marking on AI-generated content and an emphasis on data privacy. Our prediction is that legal tech companies, and AI companies generally, will need to dedicate more resources toward lobbying and compliance in 2025.

Jennifer Carter-Johnson | Associate Dean for Academic Affairs, Michigan State University College of Law

2025 Prediction: As the capabilities of legal AI continue to grow in 2025, law schools will begin to more fully embrace the challenges that the technology brings to the training of new attorneys. Legal AI scares many in legal academia with its potential to be used as a crutch in learning or for outright cheating. These challenges will force law schools to innovate in how they teach law students (and faculty!) how to leverage advancing AI capabilities in an ethical manner and with practical applications.

Biggest Surprise 2025: We will hit a tipping point in legal education as to how many schools will begin to purposefully address AI challenges. In the future, we will look back at the AI educational models developed in 2025 as the backbone of a new era of legal education.

Raj Sonani | Senior AI Product Manager at LexisNexis

2025 Prediction: I predict that legal AI will drive transformative efficiency gains in regulatory compliance, particularly in SEC reporting. AI-powered tools will continuously monitor changes in SEC requirements, provide instant compliance risk assessments, and create predictive narratives about potential corporate financial trajectories. Additionally, AI will enable automatic comparison of SEC filings across entire industry sectors and peer groups. Furthermore, AI-powered legal research will continue to advance, while a growing focus on AI ethics and bias will ensure responsible AI adoption in law.

Biggest Surprise 2025: The biggest surprise will be the rapid adoption of Agentic AI, enabling law firms and legal departments to respond to complex legal queries in near real-time. This will revolutionize the delivery of legal services, making them more efficient, effective, and client-centric.

Eddie Nasser Paxton AI | Legal Product Lead

2025 Prediction: In 2025, legal professionals will find themselves collaborating daily with AI colleagues embedded seamlessly into their firms’ workflows—complete with their own digital identities, distinct personalities, and specialized practice niches. These AI co-workers won’t just run silent tasks in the background; they’ll attend team meetings, identify issues, propose projects, and even engage in client outreach and updates. Firms will begin assigning mentorship cohorts that include both human and AI members, enabling young associates to learn from seasoned partners and trusted AI counterparts alike.

Biggest Surprise 2025: Breakthroughs in model development will open new product avenues that were previously impossible, from client facing AI to near instantaneous commercial contract review.

Jim W. Ko | Ko IP & AI Law PLLC

2025 Prediction: A series of settlement agreements in the pending copyright cases against the unauthorized use of copyrighted works in training AI models will set the market. The dollar values for some will be massive in the aggregate—in the $100s of millions and maybe even in the billions. The per person harmed or per violation value these amount to, though, will be comfortably within the range of the ongoing cost of doing business for the major AI providers.

Biggest Surprise 2025: In 2025, there will continue to be no trial awards or settlements in third-party liability claims for the implementation of AI above $10M per person harmed and only a handful above $1M, with the possible exception of for copyright and right-of-publicity cases. The number of algorithmic discrimination cases filed will increase, but the amounts awarded per person harmed will not.

Sean Allan Harrington | Director of Technology Innovation, University of Oklahoma College of Law

2025 Prediction: General-purpose frontier AI models like OpenAI’s ChatGPT or Gemini, with advanced agentic workflows, will likely outperform specialized legal models by enabling firms to develop custom solutions through no-code or low-code tools. These models will leverage firm-specific documents and open data to automate complex tasks, eliminating the need for expensive platforms like Harvey. For firms whose practice areas don’t rely on paywalled datasets in Lexis or Westlaw, these AIs will offer unparalleled adaptability and cost-efficiency. Agentic workflows will further enhance productivity by automating decision-making processes, empowering mid-to-small-sized firms to create superior, bespoke solutions without the steep costs of traditional systems.

Biggest Surprise 2025: A top 50 law school will revolutionize legal education by successfully scaling an online JD program that enhances accessibility and affordability. This breakthrough will disrupt the competitive landscape, drawing students from similarly ranked schools and forcing others to adapt or risk obsolescence.

Greg Siskind Co-Founder – Visalaw.ai

2025 Prediction: Most lawyers have only dipped their toes in the AI waters using the large public LLMs like ChatGPT, Gemini and Claude. More legal-specific tools aimed at small and mid-sized law firms will debut in the coming year that will allow a lot more lawyers to affordably and ethically use generative AI in their practices. That will include products in the legal research, analysis and drafting space. Many will begin using generative AI tools regularly because the products they are already using – particularly office suites, case management and billing products – will start rolling out AI features. Separately, I also expect the regulatory environment to become more clear as more and more state ethics’ bodies clarify how their rules apply to the use of generative AI and malpractice carriers start to get their hands around how these tools are being used by their insured law firms and what risks should be ultimately be covered.

Biggest Surprise 2025: There will be major fights in various states over the application of Model Rule 1.5 on reasonable fees over the issue of whether lawyers must pass on all cost savings of using AI to their clients.

Kerri Braun | Senior Corporate Counsel, AI/ML, Trade Secrets, and Data Strategy @ Cisco

2025 Prediction: As far as the law is concerned, I think we will start to see a shift in initial attitudes that works created with the assistance of AI are not copyrightable. It may be years before AI is viewed as a tool used to aid in human expression, but as the technology is becoming commonplace and better understood, this mindset will start to soften.

Revisions to HSR Form Released

On October 7, 2024, the Federal Trade Commission (FTC), with the concurrence of the U.S. Department of Justice (DOJ), released its long-awaited final rule related to the revision of the Hart-Scott-Rodino (HSR) premerger notification form (the “Final Rule”).

The Final Rule will be effective 90 days after its publication in the Federal Register. The FTC and DOJ state that the revisions are intended to close the perceived gaps in current information provided in the HSR process, such as the disclosure of entities and individuals within the acquiring person; identification of potential labor market effects; identification of acquisitions that create a risk of foreclosure; identification of actions that may involve innovation effects, future market entry, or nascent competitive threats; and disclosure of roll-up or serial acquisition strategies.

