FTC Finalizes $930,000 Settlement Over 'Active Listening' AI Ad Service That Allegedly Didn't Work As Advertised

(MENAFN- Free Financial Advisor) The FTC says an“Active Listening” advertising service marketed as using AI and conversations captured near smart devices did not actually use voice data and allegedly failed to provide the geographic targeting customers were promised. Laktikov Artem/Shutterstock

The Federal Trade Commission has finalized orders requiring Cox Media Group and two marketing firms to pay a combined $930,000 to settle allegations that they misled customers about an AI-powered advertising service promoted as being able to target consumers based on conversations picked up by smart devices.

The FTC announced final approval of the orders on August 27 after considering public comments on settlements first proposed in May. The companies are Georgia-based CMG Media Corporation, which does business as Cox Media Group; New Hampshire-based MindSift LLC; and Wisconsin-based 1010 Digital Works LLC.

FTC Says the 'Active Listening' Service Didn't Work as Advertised

At the center of the cases was a marketing product branded as“Active Listening.”

According to the Federal Trade Commission, the companies claimed the service could use a special algorithm to identify relevant conversations taking place near consumers' smart devices and then help small businesses target advertisements to potential customers in specific geographic areas.

The FTC alleged that those claims weren't true.

The service didn't collect or use consumers' voice data, according to the agency, and the FTC also alleged that it didn't accurately target advertisements to the geographic areas customers had paid to reach. Instead, the original FTC complaints alleged that the service involved reselling email lists obtained from other data brokers at a significant markup.

That distinction is important because businesses purchasing the service weren't simply buying an advertising campaign that underperformed. The FTC alleged they were being given a fundamentally different service from the sophisticated voice- and AI-based targeting capability that had been marketed to them.

Consumers Hadn't Opted Into the Voice Targeting Either, FTC Says

The FTC also challenged claims about consumer consent.

According to the agency, the companies represented that consumers had opted into having voice data used for the Active Listening service. The FTC alleged no such voice-data collection was actually taking place and that consumers had not provided the claimed consent.

The original complaints said the companies relied on consumers accepting terms of service when downloading and using apps as the basis for saying people had“opted in.” The FTC rejected that reasoning, saying acceptance of mandatory app terms did not constitute opt-in consent for an invasive service involving voice data from inside people's homes.

The agency added that if Active Listening had actually collected and used voice data without adequate consent as advertised, the practice itself would have violated Section 5 of the FTC Act.

Cox Media Group Will Pay Most of the $930,000

Under the finalized orders, Cox Media Group must pay $880,000. MindSift and 1010 Digital Works must each pay $25,000, bringing the combined total to $930,000.

The FTC says the money will be used to provide redress to Cox Media Group customers affected by the practices.

The orders also restrict what the three companies can claim going forward. They are prohibited from misrepresenting the qualities or features of advertising and marketing services, the collection or use of voice data, whether consumers have consented to collection or disclosure of voice data, and the geographic-targeting capabilities of their services.

The Commission voted 2-0 to finalize the consent agreements after receiving two public comments on the proposed settlements.

The Case Is Also a Warning About AI Marketing Claims

The settlement has implications beyond these three companies because businesses are increasingly being asked to pay for advertising and other services marketed with AI-powered capabilities.

For small businesses buying digital advertising, the case is a reminder to ask vendors what data actually powers a targeting product, where that data comes from, how geographic targeting is verified and what evidence supports claims involving artificial intelligence.

The case also illustrates why claims involving sensitive consumer information deserve additional scrutiny. In this instance, the FTC says the advertised voice surveillance wasn't actually occurring-but the agency made clear that collecting and using consumers' conversations without adequate consent would have presented a separate legal problem.

The final orders resolve the FTC's allegations against the companies and carry legal requirements governing their future conduct. As with other FTC consent matters, the allegations should not be characterized as independent judicial findings that every allegation was proven at trial.

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