What are Chatbots?
Chatbots are generally described as computer programmes which simulate human conversation. Chatbots can vary between task-oriented bots and conversational bots. The former are aimed at generating automated responses about common queries such as opening hours. The latter tend to be used as virtual assistants, involving more machine learning and natural language processing models.
Regulatory Implications for Businesses
A chatbot, depending on its functionalities, may be considered an AI system under the AI Act. It is, however, likely to be classified as a low-risk system and therefore some obligations of the AI Act would apply. One of the requirements for such chatbots is being transparent with customers that they are conversing with an AI system and not a human.
Additional care must be taken by businesses using chatbots within specific sectors deemed high risk under the AI Act. Implementing AI in sectors such as law enforcement, education or infrastructure may result in the chatbot being classified as a high-risk system The regulatory implications are significantly higher for high-risk systems, including ensuring sufficient human oversight of such systems.
Businesses must comply with AI legislation, even if they are implementing or have already implemented a simple chatbot as part of their business processes. The implications for a business can be catastrophic if their AI chatbot does not reach the standards of the AI Act.
Penalties for Non-Compliance with AI Legislation
Non-compliance with AI legislation can have serious consequences for businesses. The penalties can vary depending on the severity of the non-compliance and the consequences mandated by the AI Act for specific breaches.
Fines and Financial Penalties
Businesses may face substantial fines for failing to comply with AI regulations. These fines can be significant and vary depending on the nature and extent of the non-compliance. The amounts vary from EUR 7.5 million to EUR 35 million even greater than fines under the GDPR.
Legal Actions
Non-compliance can lead to legal actions against the business. This may include regulatory investigations and other legal proceedings.
Reputational Damage
Non-compliance can severely damage a business's reputation. This can result in loss of customer trust, negative publicity, and a decline in business opportunities.
Ensuring compliance with AI legislation is crucial to avoid penalties and maintain a positive business reputation.
Liability and Data Protection
Most chatbots serve to enhance customer communication and experience, provide support for customers or provide answers to common questions. In Canada, an airline implemented a chatbot for such purposes. Air Canada landed in hot water when its chatbot gave incorrect information to a customer, so can businesses if legal and ethical considerations are not considered when implementing chatbots. The result could potentially be liability, just as Air Canada was deemed liable for its chatbots deficiencies.
The benefits of chatbots may be outweighed by the problems that chatbots can create. As technology advances faster than traditional laws, such as those on liability, the complexity of determining who is liable if a chatbot provides incorrect information, advice or misleads customers requires careful assessment before implementing AI technology. Liability risks can be significantly mitigated if businesses take care at the early stages of AI implementation. The same liability risks for individual’s data can also be mitigated through careful implementation of chatbots with a privacy by design approach in mind.
How we can help
Our technology lawyers combine their technical knowledge with legal expertise, to serve clients holistically in the adoption and implementation of AI systems. We firmly believe in the opportunities and benefits that AI creates. We guide first movers in the AI industry to adopt AI confidently and in a compliant manner.
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