The Final Rule dictates the use of two separate forms: one for the acquiring entity and one for the entity to be acquired. Each party will have to designate a “deal team lead” whose files must be searched for 4(c) and 4(d) documents, even if the deal team lead is not an officer or director. In addition, the acquiring entity must provide details not previously requested, including an organization chart, a list of officers and directors, a description of the ownership structure of the entity, and information on the transaction rationale.

While the information requested in the Final Rule is more limited than what was included in the original proposed rule, there are substantial changes that parties should expect to add significant time and cost to the filing process.

FTC Social Media Staff Report Suggests Enforcement Direction and Expectations

The FTC’s staff report summarizes how it views the operations of social media and video streaming companies. Of particular interest is the insight it gives into potential enforcement focus in the coming months, and into 2025. Of particular concern for the FTC in the report, issued last month, were the following:

The high volume of information collected from users, including in ways they may not expect;
Companies relying on advertising revenue that was based on use of that information;
Use of AI over which the FTC felt users did not have control; and
A gap in protection of teens (who are not subject to COPPA).

As part of its report, the FTC recommended changes in how social media companies collect and use personal information. Those recommendations stretched over five pages of the report and fell into four categories. Namely:

Minimizing what information is collected to that which is needed to provide the company’s services. This recommendation also folded in concepts of data deletion and limits on information sharing.
Putting guardrails around targeted digital advertising. Especially, the FTC indicated, if the targeting is based on use of sensitive personal information.
Providing users with information about how automated decisions are being made. This would include not just transparency, the FTC indicated, but also having “more stringent testing and monitoring standards.”
Using COPPA as a baseline in interactions with not only children under 13, but also as a model for interacting with teens.

The FTC also signaled in the report its support of federal privacy legislation that would (a) limit “surveillance” of users and (b) give consumers the type of rights that we are seeing passed at a state level.

Putting it into Practice: While this report was directed at social media companies, the FTC recommendations can be helpful for all entities. They signal the types of safeguards and restrictions that the agency is beginning to expect when companies are using large amounts of personal data, especially that of children and/or within automated decision-making tools like AI.

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FTC Finalizes Major Rewrite of HSR Filing Requirements

Last week, the Federal Trade Commission (FTC) voted unanimously to issue a final rule that implements significant changes to the Hart-Scott-Rodino (HSR) premerger notification form and accompanying instructions. While the final rule includes numerous modifications from the draft proposal that was announced in June 2023 (see our previous client alert), this still represents the most substantial change to the HSR filing requirements in decades, and will require parties to HSR-reportable transactions to gather and provide considerably more information and documents than under the current rules. The final rule will take effect 90 days after publication in the Federal Register (unless there is a successful court challenge in the interim).

Under the HSR Act, parties to certain mergers and acquisitions are required to submit premerger notification forms that disclose information about their proposed deal and business operations. The FTC and the Antitrust Division of the US Department of Justice (DOJ) use this information to conduct a competitive impact assessment within the statutory HSR waiting period, which is typically 30 calendar days. According to the FTC’s press release accompanying the final rule, the new requirements are a necessary response “to changes in corporate structure and deal-making, as well as market realities in the ways businesses compete, that have created or exposed information gaps that prevent the agencies from conducting a thorough antitrust assessment of transactions subject to mandatory premerger review.”

Key Changes to HSR Filing Requirements

Some of the main changes will require the following:

A description of each party’s strategic rationales for the transaction, with cross-references to documents submitted with the HSR filings that support the stated rationales.
A new Overlap Narrative section that will require the buyer and target to identify and provide (i) a written description of current or planned products or services where they compete (or could compete) with each other, (ii) actual or projected revenues for each such product or service, (iii) a description of all categories of customers that purchase or use the product or service, and (iv) the top 10 customers for each customer category (e.g., retailer, distributor, broker, national account, local account, etc.).
A narrative describing supply relationships between the transaction parties or between the buyer and any other business that competes with the target, including the amount of revenue involved and the top 10 customers or suppliers.
In addition to requiring documents discussing the competitive aspects of the proposed transactions that were prepared by or for officers and directors (current Item 4(c)), filing persons must also submit (i) transaction-related documents prepared by or for a “supervisory deal team lead”, and (ii) ordinary course business plans and reports about overlapping products and services that were provided to the CEO or Board of Directors within a year prior to filing.
Acquiring persons must list all current and recent officers and directors (or in the case of unincorporated entities, individuals exercising similar functions) in cases where those individuals hold similar positions in entities that have overlapping operations with the target.
Identification of minority holders of additional entities related to the transaction parties, as well as more information about minority interest holders, including limited partners in partnerships where the limited partner has certain rights related to the board (or similar bodies) of the acquiring entity and its related parties, and in some cases, the target. (Currently, the HSR form only requires disclosure of the general partner.)
Additional information regarding certain prior acquisitions by both the buyer and the target. (Currently, only buyers must provide information regarding prior acquisitions.)
If an HSR filing is being made based on an executed letter of intent or term sheet rather than a definitive agreement, the filing must include a dated document containing sufficient details about the transaction.
Parties must submit the entirety of all agreements related to the transaction (not just the principal transaction agreement).
All foreign-language documents must be accompanied by English-language translations.
Filing parties must disclose economic subsidies received from certain foreign governments or entities of concern to the United States.
Information related to certain contracts with defense or intelligence agencies.
It is worth noting that a few particularly onerous or controversial proposals from the initial draft rule were not adopted, including the proposal to require collection and production of all drafts of responsive documents (rather than just final versions), as well as specific information about labor markets and each filing party’s workers.

Related Changes to the Merger Review Process

Significantly, the FTC announced that, following the final rule coming into full effect, it will lift its suspension on early termination of the waiting period for HSR filings involving transactions that clearly raise no competitive issues. According to the FTC, “[b]ecause the final rule will provide the agencies with additional information necessary to conduct antitrust assessments, the rule will help inform the processes and procedures used to grant early terminations.”

The FTC also stated that it is introducing a new online portal for market participants, stakeholders, and the general public to directly submit comments on proposed transactions that may be under review by the FTC (it is unclear if the DOJ will follow suit). According to its press release, the FTC “welcomes information on specific transactions and how they may affect competition from consumers, workers, suppliers, rivals, business partners, advocacy organizations, professional and trade associations, local, state, and federal elected officials, academics, and others.”

