Open AI is being investigated by the FTC over data and privacy concerns. It could be ChatGPT's biggest threat yet.

• The FTC is investigating OpenAI over its lack of transparency regarding data and privacy.
• The FTC is demanding Open AI detail how and where it collects data.

OpenAI may need a good team of lawyers — presumably ones who don't use ChatGPT to write their briefings — fast.

The Federal Trade Commission launched an investigation into OpenAI to determine whether the company violated consumer protection laws through its lack of transparency regarding data collection and privacy, according to documents published by The Washington Post.

In the 20-page document obtained by The Post, the FTC ordered OpenAI to detail how and where it has collected all sources of data used to train its large language models, or LLMs, which is the AI technology at the foundation of its chatbot ChatGPT. The agency also demanded OpenAI explain the precautions it takes to avert personal information from falling into datasets used to train its LLMs.

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If found to have been in violation of these laws, OpenAI could be forced to pay fines and be ordered to follow strict data-management practices outlined in a consent decree (tech companies such as Twitter and Facebook have been issued consent decrees by the FTC in the past.)

The FTC may be the biggest regulatory threat looming over the company, which has been the poster child of generative AI's surge in popularity since its release of ChatGPT last November.

And with lawsuits filed against Open AI mounting, the company may not just be a trailblazer for a new frontier of technology, but a harbinger of potential legal regulations on the generative-AI industry.

Like the FTC's current probe, many existing legal challenges to OpenAI concern the company's collection of data to train ChatGPT.

In June, 16 anonymous plaintiffs sued OpenAI, alleging the company scooped up "massive amounts of personal data" off the web to develop ChatGPT.

Numerous authors, including comedian Sarah Silverman, have also sued OpenAI. They allege the company harvested their copyrighted works to train ChatGPT, citing the chatbot's ability to provide accurate summaries of their books.

OpenAI CEO and cofounder Sam Altman traveled great lengths — literally — to lobby world leaders on generative AI and reportedly nudge lawmakers to consider weaker regulations on the fast-emerging technology.

But Altman has yet to comment on any of the recent legal challenges aimed at his company. OpenAI did not immediately respond to a request for comment on the investigation. An FTC spokesperson declined to comment when contacted by Insider.

In the past, Altman has said he wants to prevent OpenAI from getting into legal trouble. At a tech conference in Abu Dhabi, he told an audience that he had no plans to take OpenAI public, fearing the company's unusual business model would lead to legal challenges from investors.