AI-Powered Marketing for Businesses: Navigating the legal challenges

By Emma Shanes Dec 24, 2024

Emma Shanes, "AI-Powered Marketing for Businesses: Navigating the legal challenges." Enago Academy. December 24, 2024. https://www.enago.com/academy/guestposts/emmaa/ai-powered-marketing-businesses-legal-challenges/.

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Artificial intelligence (AI) continues to be a game changer in the modern business world. Moreover, it has significantly changed how many professionals approach marketing, specifically in the areas of customer engagement, advertising, and data analysis. Ultimately, AI has enabled companies to harness the power of predictive analytics alongside targeted recommendations, which has made outreach efforts more precise and laser-focused when driving revenue growth.

However, AI’s adoption within the marketing sector has given rise to new legal challenges, specifically with regard to data privacy, intellectual property (IP), algorithmic decision-making bias, and truth in advertising. And these issues carry with them the potential to permanently damage a business’s good reputation and credibility in the marketplace, thereby eroding trust among consumer groups and leading to financial loss.

This article will explore the legal challenges businesses can encounter when adopting AI tools as part of their marketing strategy. Drawing upon expert research and the landscape of the business world will enable us to explore the intersection of AI, law, and marketing–and offer key insight from both the theoretical and practical perspectives.

The Emergence of AI in Marketing

Through the use of AI, businesses have been able to realize new levels of automation, personalization, and optimization within the development and deployment of marketing strategies.

Fueled by machine learning and data analysis, AI is used to power tools and applications that cater outreach efforts to individual consumer preferences, anticipate trends, and let marketing professionals stay ahead of demand.

And real-world examples are plentiful.

For instance, the music app Spotify depends upon machine learning to create personalized playlists that align with a user’s preference to ensure ongoing engagement. The online retail behemoth Amazon implements AI to provide shoppers with recommendations that result in higher dollars being spent at checkout.

Even companies that are considered more “traditional” in nature due to their corporate history use AI. An example here is Coca-Cola. The global beverage giant has deployed AI in its social media marketing and subsequent data analysis. This has allowed the company to shape campaigns that resonate with target audiences–both in the United States and abroad.

Undoubtedly, AI has helped countless companies–both large and small–become more efficient, make better decisions, and eliminate redundant and repetitive tasks. However, for all of the benefits that AI presents, there is a darker side to the technology–one that has numerous ethical and legal considerations.

The Dark Side of AI

In order to stay on the right side of the law, remain in the good graces of consumers, and ensure regulatory compliance, it’s necessary for marketers to be aware of the ethical and legal matters that are part and parcel with the growing dependence many businesses have on AI.

Consider the key legal issues in AI marketing:

Data Privacy and Security: AI-driven tools rely heavily on consumer data and that data is governed by regulatory frameworks, including GDPR and CCPA. Therefore, to remain compliant, businesses must minimize the risk of data breaches or a bad actor gaining access to sensitive information, which can result in hefty fines and legal penalties.
Intellectual Property Issues: When AI is used to generate marketing content, there could be some ambiguity regarding who actually owns the IP of that material, especially if imagery, slogans, taglines, and other keywords are copyright-protected or trademarked.
Discrimination and Bias: The algorithms that are used by AI can offer generalizations about distinct user groups, which may be incorrect, offer biased consumer profiling, and introduce unwelcome stereotypes that lead to legal implications for a company as well as long-term reputational damage.
Accountability and Liability: AI may be able to quickly generate mountains of information, but there is no guarantee that information is 100% correct. If AI creates marketing material that is full of errors or false advertising, a company could be held legally responsible if harm or violations of the law result.

Navigating Legal Compliance in AI Marketing

As a marketer, it is possible to minimize legal risks while also leveraging the power of AI–and it requires a business being proactive, vigilant, and savvy to industry or regulatory changes.

Of course, managing legal compliance and shielding an organization from potential liabilities begins at the most basic level with the overall structure of the business.

There are four primary business structures, which include Sole Proprietorship, Partnership, Limited Liability Company (LLC), and Corporation. All of these designations come with their own pros and cons. However, the most popular structure is the LLC because it places a clear boundary between the personal and the professional.

What this means is that a business owner’s personal assets, such as bank accounts, real estate, and the like are off the table if a business gets sued because of AI abuse, data privacy issues, false advertising, copyright infringement, etc.

LLCs, though, are governed by rules that are state-specific, so in order to decide if this structure is right for you, it’s necessary to look up tips to start an LLC in New York or how to establish one in Florida or whatever place you reside. However, an LLC also enables you to bring on employees and attract investors as you also register for an Employer Identification Number (EIN) with the IRS when setting up the business.

Beyond business structure, here are some other ways to confirm your company follows the law when using AI in a marketing strategy.

Investigate and implement data collection, storage, and usage methods that are secure and comply with GDPR, CCPA, and other regulations that apply to your business. Always be sure to allow consumers to consent and opt in to receiving your marketing communications, and make sure they are also always provided with the chance to delete their data.
Showcase a commitment to ethical AI practices and seek to eliminate bias, stereotypes, and incorrect information in your marketing content to ensure fairness and transparency.
Engage with legal professionals specializing in copyright, trademark, and IP law when formulating AI marketing strategies at the grassroots level. Also, consult with these individuals to remain abreast of evolving regulations–and be ready to pivot and adapt practices quickly.
Facilitate in-depth training with anyone on your team involved in marketing practices. Make sure these professionals have an understanding of the regulations and laws that your company is beholden to. Furthermore, make sure your marketing function does not operate in a silo and encourage cross-functional collaboration to realize campaign compliance.

The Future of AI Marketing: Protecting Your Company’s Longevity

AI is the future; it isn’t going away anytime soon. As such, businesses must prepare for legal frameworks that are designed to address this technology’s complexities. There is a great likelihood that new regulations will up the standards as it relates to accountability, fairness, and transparency.

Ultimately, innovation and transformation must be balanced with responsibility and human oversight. For businesses, staying informed and adaptable will be key.

Continuous legal research and collaboration with experts can help businesses achieve compliance and remain resilient–both ethically and legally. And this is so true especially when an enterprise is faced with stricter guidelines on how AI is best implemented in marketing practice, how to properly and securely handle sensitive consumer data, and how a human being might be held accountable if robots are used in algorithmic decision-making.

As with any important business decision, company owners and executive leaders are encouraged to align themselves with attorneys, technology subject matter experts, and other key stakeholders who can assist in advising on best practices to remain above board, in compliance with the law, and deemed trustworthy by consumers.