Advertisers using AI-generated human characters in marketing campaigns face new compliance obligations in New York beginning this week under a first-of-its-kind state law requiring disclosure of certain “synthetic performers” in commercial advertisements.
The law, which took effect June 9, is codified in Section 396-b of New York’s General Business Law. It reflects a growing trend among lawmakers to impose transparency requirements on AI-generated content without broadly regulating the underlying technology itself. According to a client advisory published by law firm McDermott Will & Schulte, the statute targets a relatively narrow category of AI-generated content but could nonetheless affect a wide range of digital advertising, social media marketing and commercial production practices.
The new requirements apply when a person or business creates an advertisement for a commercial purpose that contains a synthetic performer and has actual knowledge that such a performer appears in the advertisement. In those circumstances, the advertiser must conspicuously disclose the use of the synthetic performer. Violations can result in civil penalties of $1,000 for a first offense and $5,000 for subsequent violations. The law does not create a private right of action, suggesting enforcement will likely fall to state regulators, including the New York attorney general.
One of the most significant challenges for advertisers is that the statute provides little guidance on how disclosures should be made. The law requires disclosures to be “conspicuous” but does not define that term, prescribe disclosure language or establish placement and formatting requirements.
McDermott advises advertisers to look to the Federal Trade Commission’s established “clear and conspicuous” disclosure standard as a practical benchmark. Under that framework, disclosures generally should appear close to the relevant content, be prominent enough for consumers to notice and understand, and not be hidden in fine print or behind hyperlinks.
The law’s scope is driven by its definition of a “synthetic performer.” The statute defines the term as a human-like digital asset created through generative AI or another software algorithm that engages in audiovisual or visual performances. Importantly, the disclosure obligation is not triggered merely because AI was used somewhere in the creative process. Rather, it applies when an advertisement includes a synthetic human performer intended to create the impression that a human is appearing in the advertisement.
That distinction may limit the law’s reach. The advisory notes that common uses of AI, such as image enhancement, content editing, background generation or nonhuman graphics, may fall outside the statute. At the same time, the law could sweep more broadly than some advertisers expect because it applies to content generated through traditional software algorithms as well as generative AI systems. The statute’s reference to a digital “asset” could potentially encompass AI-generated avatars, models, synthetic voices or even isolated human features used in commercial advertising.
WHAT’S NEXT IN ANTITRUST AND TECHNOLOGY REGULATION™
The statute also extends beyond traditional television commercials. Covered advertisements may include social media campaigns, digital advertisements, streaming content, sponsored content and online video promotions, among other forms of commercial marketing.
Several exemptions narrow the law’s application. Advertisements promoting expressive works such as films, television programs, documentaries, streaming content and video games are exempt when the synthetic performer’s use in the advertisement is consistent with its use in the underlying work. Audio-only advertisements are excluded, as are AI systems used solely to translate a human performer’s language.
For advertisers, agencies and brands increasingly experimenting with generative AI, the advisory emphasizes that compliance will require more than simply adding a disclosure label. McDermott recommends that companies inventory marketing practices involving AI-generated performers, review contractual responsibilities with agencies and AI vendors, update advertising review procedures and maintain records documenting how AI-generated content was created and reviewed. Businesses should also assess related publicity rights, privacy, intellectual property and consumer protection risks that may arise independently of the disclosure requirement.
The law arrives as regulators across the United States continue to focus on transparency measures for AI-generated content rather than comprehensive regulation of AI systems themselves. For advertisers, New York’s new requirements offer an early indication of the compliance frameworks that may emerge as states increasingly scrutinize the commercial use of generative AI.