Practical Implications for Deals

The final rule issued by the FTC marks a sea change in the preparation of filings for HSR-reportable transactions. The new requirements will significantly increase the time, effort and cost of preparing all HSR filings, with the impact likely to be magnified for deals where the buyer and target are competitors or operate within the same supply chain. Transaction parties will need to account for this new reality in their deal timelines and budgets. Transaction agreements will need to allow for more time to file HSR, and it may be advantageous for some parties to begin filing preparations much earlier in the deal process. In addition, the new transaction agreement requirements mean that key terms of deals will need to be more fully fleshed out before parties can file HSR and start the 30-day clock.

Also, since filing parties will now have an affirmative obligation to disclose competitive overlaps as well as supplier-customer relationships, careful consideration will need to be given to how those are described, since statements made in the HSR filing could later be used against the parties in an in-depth investigation (if the reviewing agency issues a “Second Request”) or in litigation (if the agency challenges the deal). Moreover, for serial acquirors, descriptions of products and overlaps in one filing could have consequences for future HSR-reportable transactions.

Additionally, the new obligation on filers to provide customer and/or supplier information in the HSR filing may cause parties to re-evaluate their approach towards third party outreach regarding proposed transactions, given the possibility of earlier and more frequent FTC/DOJ calls to those customers and suppliers.

© 2024 Bracewell LLP

by: Daniel E. Hemli, Jacqueline R. Java of Bracewell LLP

For more on HSR, visit the NLR Antitrust Trade Regulation section.

FTC Finalizes “Click-to-Cancel” Rule

The Federal Trade Commission (FTC) has finalized amendments to the Negative Option Rule, now retitled the “Rule Concerning Recurring Subscriptions and Other Negative Option Programs“ (“Rule”), which represents a significant overhaul of the regulatory framework governing how companies handle subscription services and automatic renewals.

Over the years, the FTC has received numerous complaints about deceptive practices related to negative option programs, prompting the need for updated regulations. The original rule, established in 1973, was focused primarily on protecting consumers from deceptive practices in physical goods such as book and record clubs. However, with the rise of e-commerce, the need for more robust protections for online subscriptions has grown significantly. The FTC’s amendments aim to address these issues and bring more transparency and fairness to this business model.

“Negative option marketing” is a broad term that encompasses a variety of subscription and membership practices. The Rule expands coverage to apply broadly to all forms of negative option marketing in any form of media, including, but not limited to, electronic media, telephone, print, and in-person transactions. It defines the negative option feature as “a contract provision under which the consumer’s silence or failure to take affirmative action to reject a good or service or to cancel the agreement is interpreted by the negative option seller as acceptance or continuing acceptance of the offer.” Negative option programs generally fall into four categories: prenotification plans, continuity plans, automatic renewals, and free trial (i.e., free-to-pay or nominal-fee-to-pay) conversion offers.

Most provisions of the Rule will go into effect 60 days after its publication in the Federal Register, except the provisions regarding disclosure of important information (§ 425.4), consent (§ 425.5) and simple cancellation (§ 425.6), which will become effective 180 days after publication in the Federal Register, thus providing businesses with a period to adapt their subscription practices to these new requirements.

Key Updates

Clear and Conspicuous Disclosures: The FTC now requires businesses to present subscription terms in a clear and conspicuous manner before any billing occurs. Sellers must provide the following “important information” prior to obtaining the consumer’s billing information: (1) that consumers’ payments will increase or recur, if applicable, unless the consumer takes steps to prevent or stop such charges; (2) the deadline by which consumers must act to stop charges; (3) the amount or ranges of costs consumers may incur, and frequency of the charges; (4) information about the mechanism consumers may use to cancel the recurring payments. Each of the required disclosures must be clear and conspicuous, and failure to provide this information is a deceptive or unfair practice.
Consent: The Rule requires negative option sellers to obtain consumers’ express informed consent before charging the consumer. The failure to obtain such consent is a deceptive or unfair practice. Sellers must keep or maintain verification of the consumer’s consent for at least three years.
Click-to-Cancel Requirement: One of the most notable changes in the Rule is the introduction of the “click-to-cancel” provision. This new requirement mandates that companies provide a straightforward and user-friendly method for consumers to cancel their subscriptions. At a minimum, the simple mechanism for cancellation must be provided through the same medium the consumer used to consent to the Negative Option Feature. For example, for services that are subscribed to online, the cancellation process must also be available online and must be as easy as signing up for the service in the first place. This is especially significant because many businesses have been criticized for making cancellation intentionally difficult, such as by requiring consumers to call a customer service line or navigate multiple steps just to cancel their service.
Removal of Annual Reminder Requirement: During the rulemaking process, the FTC had initially proposed requiring businesses to send consumers an annual reminder of their ongoing subscription services and provide information on how to cancel. However, this provision was ultimately removed from the final Rule. While consumer advocates had supported the inclusion of annual reminders, which would have provided an extra layer of protection for consumer, businesses argued that this requirement would be overly burdensome, especially for companies with large subscriber bases. However, the Rule still mandates that sellers must provide consumers with clear and timely notifications regarding recurring charges.
Removal of Prohibition on Upsell Offers: Another key provision of the proposed version of the Rule was the regulation of upsell offers during the cancellation process, which would have required sellers to immediately effectuate cancellation unless they obtained the consumer’s unambiguously affirmative consent to receive a save prior to cancellation. Companies often attempt to retain customers by offering lower-priced alternatives or special deals when a consumer tries to cancel a subscription. While these offers are not inherently problematic, the FTC has expressed concern that some businesses use upsell tactics to confuse consumers or prevent them from successfully canceling their service. However, the finalized version did not adopt this amendment. The FTC has determined that revisions to this proposed provision are necessary, for which it would need to seek additional comment. This means that while businesses are free to present alternatives to consumers, they also must provide a clear and direct path to cancelation without requiring consumers to navigate multiple steps or reject numerous offers.
Enforcement and Penalties: To ensure compliance with the new Rule, the FTC has increased the potential penalties for violations. Businesses that fail to adhere to the new requirements can face significant fines. The FTC has the authority to pursue penalties of up to $51,744 per violation, which could quickly add up for companies with large subscriber bases. This enforcement mechanism underscores the seriousness of the FTC’s efforts to crack down on deceptive subscription practices and provides a strong incentive for businesses to comply with the Rule.
Relation to Other Laws: The Rule does not preempt state laws that require more protection for consumers. Rather, it reflects the FTC’s intention to align with other laws and regulations, such as the Restore Online Shoppers’ Confidence Act (ROSCA), The Telemarketing Sales Rule, and state-level automatic renewal laws.

