Businesses paid for an AI-powered ad service that Cox Media Group claimed would target consumers based on smart device conversations. The FTC is now saying that technology never existed, and the broadcaster could have to pay up to the tune of nearly $1 million.
According to complaints, CMG and the two partner marketing firms, New Hampshire-based MindSift LLC and Wisconsin-based 1010 Digital Works LLC, marketed an “Active Listening” service that used a proprietary algorithm to detect conversations from smart devices in real time and deliver geographically targeted ads to consumers within a small business’s desired area.
The service, the FTC alleged, did neither. It did not use voice data at all, and it did not accurately place ads in customers’ target locations. What the companies actually provided, according to the complaints, was resold email lists purchased from data brokers at a large markup.
In addition, the FTC also determined all three companies falsely told potential customers that consumers had opted into the Active Listening service by accepting app terms of service. Clicking through mandatory terms of service, the FTC stated, does not constitute opt-in consent for voice data collection inside consumers’ homes.
MindSift and 1010 Digital Works face a second count for supplying CMG with marketing materials, sales pitches, and customer-facing responses that misled small businesses about the service’s capabilities.
Under the proposed settlement, CMG will pay $880,000, with MindSift and 1010 Digital Works each paying $25,000. Funds will be used to provide redress to affected CMG customers. All three companies are prohibited from misrepresenting the capabilities of their advertising services, the collection and use of voice data, consumer consent, and geographic targeting capabilities. The Commission voted 2-0 to issue the complaints and accept the consent agreements.
FTC Bureau of Consumer Protection Director Christopher Mufarrige said, “Not only did the product these companies marketed not do what they claimed it did, but they also misled potential customers by claiming consumers had opted into this service when it’s clear they did not. It is a basic rule of business that you need to be honest with your customers, and these companies failed to do that.”
The proposed orders will be published in the Federal Register and subject to a 30-day public comment period before the Commission decides whether to make them final.
