A recent advertising change in New York could have wide-reaching effects, especially for ecommerce brands that use AI-generated images and videos of people in their ads. The law now requires that businesses clearly label any ad that includes AI-generated people, or risk large fines.

It has already begun to impact the ecommerce space, and is forcing some businesses to decide whether to switch to human models or be okay with labeling their AI ads. While the law only applies to New York for now, other states may eventually decide to implement similar rules in the future.

New NY Advertising Law Takes Aim at AI Ads

Advertising laws in New York underwent a recent change, as it’s now required to provide clear notices when an ad includes AI-generated images of people. Companies that violate this new Synthetic Performer Disclosure Law will get a $1,000 fine for the first offense, and then $5,000 per violation for the next offenses.

Organizations use an average of 12 AI agents throughout their businesses, with many companies using AI for advertising in one way or another. As a result, this new law could be a major shakeup and change how companies advertise their items going forward.

While the law doesn’t forbid companies from using AI, it requires them to label ads featuring AI-generated people. There’s a chance that this may lead to some potential customers not trusting an ad or product, or being unsure about which part of the Ad was AI-generated.

Ecommerce is Already Being Impacted

The ecommerce industry is already beginning to see the impact of this new law. For example, Amazon has notified third-party sellers to identify all of their product content that features AI-generated images of people before uploading it.

Amazon may then display a notice to shoppers on the platform, though the company hasn’t explained how this looks. Also, sellers may not know where every shopper lives, and Amazon won’t be able to tell in all cases whether a person in an image or ad was photographed or generated with AI without brands telling them, potentially complicating things even further.

As a result, if there’s a chance that your digital campaign reaches the screens and devices of New Yorkers, this new law applies to you. 

This new law also has plenty of impact on individual sellers, as well. It forces them to go through and manually label AI ads and listings within platforms they sell on, potentially changes workflows that have previously relied on AI, and may hurt the effectiveness of their ads.

New York Isn’t the First to Impose Laws Like This

While New York is the first state to implement a law to boost AI transparency in advertising, it’s not the first to impose laws around AI generation in general. For example, in California, the AI Transparency Act requires certain providers of generative AI systems to meet origin and detection obligations.

Also, Utah requires disclosure in certain consumer interactions that involve AI, and Tennessee has the Ensuring Likeness, Voice, and Image Security (ELVIS) Act, which protects people from falling victim to unauthorized AI replicas of both their likeness and voice. Many other states also regulate AI in some way, with more laws likely to come as AI continues to grow more popular.

Merchants selling across the country need to keep track of these requirements and ensure they’re implemented to continue to operate legally.

The Change is Especially Hard on Small Companies

While the law applies to all companies, it hits smaller companies the hardest. Many large companies have advertising budgets that allow them to not only include real humans in their ads, but also pay for studio lighting, directors, retouchers, and other things that help the finished images and/or video look professional and high-quality.

However, many smaller businesses may not have the budget for these, and thus rely on using AI product imager generators to create good-looking ads without spending too much. But now, brands taking this approach to advertising will have to disclose when an ad uses AI-generated people, which may hurt its effectiveness or value, and possibly lead to customer distrust.

So while large companies may be able to continue with business as usual when it comes to creating ads, many smaller brands will need to rethink their approach as a result of this law.

Our Take

Navigate the Law Properly to Avoid Penalties

Because of this law, and the high cost of breaking it, companies in New York need to be prepared to either advertise using real human models or continue to use AI models, but just making sure to clearly state that they’re AI and not real humans. Also, it couldn’t hurt to explain to your customers why you’ve decided to use AI for your ads. 

If you explain that you’re doing it to spend less so you can improve product quality, pay your team more, or focus your funds more on enhancing the customer experience, rather than paying for ads, they may be more receptive to you using it.

Also, while using real humans in your ads is often more expensive than just generating models, there are still ways to save on costs. This includes things like relying on natural light rather than expensive lighting for your shots, and working with brand fans, customers, or employees to star in the ads, rather than working with actors or casting agencies, which may have higher costs.

While this law only applies to New York right now, it wouldn’t be surprising to see similar laws pop up throughout the country. As a result, even companies in states where there isn’t a law like this should be prepared for a future when one comes into effect.