Industry Impact

The new regulatory landscape for Negative Option Programs will have several notable impacts on industries that rely heavily on subscription-based revenue models, such as e-commerce, streaming platforms, Software as a Service providers, health and fitness subscriptions, and other online services. Companies will need to reassess their subscription practices, ensure that their cancellation processes are in line with the new requirements, and update their disclosures to meet the transparency standards set by the FTC. Businesses will also need to invest in employee trainings and possibly make changes to their subscription systems and software. This could lead to increased compliance and operational costs as companies try to come into compliance with these new requirements, on top of the potential for lost revenue due to less automatic renewal income.

TCPA Rules on Revoking Consent for Unwanted Robocalls and Robotexts Effective April 2025

On October 11, 2024, the Federal Communications Commission announced that the effective date for Telephone Consumer Protection Act (TCPA) rules on revoking consent for unwanted robocalls and robotexts is set for April 11, 2025.

On February 15, 2024, the FCC adopted the TCPA Consent Order in the above-captioned proceeding. In that rulemaking, the FCC adopted rules making it simpler for consumers to revoke consent to receive unwanted robocalls and robotexts. Callers and texters must honor these opt-out requests in a timely manner.

The TCPA Consent Order established that these rules would become effective six months following publication in the Federal Register that the Office of Management and Budget has completed its review of the modified information collection requirements under the Paperwork Reduction Act of 1995. OMB approved these modified information collection requirements on September 26, 2024.

On October 11, 2024, the FCC announced in the Federal Register that compliance with the amendments and new rules set forth in the TCPA Consent Order as contained in 47 CFR §§ 64.1200(a)(9)(i)(F), (10), (11) and (d)(3) is required as of April 11, 2025.

Background of the TCPA Rules on Revoking Consent for Unwanted Robocalls and Robotexts

The TCPA restricts robocalls and robotexts absent the prior express consent of the called party or a recognized exemption. The FCC has made clear that consumers have a right to decide which robocalls and robotexts they wish to receive by exercising their ability to grant or revoke consent to receive such calls and texts.

The FCC has now adopted new rules to strengthen the ability of consumers to decide which robocalls and robotexts they wish to receive, codified the FCC’s past guidance on consent to make these requirements easily accessible and apparent to callers and consumers, and closed purported loopholes that allow wireless providers to make robocalls and robotexts without the ability for the subscriber to opt out.

What is the Practical Impact of the TCPA Revocation Rules?

As previously discussed by FTC defense and telemarketing compliance attorney Richard B. Newman, in March 2024 the Federal Communications Commission announced that it adopted new rules and codified previously adopted protections that make it simpler for consumers to revoke consent to unwanted robocalls and robotexts (specifically, autodialed and/or artificial/ prerecorded voice calls and texts) while requiring that callers and texters honor these requests in a timely manner.

In pertinent part:

Revocation of prior express consent for autodialed, prerecorded or artificial voice calls (and autodialed texts) can be made in any reasonable manner (callers may not infringe on that right by designating an exclusive means to revoke consent that precludes the use of any other reasonable method).
Callers are required to honor do-not-call and consent revocation requests within a reasonable time not to exceed ten (10) business days of receipt.
Text senders are limited to a prompt one-time text message confirming a consumer’s request that no further text messages be sent under the TCPA (the longer the delay, the more difficult it will be to demonstrate that such a message falls within the original prior consent).
Revocation of consent applies only to those autodialed and/or artificial/prerecorded voice calls and texts for which consent is required.
A revocation to marketing messages precludes all further telephone calls or text messages unless an enumerated exemption exists.

Telemarketers and lead generators should consult with an experienced FTC defense lawyer to discuss the scope of the new rules and protections, including, but not limited to, the scope and applicability of a revocation for one purpose to other communication purposes.

by: Richard B. Newman of Hinch Newman LLP

For more news on FCC TCPA Regulations, visit the NLR Communications, Media, & Internet section.

Rytr or Wrong: Is the FTC’s Operation AI Comply a Prudent Defense Against Deception or an Assault on Innovation and Constitutional Free Speech?

In today’s rapidly evolving digital economy, new artificial intelligence tools promise to transform every industry. Sometimes, those promises are overblown or outright deceptive. So, as the AI hype cycle continues, regulators are left with the unenviable role of determining their duties to shape the impact of these developing tools on businesses and the public. Although the EEOC, SEC, DOJ and several State Attorneys General are issuing warnings and increasingly investigating the risks of AI, this tension is on full display with the Federal Trade Commission’s recent enforcement actions announced as part of its “Operation AI Comply,” which marks the beginning of its “new law enforcement sweep” against companies that are relying on AI “as a way to supercharge deceptive or unfair conduct that harms consumers.”¹

Although many of the initial targets of Operation AI Comply were accused of conduct that plausibly violated Section 5, the FTC’s charges against an AI writing assistant, Rytr, drew strong dissents from two of the FTC Commissioners who accused their fellow commissioners of effectively strangling AI innovation in the crib. There are several important takeaways from Operation AI Comply, particularly if the dissenting commissioners have correctly identified that the FTC is pushing the boundaries of its authority in pursuit of AI.

The FTC and its Role in AI Regulation.

