Snap Stock Falls as FTC Refers MyAI Chatbot Complaint to Justice Department

Break The stock closed down 5% on Thursday after the Federal Trade Commission said it would refer a complaint against the company to the Justice Department.

The FTC’s non-public complaint involves allegations that Snapchat’s My AI chatbot poses “risks and harms to young users,” the commission said in a statement. The complaint arises from the FTC’s compliance reviews with Snap following a 2014 review. settlement regarding allegations of public deception related to the company’s data collection.

As part of the FTC’s compliance reviews of Snap, the agency said it had discovered the possibility that the company “is violating or is about to violate the law.”

“A proceeding is in the public interest,” the FTC said in its statement.

The FTC did not specify what its complaint about the My AI chatbot focused on, but the chatbot has come under scrutiny before.

A Snap spokesperson rejected the FTC’s claims in a statement to CNBC.

“Unfortunately, on the last day of this Administration, a divided FTC decided to reject a proposed complaint that does not consider any of these efforts, is based on inaccuracies, and lacks concrete evidence,” the Snap spokesperson said. “It also fails to identify any tangible harm and is subject to serious First Amendment concerns.”

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

Break debuted the My AI chatbot in 2023. It is motorized by OpenAI and Google’s large language models, giving it the ability to answer user questions and provide tips and suggestions similar to ChatGPT and other AI-powered chat tools.

The chatbot has been noted for providing problematic answers. In one case, while talking to a journalist posing as a teenager, the chatbot responded by explaining how to hide the smell of alcohol and marijuana, The Washington Post reported in 2023. At the time of the chatbot’s initial launch, Snap saying that My AI, like other AI-powered chatbots, is “prone to hallucinations and can be tricked into saying almost anything. Please note its many shortcomings and I’m sorry in advance!”

In October 2013, the UK Information Commissioner’s Office issued a preliminary enforcement notice against Snap, alleging that the company’s My AI-related risk assessment “did not adequately assess the data protection risks posed by generative AI technology, particularly to children.”

Although the FTC said it voted during a closed-door meeting to issue a public statement about its case against Snap and its subsequent referral to the Justice Department, it noted that FTC commissioners Melissa Holyoak and Andrew Ferguson were absent.

The FTC also noted a dissenting statement by Ferguson, whom President-elect Donald Trump named in december to replace Lina Khan as the next chair of the FTC.

Ferguson noted that these types of referrals “are not disclosed unless and until the Department or the Commission files the complaint with the court.”

“I did not participate in the ridiculous closed-door meeting in which this matter was approved,” he wrote.

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

If the Justice Department files the complaint, Ferguson said it “will release a more detailed statement regarding this affront to the Constitution and the rule of law.”

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