On August 25, 2025, the Federal Trade Commission (FTC) announced a new AI-washing case against Air AI, a company selling business coaching and support services. The FTC alleged that the company made deceptive marketing claims about its artificial intelligence (AI) tool, including that it could operate autonomously and enable buyers to replace or avoid hiring employees.
An article originally published in Law360 on August 5, 2025 by DLA Piper discussed the FTC’s increasing focus on AI-washing cases. The article suggested the FTC would continue to target these cases, and that it might target agentic AI or deceptive productivity claims, citing both the increased focus on AI agents and on the widespread marketing of AI tools that claim to help businesses reduce headcount.
We provide a concise summary of the FTC’s recent action against AI washing, along with considerations for companies involved with AI products.
Case background
According to the FTC’s complaint, “[m]uch of Defendants’ advertising focused on the conversational AI technology sometimes called ‘Odin,’ claiming it would save consumers time, money, and effort by replacing existing or future sales representatives with AI agents.”
The defendants claimed that Odin could conduct “long phone conversations that sound like a REAL human, with infinite memory, perfect recall, and can autonomously take actions across 5,000 plus applications.” They also claimed the tool was better than human sales representatives, as it could perform the role “without having to be trained, managed, or motivated.”
However, the FTC alleged that, even when this technology was available, it “does not function as advertised,” and is instead “faulty, often not able to perform basic functions like placing outbound calls to businesses, scheduling appointments, taking down email addresses, or responding accurately to questions….Rather than a built-for-you solution that requires minimal effort, getting the conversational AI to function at all requires a substantial time commitment where consumers must pre-script answers for every potential question, making it nearly impossible to use.”
FTC’s ruling
The FTC stated that the defendants used deceptive claims to collect millions of dollars from entrepreneurs and small businesses, some reportedly losing as much as USD250,000 and incurring debt. The case was filed in the District of Arizona, and the FTC has asked the court for a temporary restraining order and other equitable relief in advance of seeking a preliminary injunction.
Air AI is the fourth AI-washing case filed by the FTC in 2025, and the twelfth such case it has brought since 2024. Air AI also appears to be the seventh AI-washing case that the FTC has filed involving the sale of business opportunities or coaching services.[1] Notably, the case may be the first consumer protection action to allege deception regarding (1) the marketing of agentic AI, or (2) claims about the replacement of human employees.
Key takeaways
The Air AI case reinforces the FTC’s commitment to addressing deceptive AI claims. It also suggests that the agency does not view the White House’s AI Action Plan as a barrier to enforcement.
The FTC’s complaint reflects that agentic AI and AI productivity claims are receiving scrutiny under consumer protection laws. Companies marketing AI products are encouraged to review their claims to ensure proper compliance.
[1] On the same day that the FTC announced its action against Air AI, it also announced a proposed settlement in a previously filed AI-washing case, Click Profit LLC, involving business opportunity sellers that promised to create and operate online stores using an “AI-backed bot.” The proposed orders ban the defendants from selling or operating any business opportunities and impose partially suspended monetary judgments of USD7.3 million and USD13.6 million.
[View source.]
