Amazon and Walmart Chatbots Face FTC Scrutiny Over 'Made in USA' Claims

Two U.S. senators have formally requested that the Federal Trade Commission (FTC) investigate the artificial intelligence-powered shopping assistants used by Amazon.com, Inc. (AMZN) and Walmart Inc. (WMT), citing concerns that the tools may be disadvantaging American-made products and misleading consumers.

Senators Allege Unfair Practices

In a letter to the FTC, Senators Tammy Baldwin and Rick Scott claimed that Amazon’s Alexa for Shopping and Walmart’s Sparky AI assistant could be undermining efforts to promote U.S. manufacturing. The senators allege the chatbots suppress information about products made in the USA and fail to identify goods that are fraudulently labeled as such, according to a Reuters report.

The letter highlights findings from a study by a think tank led by former FTC Chair Lina Khan. It asserts that the AI tools suppress data on American-origin goods while readily providing information on products made in other countries, such as China.

Study Cites Troubling Chatbot Responses

The senators' letter detailed specific interactions with the AI tools as documented in the study. The findings suggest a potential conflict between the retailers' business interests and U.S. labeling laws.

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Key allegations cited in the letter include:

• When asked about the lack of a "Made in USA" filter, Amazon's Alexa allegedly responded that implementing one would "redirect significant sales away from their largest seller base," referring to overseas manufacturers.
• When asked why it did not flag suspicious "made in USA" claims, Walmart's Sparky reportedly cited limited FTC enforcement against retailers, calling the inaction "a business calculation, not a legal justification."
• The study also concluded that the AI assistants can often detect when "made in USA" labels are false, but that the retailers are not using this capability to police their listings.

Call for Regulatory Action

Baldwin and Scott urged the commission to conduct a "robust investigation" and consider "additional enforcement measures to deter such behavior going forward." This request follows letters the FTC sent to both companies last year urging them to crack down on false "made in USA" claims from third-party sellers.

For investors, this development adds a new layer of regulatory risk for the retail giants, particularly concerning their significant investments in AI-driven e-commerce. Increased FTC scrutiny could lead to fines, mandatory changes in how their AI operates, and potential reputational damage. According to Reuters, Amazon, Walmart, and the FTC did not immediately respond to requests for comment.