Recently, the Italian Competition and Market Authority (AGCM) officially launched an investigation into the Chinese artificial intelligence company DeepSeek, focusing on concerns that its AI products may generate false or misleading information, commonly known as “hallucinations.” This case has attracted significant attention from European regulators and highlights the new challenges of AI governance and compliance worldwide.

1. Case Background

DeepSeek is jointly operated by companies based in Hangzhou and Beijing. Its AI chatbot service is widely popular, especially in the Italian market with a large user base. However, the AGCM investigation revealed that DeepSeek failed to clearly and transparently disclose the risks that its AI models may produce inaccurate or fabricated content.

Specifically:

• The user interface only contains a vague English disclaimer stating “AI-generated, for reference only,” with no Italian version and no clear warnings on key pages such as the homepage, registration, or login pages;

• Although the terms of use contain related explanations, they are buried and require users to actively seek them out, limiting their effectiveness.

2. Regulatory Allegations and Legal Basis

The AGCM, relying on Articles 20, 21, and 22 of the Italian Consumer Code, alleges that DeepSeek engaged in unfair commercial practices by failing to sufficiently disclose the risk of “AI hallucinations,” thereby misleading users into trusting AI results and affecting their ability to make informed choices.

This concealment poses particularly serious risks in sensitive areas such as healthcare, legal advice, and finance, where users heavily depend on the accuracy of AI outputs.

3. Investigation Procedure and Potential Impacts

AGCM has formally initiated the investigation and requested DeepSeek to submit detailed service information, Italian user data, corporate structure, and other relevant documents within 30 days to cooperate with the inquiry. Failure to comply or submission of false information may result in heavy fines up to several hundred thousand euros.

4. Compliance Recommendations

• Strengthen AI Product Compliance Requirements
  This case demonstrates that European regulators will require clear and transparent disclosures regarding AI-generated content risks. Insufficient risk warnings may be deemed unfair competition or misleading advertising. AI providers must improve user notification mechanisms.

• Accelerate Global Regulatory Framework Development
  Italy’s case sets an important precedent for AI governance across the EU and globally. Countries will tighten regulations, and companies must proactively adapt to data privacy and consumer protection laws.

• Market Trust Volatility Risk
  Regulatory investigations and negative publicity may temporarily undermine user trust and market expansion for DeepSeek and similar AI products, pressuring them to speed up compliance adjustments.

Conclusion

The DeepSeek case epitomizes the ongoing tension between AI innovation and regulatory compliance, reminding all AI companies to prioritize compliance by ensuring risk transparency and user notification to gain dual acceptance from markets and regulators.

As AI continues to penetrate diverse social sectors, balancing compliance and innovation will be key to the industry’s future development.

Note: Relevant Articles of the Italian Consumer Code (Decreto Legislativo 6 settembre 2005, n. 206)

Article 20 — Prohibition of Unfair Commercial Practices

Any commercial practice that is deceptive or misleads consumers into making wrong decisions is prohibited.
Deceptive practices include false information or omission of key facts that prevent consumers from making informed choices.
This article aims to protect consumers from misleading and unfair commercial practices and maintain market fairness.

Article 21 — Misleading Commercial Practices

Defined as promotional activities that give false or misleading impressions about a product or service.
Includes false statements about product nature, quality, use, price, or failure to disclose important information.
Misleading practices cause consumers to make incorrect purchasing decisions and violate consumer rights.

Article 22 — Commercial Practices that Harm Consumers’ Economic Interests

Prohibits unfair means to harm consumers’ economic interests.
Commercial practices must not exploit consumer trust or lack of experience to gain unfair advantages.
Examples include hidden charges, false discounts, or exaggerated product effectiveness.