The FTC plays a critical role in protecting consumers from unfair or deceptive practices, and it has long been warning developers about how their algorithms and AI tools might violate one of its broadest sources of statutory authority: Section 5 of the FTC Act.²

In many respects, the FTC’s September 25, 2024, announcement of its “Crackdown on Deceptive AI Claims and Schemes” should not have come as a surprise, as most of the enforcement actions related to overhyping AI.³For example, the FTC’s Complaint and proposed settlement with DoNotPay – which made bold claims about being “the world’s first robot lawyer” and that it could “generate perfectly valid legal documents in no time,” replacing “the $200-billion-dollar legal industry with artificial intelligence”⁴– turned on relatively straightforward false or unsubstantiated performance claims in violation of Section 5 of the FTC Act.⁵Similarly, the FTC’s charges against Ascend Ecom,⁶Ecommerce Empire Builders,⁷and FBA Machine⁸all relate to allegations of e-commerce business opportunity schemes that generally engaged in AI-washing – i.e., a tactic of exaggerating or falsely representing that a product uses AI in an effort to make the product or company appear more cutting edge than it actually is.⁹Each of these four cases was unanimously supported by the Commission, receiving 5-0 votes, and is consistent with other actions brought by the FTC to combat unfair, deceptive, or discriminatory impacts of AI.¹⁰

However, with a 3-2 split among its commissioners, the FTC’s complaint against Rytr is a different story.¹¹ Historically, unanimous decisions were more typical; however, split decisions are becoming more common as the FTC pursues more aggressive enforcement actions and reflect a broader ideological conflict about the role of regulation and market intervention.

Rytr: Creative Assistant or Assistant to Fraud?

Rytr is a generative AI writing assistant that produces unlimited written content for subscribers for over 43 use cases.¹²At the core of the FTC’s complaint against Rytr is the risk that one of its use cases – a “Testimonial & Review” feature – can be used to create customer reviews that may be false or misleading.¹³

Based on limited user input, users can generate “genuine-sounding, detailed reviews quickly and with little user effort,” which the FTC believes “would almost certainly be false for users who copy the generated content and publish it online.”¹⁴The FTC gives one example where a user provided minimal inputs of “this product” and “dog shampoo” to generate a detailed paragraph boasting how the dog shampoo smelled great, reduced shedding, improved the shine of their dog’s coat, and recommended the product.¹⁵Based on example inputs and outputs like this, the FTC concluded that Rytr’s services “causes or is likely to cause substantial harm to consumers” and “its likely only use is to facilitate subscribers posting fake reviews with which to deceive consumers.”¹⁶As such, the FTC’s complaint argues that Rytr – by offering a tool that could be readily used to generate false reviews — provided the “means and instrumentalities for deception” and engaged in unfair acts or practices in violation of Section 5 of the FTC Act.¹⁷

In other words, the majority of the FTC Commissioners were concerned about an infinite potential for inaccurate or deceptive product reviews by Rytr’s subscribers and did not recognize countervailing reasons to allow this use of technology. Without admitting or denying the allegations in the Complaint, Rytr agreed to a proposed settlement with the FTC by which Rytr would stop offering the Testimonial & Review use case at issue in this case¹⁸– a pragmatic solution to avoid litigation with the government.

Dissents from the FTC’s Direction.

Commissioners Melissa Holyoak and Andrew Ferguson submitted two dissenting statements, criticizing the complaint against Rytr as an aggressive expansion of the FTC’s authority under Section 5 and cautioned against its chilling effect on a nascent industry.¹⁹

Commissioner Ferguson framed the internal conflict well: “Treating as categorically illegal a generative AI tool merely because of the possibility that someone might use it for fraud is inconsistent with our precedents and common sense. And it threatens to turn honest innovators into lawbreakers and risks strangling a potentially revolutionary technology in its cradle.”²⁰The dissenting statements identified three broad objections to the Rytr complaint.

First, as a threshold matter, the complaint failed to identify any evidence of actual harmful or deceptive acts stemming from Rytr’s product – a clear requirement under Section 5 of the FTC Act.²¹ Both dissents criticized the complaint for effectively treating draft outputs from Rytr as the final reviews published by users; however, “the Commission does not allege a single example of a Rytr-generated review being used to deceive consumers in violation of Section 5 [.]²² Both dissents criticized the complaint for ignoring the obvious benefits of generative AI in this context. Namely, that “much of the promise of AI stems from its remarkable ability to provide such benefits to consumers using AI tools. . . . If Rytr’s tool helped users draft reviews about their experiences that they would not have posted without the benefit of a drafting aid, consumers seeing their reviews benefitted, too.”²³

Second, the dissenters rejected the complaint as “a dramatic extension of means-and-instrumentalities liability,”²⁴particularly in a case “where there is no allegation that Rytr itself made misrepresentations.”²⁵The complaint focused on the fact that Rytr “has furnished its users and subscribers with the means to generate written content for consumer reviews that is false and deceptive[,]” thus providing “the means and instrumentalities for the commissions of deceptive acts and practices.”²⁶However, the dissenters note that the “critical element for primary liability is the existence of a representation, either by statement or omission, made by the defendant.”²⁷The theory advanced against Rytr could be “true of an almost unlimited number of products and services: pencils, paper, printers, computers, smartphones, word processors, . . . etc.”²⁸Accordingly, both dissenting commissioners rejected this expansion of means-and-instrumentalities liability because a “knowledge requirement avoids treating innocent and productive conduct as illegal merely because of the subsequent acts of independent third parties.”²⁹

Finally, the dissenters offered several reasons why the FTC’s complaint was not in the public’s interest. Both dissenters expressed concerns that this case was too aggressive and would undermine innovation in the AI industry.³⁰Commissioner Ferguson went further to note that the complaint could violate important First Amendment interests, noting that the complaint “holds a company liable under Section 5 for a product that helps people speak, quite literally.”³¹He criticized the theory behind the complaint; “[y]et because the technology in question is new and unfamiliar, I fear we are giving short shrift to common sense and to fundamental constitutional values.”³²

Conclusion

It bears repeating that the FTC Commissioners unanimously approved almost every case listed in Operation AI Comply; “[w]hen people use generative AI technology to lie, cheat, and steal, the law should punish them no differently than if they use quill and parchment.”³³So, the FTC’s warnings about marketing AI systems for professional services, using AI to engage in misleading marketing, or overstating a product’s AI integration should be heeded, especially with the FTC’s statements that this is only the beginning of its enforcement activity.³⁴In prepared remarks, Chair Lina Khan has stated that the FTC is “making clear that there is no AI exemption from the laws on the books[,]³⁵so companies should take care to protect against whether their AI and other automated tools are being used for unfair or deceptive purposes or have biased or discriminatory impacts. Just because a technology is new does not mean that it can ignore existing laws – and we’ve seen similar sentiments and disputes in other areas of emerging technology enforcement, such as the SEC’s view that, with respect to U.S. securities laws, “[t]here’s no reason to treat the crypto market differently just because different technology is used.”³⁶

However, the Rytr case could be an indicator that the majority intends to pursue a broader theory of liability under Section 5 of the FTC Act to include tools that merely could be misused – without proof of actual harm or intent. If that continues to be the case, developers should be vigilant in identifying how their products and platforms could be misused for fraudulent purposes, as well-intentioned developers may become the target of investigations or other inquiries by the FTC. The FTC is accepting public comments on the proposed consent agreement with Rytr through November 4, 2024,³⁷which could develop the FTC’s position further.

