The 2024 EU AI Act, which was officially passed, will significantly impact the marketing industry in the short and long term. While the legislation is not directly applicable to US businesses, it will undoubtedly shape the thinking of US regulators, and marketing teams should pay close attention to its key provisions.
The EU AI Act adopts a risk-based approach, classifying AI applications into four categories: unacceptable risk, high risk, limited risk, and minimal risk.
The phrase “unacceptable risk” can have significant short-term and long-term impacts on businesses in the United States, especially those that have customers in the European Union.
If a business is found to pose an unacceptable risk, it may face financial penalties, legal action, and a damaged reputation, all of which can have serious implications for the business’s bottom line.
It’s important for businesses to take data privacy and protection seriously, especially as regulations like the EU’s General Data Protection Regulation (GDPR) continue to be enforced. By implementing robust data protection measures, businesses can avoid the risk of financial penalties and legal action and enhance their reputation for being trustworthy and reliable.
Here are four specific examples of how the Act could impact US businesses:
1. Impact on Social Media Companies: The AI Act includes provisions that would regulate the use of AI in social media platforms. This could have significant impacts on US-based social media companies like Facebook, Twitter, and Instagram, which have large user bases in the EU. The Act would require these companies to be transparent about how they use AI algorithms to make decisions about content moderation, advertising, and other functions. Failure to comply with these regulations could result in significant financial penalties.
2. Impact on Targeted Advertising: The AI Act includes provisions that would regulate the use of AI in targeted advertising. This could significantly impact US-based marketers who use targeted advertising to reach customers in the EU. The Act would require these marketers to be transparent about how they use AI algorithms to target ads to specific individuals and obtain explicit consent from individuals before collecting and using their personal data for advertising purposes. Failure to comply with these regulations could result in significant financial penalties.
3. Impact on Customer Service: The AI Act also includes provisions that would regulate the use of AI in customer service. This could impact US-based marketers who use AI-powered chatbots or virtual assistants to provide customer support in the EU market. The Act would require these marketers to ensure that their AI-powered customer service tools are transparent and fair and do not discriminate against individuals based on their personal characteristics. Failure to comply with these regulations could result in significant legal action and damage to the company’s reputation.
4. Impact on Healthcare: The EU AI Act also includes provisions that would regulate the use of AI in healthcare. This could impact US-based healthcare providers and tech companies that offer healthcare services or products in the EU market. The Act would require these providers and companies to ensure that their AI-powered healthcare tools are transparent, fair, and safe, and that they do not discriminate against patients based on their personal characteristics. Failure to comply with these regulations could result in significant legal action and damage to the company’s reputation.
This framework will impact businesses that use AI technologies to collect and use consumer data, deploy algorithms for targeted advertising, and leverage AI-powered tools.
In the short term, the EU AI Act’s focus on data responsibility will significantly impact businesses that collect and use consumer data.
Regulations will emphasize ethical and transparent data collection, storage, and use, which will directly impact AI-driven personalization and targeting. Businesses that fail to comply with these regulations may face significant fines and reputational damage.
The EU AI Act’s emphasis on AI bias mitigation is another area that will impact businesses in the short term.
Regulations will likely mandate steps to address potential discrimination within AI models and datasets, ensuring fairer outcomes for consumers. Businesses that fail to address AI bias effectively may face legal action or reputational damage.
In the long term, the EU AI Act’s focus on explainability will become increasingly important. The ability to explain how AI systems reach decisions will be crucial for businesses that use AI technologies in high-stakes decision-making contexts. Businesses that fail to explain their AI-powered decisions clearly may face legal action or reputational damage.
In addition to these short- and long-term impacts, the EU AI Act’s focus on increased compliance costs will significantly impact businesses. Preparing for stricter regulations will add operational burdens, including investment in data management, AI auditing, and risk assessment procedures. Businesses that fail to invest in these areas may face significant fines and reputational damage.
Although the US is unlikely to copy the EU’s approach directly, marketers and business owners should expect a similar focus on data responsibility, AI bias mitigation, explainability, and increased compliance costs.
Businesses that proactively adapt to these regulatory changes will be better positioned to comply with future regulations and avoid reputational damage.
To stay ahead of the curve, marketing teams and business owners should monitor proposed state and federal regulations, prioritize responsible AI use, and build close partnerships with legal, IT, and data science teams. By doing so, they can ensure compliance with future regulations and leverage AI technologies in ways that are ethical, transparent, and fair to consumers.
You can access the EU Artificial Intelligence Act directly here.
