The Federal Trade Commission (FTC) finalized an order Wednesday banning General Motors (GM) and its OnStar telematics service from sharing specific consumer data with consumer reporting agencies. The finalized order, a year after the proposed settlement with GM, mandates greater transparency from the automaker and requires explicit consumer consent for any data collection.

The FTC's action follows a New York Times report nearly two years ago that detailed how GM and OnStar collected, used, and sold drivers' precise geolocation data and driving behavior to third parties, including data brokers LexisNexis and Verisk. This data originated from GM's Smart Driver program, a free feature within its connected car apps that monitored and rated driving behaviors and seatbelt use. The New York Times reported that data brokers then sold this information to insurance providers, potentially impacting customers' insurance rates.

The core issue revolves around the ethical implications of using artificial intelligence (AI) and machine learning (ML) in data collection and analysis within the automotive industry. The Smart Driver program employed algorithms to assess driving behavior, essentially creating a risk profile based on data points like speed, braking habits, and location. This risk profile was then leveraged by third-party data brokers, highlighting the potential for AI-driven data collection to be used in ways that consumers may not anticipate or consent to.

GM discontinued the Smart Driver program across all its brands in April 2024, citing customer feedback. At that time, GM stated that it unenrolled all customers and terminated its third-party telematics relationships with LexisNexis and Verisk.

The FTC's order underscores the growing regulatory scrutiny surrounding data privacy and the use of AI in consumer products. It highlights the need for companies to be transparent about their data collection practices and to obtain explicit consent from consumers before sharing their data with third parties. This is particularly relevant in the context of connected cars, which are increasingly equipped with sensors and AI-powered systems that generate vast amounts of data about drivers and their behavior.

The settlement with GM serves as a precedent for other automakers and technology companies that collect and use consumer data. It signals a shift towards greater consumer control over personal data and a more cautious approach to data sharing with third parties. The FTC's action reflects a broader societal concern about the potential for AI to be used in ways that could harm consumers, particularly in areas like pricing and access to services.

Looking ahead, the FTC's order may prompt further regulatory action in the area of data privacy and AI. As AI becomes more pervasive in consumer products and services, it is likely that regulators will continue to focus on ensuring that consumers are protected from unfair or deceptive data practices. The GM case serves as a reminder that companies must prioritize transparency and consumer consent when collecting and using data, particularly when AI is involved.