1) FTC Announces Crackdown on Deceptive AI Claims and Schemes, Press Release, Federal Trade Commission (Sept. 25, 2024), available at https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-announces-crackdown-deceptive-ai-claims-schemes.

2) See, e.g., Aiming for truth, fairness, and equity in your company’s use of AI, Elisa Johnson, Federal Trade Commission (April 19, 2021), available at https://www.ftc.gov/business-guidance/blog/2021/04/aiming-truth-fairness-equity-your-companys-use-ai.

3) Operation AI Comply: Detecting AI-infused frauds and deceptions, Alvaro Puig, Federal Trade Commission (Sept. 25, 2024), available at https://consumer.ftc.gov/consumer-alerts/2024/09/operation-ai-comply-detecting-ai-infused-frauds-and-deceptions.

4) See, e.g., id.

5) In re DoNotPay, Inc., FTC Matter No. 2323042, Complaint available at https://www.ftc.gov/system/files/ftc_gov/pdf/DoNotPayInc-Complaint.pdf.

6) FTC v. Ascend Capventures, Inc., et al., C.D. Ca. Case No. 2:24-CV-07660-SPG-JPR (Filed Sept. 9, 2024).

7) FTC v. Empire Holdings Group LLC, et al., E.D. Pa. Case No. 2:24-CV-04949 (Filed Sept. 18, 2024).

8) FTC v. TheFBAMachine Inc., et al., D. N.J. Case No. 2:24-CV-06635-JXN-LDW (Filed June 3, 2024).

9) See generally, FTC Announces Crackdown on Deceptive AI Claims and Schemes, supra.

10) The FTC aggregated several summaries for its recent cases related to AI and other automated tools, which can be found here: https://www.ftc.gov/business-guidance/blog/2024/09/operation-ai-comply-continuing-crackdown-overpromises-ai-related-lies#:~:text=These%20cases%20are,CRI%20Genetics.

11) See generally Cases and Proceedings: Rytr, FTC Matter No. 2323052 (last updated Sept. 25, 2024), available at https://www.ftc.gov/legal-library/browse/cases-proceedings/rytr.

12) See, e.g., In re Rytr LLC, FTC Matter No. 2323052, Complaint ¶ 2, available at https://www.ftc.gov/system/files/ftc_gov/pdf/2323052rytrcomplaint.pdf.

13) Id. ¶ 6.

14) Id. ¶¶ 6-8.

15) Id. ¶ 10.

16) Id. ¶ 14.

17) Id. ¶¶ 15-18.

18) See In re Rytr LLC, Agreement Containing Consent Order, available at https://www.ftc.gov/system/files/ftc_gov/pdf/2323052rytracco.pdf.

19) See, e.g., Dissenting Statement of Commissioner Melissa Holyoak, Joined by Commissioner Andrew N. Ferguson, In re Rytr LLC, FTC Matter No. 2323052 at p.1 (cautioning against settlements to “advance claims or obtain orders that a court is highly unlikely to credit or grant in litigation,” as it may encourage the use of “questionable or misguided theories or cases.”) [hereinafter, “Holyoak Dissent”].

20) Dissenting Statement of Commissioner Andrew N. Ferguson, Joined by Commissioner Melissa Holyoak, In re Rytr LLC, FTC Matter No. 2323052 at p.1 [hereinafter, “Ferguson Dissent”].

21) See 15 U.S.C. § 45(n) (prohibiting the FTC from declaring an act or practice unfair unless it “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.”).

22) Ferguson Dissent at p.6; see also Holyoak Dissent at p.2.

23) Holyoak Dissent at p.3; see also Ferguson Dissent at p.7 (noting the challenges of writing a thoughtful review and that “a tool that produces a well-written first draft of a review based on some keyword inputs can make the task more accessible.”).

24) Ferguson Dissent at p.5.

25) Holyoak Dissent at p.4 (emphasis original).

26) Complaint ¶¶ 15-16.

27) Holyoak Dissent at p.4 (emphasis original) (cleaned up with citations omitted); see also Ferguson Dissent at pp.3-5 (discussing the circumstances in which means-and-instrumentalities liability arises).

28) Ferguson Dissent at p.5.

29) Ferguson Dissent at p.7; see also Holyoak Dissent at p.5 (“Section 5 does not categorically prohibit a product or service merely because someone might use it to deceive someone else.”).

30) Holyoak Dissent at p.5 (“Today’s misguided complaint and its erroneous application of Section 5 will likely undermine innovation in the AI space.”); Ferguson Dissent at p.10 (“But we should not bend the law to get at AI. And we certainly should not chill innovation by threatening to hold AI companies liable for whatever illegal use some clever fraudster might find for their technology.”).

31) Ferguson Dissent at p.10.

32) Id.

33) Id. at p.9 (citing Concurring and Dissenting Statement of Commissioner Andrew N. Ferguson, A Look Behind the Screens: Examining the Data Practices of Social Media and Video Streaming Services, at pp.10-11 (Sept. 19, 2024)).

34) Operation AI Comply: Detecting AI-infused frauds and deceptions, supra.

35) A few key principles: An excerpt from Chair Khan’s Remarks at the January Tech Summit on AI, FTC (Feb. 8, 2024), available at https://www.ftc.gov/policy/advocacy-research/tech-at-ftc/2024/02/few-key-principles-excerpt-chair-khans-remarks-january-tech-summit-ai.

