Definition
The legal risk — flagged in a 2026 FTC proposed policy statement — that AI companies who alter or filter their systems' outputs to comply with state AI laws could themselves be found to violate the federal FTC Act's prohibition on unfair or deceptive practices. This creates a regulatory 'squeeze': companies may face penalties either for complying with state accuracy or bias-mitigation requirements or for not complying with them. The FTC's position is that suppressing accurate AI outputs — even to satisfy a state law — could deceive consumers.
Why it matters
Legal and compliance teams face a genuinely contradictory regulatory landscape: an AI system adjusted to satisfy one regulator's requirements may simultaneously violate another's, requiring careful prioritisation and possibly the deferral of certain AI output adjustments until the legal conflict is resolved.