36) Prepared Remarks of Gary Gensler on Crypto Markets at Penn Law Capital Markets Association Annual Conference, Chair Gary Gensler, SEC (April 4, 2022), available at https://www.sec.gov/newsroom/speeches-statements/gensler-remarks-crypto-markets-040422.

37) Rytr LLC; Analysis of Proposed Consent Order To Aid Public Comment, Federal Register, available at https://www.federalregister.gov/documents/2024/10/03/2024-22767/rytr-llc-analysis-of-proposed-consent-order-to-aid-public-comment.

For more news on FTC Action on Artificial Intelligence, visit the NLR Antitrust, Trade, & Regulation section.

What Digital Advertisers and Influencers Need to Know About the FTC Final Rule Banning Fake Consumer Reviews and Testimonials

As previously blogged about here, following notices of proposed rulemaking in 2022 and 2023, on August 22, 2024 the Federal Trade Commission finalized a rule that will impose monetary civil penalties false and misleading consumer reviews and testimonials. Those covered by the Final Rule, including, but not limited to, advertisers, marketers, manufacturers, brands and various intermediaries, and businesses that promote and assist such entities, should consult with an experienced FTC compliance lawyer and begin to prepare for its enforcement, immediately.

What Does the FTC Final Rule Banning Fake Consumer Reviews and Testimonials Cover?

The FTC Final Rule Banning Fake Consumer Reviews and Testimonials formalizes the prohibition of various practices relating to the use of consumer reviews and testimonials and sets forth which practices may be considered unfair or deceptive pursuant to the FTC Act.

In short, the Final Rule is intended to foster fair competition and protect consumers’ purchasing decisions. In general, the Final Rule covers: (i) the purchase, sale or procuring of fake reviews or testimonials (for example and without limitation, a reviewer that does not exist, a reviewer that did not actually use or possess experience with the product or service, or a review that misrepresents actual experience); (ii) providing compensation or other incentives in exchange for reviews that express a particular sentiment; (iii) facilitating “insider” consumer reviews and testimonials that do not contain a clear and conspicuous disclosure of the relationship; (iv) utilizing websites that appear to be independent review websites when, in fact, they are controlled by the business whose products or services are reviewed; (v) suppressing reviews, either by intimidation or by merely publishing certain reviews or ratings (for example and without limitation, only positive reviews or ratings); and (vi) misusing fake indicators of social media influence.

The Final Rule also includes some important definitions. For example, the Final Rule defines “consumer reviews” as reviews published to a website or platform dedicated (in whole or in part) to receiving and displaying consumer evaluations, including, for example, via reviews or ratings.

The Final Rule defines “consumer review hosting” as “providing the technological means by which a website or platform enables consumers to see or hear the consumer reviews that consumers have submitted to the website or platform.” In simple terms, this means that if an employee posts an unsolicited review on a corporate website concerning a product/service that they have experience using, it may not necessarily be considered deceptive as long as the material connection is disclosed.

“Clear and conspicuous” disclosures (such as, for example and without limitation, those pertaining to material relationships between a manager or officer to a brand), must be unavoidable, and easy to notice and understand for ordinary, reasonable consumers. Note, for audiovisual content, disclosures must be presented in “at least the same means as the representations requiring the disclosure.”

The Final Rule follows the FTC’s Updated Endorsement Guidelines (2023). The FTC Endorsement Guides address a much broader range of conduct than the Final Rule, and provide best practice recommendations regarding the use of product endorsements and reviews in advertising.

What are the Requirements of the FTC Final Rule on Reviews and Testimonials?

The Final Rule largely codifies existing FTC policy related to reviews and testimonials and sets forth limitations for a handful of categories of conduct that the FTC will consider deceptive. In part, the Final Rule prevents covered entities and their agents from using fake reviews and deceptive testimonials, suppressing honest negative reviews and paying for positive reviews.

In pertinent part and without limitation:

16 CFR § 465.2: Fake or false consumer reviews, consumer testimonials, or celebrity testimonials

Business and brands are prohibited from creating, buying, selling or disseminating fake or false reviews or testimonials, including, but not limited to, those that expressly or impliedly misrepresent they are by someone that does not exist (for example and without limitation, AI-generated reviews), by someone that does not have experience with the product/service, those that misrepresent experience with a product or service, and negative reviews intended to damage competitors.

Businesses and brands are prohibited from creating, purchasing, procuring or disseminating such reviews (and/or facilitating dissemination) when the business knew or should have known that the reviews or testimonials were not bona fide.

16 CFR § 465.4: Buying positive or negative consumer reviews

Business and brands are prohibited from incentivizing a consumer to write a review when the incentive is conditioned – expressly or implicitly – on the review expressing a particular sentiment (whether positive or negative) about a business or brand, or related products or services. It is not unlawful for a company to offer incentives for consumers to write reviews, however, it is unlawful, for example, to condition the incentive upon, for example, a 5-star review. While the FTC Endorsement Guides separately mandate a clear and conspicuous disclosure when a review is incentivized by monetary payment or another incentive/relationship, a disclosure of the incentive is not a defense when the incentive is conditioned on the review expressing a particular sentiment.

16 CFR § 465.5: Insider consumer reviews and consumer testimonials

Section 465.5 of the Final Rule prohibits businesses and brands from creating, soliciting or posting reviews or testimonials by officers, managers, employees or agents thereof without clearly and conspicuously disclosing their relationship, or “material connection.” There are limited exceptions. First, the prohibition does not apply to unsolicited social media posts by employees or social media posts that result from generalized solicitations (e.g., non-employee specific). Second, the prohibition does not apply to unsolicited employee reviews that merely appear on a business’s website because of its “consumer review hosting” function.

Additionally, reviews solicited from immediate relatives (e.g., spouse, parent, child or sibling), employees or agents of officers, managers, employees or agents of a business or brand require that latter ensure that the immediate relative clearly, conspicuously and transparently disclose the material connection to the business. The foregoing also applies, for example and without limitation, to requests that employees or agents solicit reviews from relatives. Covered “insiders” are required to instruct such reviewers to clearly and conspicuously disclose their relationships to the business or brand and, if they knew or should have known that a related review appears without a disclosure, take remedial steps to address the disclosure.

The Final Rule states that if the business or brand knew or should have known of a material relationship between a testimonialist and the business, it is a violation for the business or brand to disseminate or cause the dissemination of a consumer testimonial from its officer, manager, employee, or agent without a clear and conspicuous disclosure of such relationship.

16 CFR § 465.6: Company-controlled review websites or entities

Companies and brands are prohibited from creating or controlling review websites or platforms that appear independent when they are, in fact, operated by the company itself. For example, companies may not expressly or by implication falsely represent that a website they control provides independent reviews or opinions. Section 456.6 is intended to prevent the creation of illegitimate independent review websites, organizations or entities to review products and services. It does not apply to general consumer reviews on a brand’s website, for example, so long as those reviews comply with applicable legal regulations.

16 CFR § 465.7: Review suppression

Pursuant to Section 465.7 of the Final Rule, businesses and brands may not suppress, manipulated or attempt to suppress or manipulate negative reviews (or otherwise manipulate or attempt to manipulate overall perception) by solely displaying positive feedback, with limited exceptions such as when a review contains confidential or personal information, or is false or fake, and/or wholly unrelated to the products/services offered. The criteria for doing so must be “applied equally to all reviews submitted without regard to sentiment.”

Businesses and brands are also prohibited from suppressing negative reviews or ratings, and misrepresenting (expressly or implicitly) that the selected consumer reviews or ratings represent most or all reviews or ratings. The Final Rule does not prohibit sorting or organizing reviews – per se – however doing so in a manner that makes it more difficult for consumers to view/learn of negative reviews may be considered an unfair or deceptive act or practice.

All reviews must be treated fairly so that consumers are provided with a true an accurate representation of consumer experiences.

Additionally, the Final Rule prohibits the use of “unfounded or groundless legal threat” or other physical threat, intimidation or false accusation to prevent a review from being written or created or to cause the review to be removed.

Section 465.7, in pertinent part, is consistent with various portions of the January 2022 agency guidance entitled Featuring Online Customer Reviews: A Guide for Platforms. The foregoing guidance recommends that businesses and brands: (i) that operate a website or platform that features reviews, have processes in place to ensure those reviews truly reflect the feedback received from legitimate customers about their real experiences; (ii) be transparent about your review-related practices; (ii) do not ask for reviews only from people you think will leave positive ones; (iii) that offer an incentive to consumers for leaving a review, not condition it, explicitly or implicitly, on the review being positive (even without that condition, offering an incentive to write a review may introduce bias or change the weight and credibility that readers give that review); (iv) do not prevent or discourage people from submitting negative reviews; (v) have a reasonable processes in place to verify that reviews are genuine and not fake, deceptive, or otherwise manipulated (be proactive in modifying and upgrading your processes); (vi) do not edit reviews to alter the message (e.g., do not change words to make a negative review sound more positive); (vii) treat positive and negative reviews equally (do not subject negative reviews to greater scrutiny); (viii) publish all genuine reviews and do not exclude negative ones; (ix) do not display reviews in a misleading way (e.g., it could be deceptive to feature the positive ones more prominently or require a click through to view negative reviews); (x) that display reviews when the reviewer has a material connection to the company or brand offering the product or service (e.g., when the reviewer has received compensation or a free product in exchange for their review), clearly and conspicuously disclose such relationships; (xi) clearly and conspicuously disclose how they collect, process and display reviews, and how they determine overall ratings, to the extent necessary to avoid misleading consumers; and (xii) have a reasonable procedure to identify fake or suspicious reviews after publication (if a consumer or business tells a business or brand that a review may be fake, investigation and appropriate action are necessary – that may include taking down suspicious or phony reviews or leaving them up with appropriate labels).

16 CFR § 465.8: Misuse of fake indicators of social media influence

Section 465.7 prohibits selling, distributing, purchasing or procuring “fake indicators of social media influence” (for example and without limitation, likes, saves, shares, subscribers, followers or views generated by a bot or fake account) that are actually known to be or should be known to be fake, and that could potentially be used or are actually used to misrepresent or artificially inflate individual or business importance for a commercial purpose. Thus, liability will not attach to a business or brand that engages an influencer using fake indicators of social media influence if the business or brand neither knew nor should have known thereof.

How is the FTC Final Rule Different from the Proposed Rule?

Notably, the Final Rule does not include a provision from the proposed rule that would have precluded advertisers from using consumer reviews that were created for a different product. Known as “review hijacking,” the FTC was unable to resolve various concerns about the meaning of “substantially different product.” The FTC reserved the right to revisit this issue, going forward via further rulemaking.

What are the Consequences for Violating the FTC Final Rule on Reviews and Testimonials?

The concepts, prohibitions and obligations included in the Final Rule are not entirely new. However, the Final Rule does significantly enhance the FTC’s ability to pursue civil monetary damages in the form of penalties in the amount of up to $51,744, per violation or per day for ongoing violations. The Final Rule also will permit the FTC to seek judicial orders that require violators to compensate consumers for the consequences of their unlawful conduct.

Takeaway:

The Final Rule banning fake consumer reviews and testimonials generally prohibits specific practices that the FTC has determined are deceptive or misleading, including: (i) fake or false consumer reviews, consumer testimonials or celebrity testimonials; (ii) purchasing positive or negative consumer reviews; (iii) insider consumer reviews and consumer testimonials; (iv) company-controlled review websites or entities; (v) review suppression; and (vi) misuse of fake indicators of social media influence. The Final rule will be effective October 21, 2024. Violations of the Final Rule can result in significant financial and reputational consequences. Companies that utilize consumer reviews, consumer testimonials or celebrity endorsements should consult with an experienced eCommerce attorney to discuss proactively implementing responsible written policies and contracts that ensure compliance with the Final Rule and other applicable legal regulations (for example and without limitation, ensure the clear and conspicuous disclosure of material connections), educating employees and agents, reviewing marketing strategies, auditing first and third-party (for example and without limitation, lead generators) promotional materials and activities for non-compliance (for example and without limitation, ensuring that reviews provide an accurate representation of consumer experiences), and developing and implementing appropriate compliance plans and written policies that include required remedial actions.

Tag: FTC

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