In 2024, 15 AI technology corporations were hit by regulators for exaggerating their products’ capabilities, and that number has greater than doubled from 2023. AI-related filings are on the rise and tech corporations may very well be caught within the crossfire in the event that they don’t understand emerging regulations and how one can avoid them.
What’s Fallacious with AI Marketing Today?
While many are conversant in the phrase “greenwashing,” it’s only within the last 12 months that a brand new form has emerged from the hype around artificial intelligence, and it’s called “AI washing.” In line with BBC the phenomenon of AI washing might be defined as claiming to make use of AI when in point of fact a less-sophisticated approach to computing is getting used. They explain that AI washing may occur when corporations overstate how operational their AI is or when an organization combines products or capabilities together. For instance, when “firms are simply bolting an AI chatbot onto their existing non-AI operating software.”
Over-exaggerated AI claims are dangerous for users and other stakeholders. Three obvious concerns about AI washing come to mind:
- The user paying for something they’re not getting
- Users expecting an consequence that isn’t achievable
- Company stakeholders not knowing in the event that they’re investing in a business that is really innovating with AI
AI washing is a growing issue as tech corporations compete for greater market share. As many as 40% of corporations who described themselves as an AI start-up in 2019 had zero artificial intelligence technology. The pressure to supply advanced technology is even greater now than it was five years ago.
What’s Driving AI Washing?
Experts have just a few theories about what’s behind this growing phenomenon. Douglas Dick, the pinnacle of emerging technology risk at KPMG within the UK, told BBC that it’s the shortage of AI definition and the paradox that makes AI washing possible.
Experts at Berkely imagine that the discourse of organizational culture is chargeable for AI washing, and the core reasons for this phenomenon include:
- Lack of technical AI knowledge in senior leadership
- Pressure for continuous innovation
- Short-termism and hype
- Fear of missing out (FOMO)
AI washing will also be driven by funding. Investors wish to see consistent innovation and outpacing of competitors. Even when brands haven’t fully developed an AI capability, they will attract the eye of investors with half-baked automation tools to earn additional capital.
With the worldwide AI market set to achieve roughly $250B by the top of 2025, it’s easy to grasp why the bandwagon is in full effect, and startups longing for funding are quick to slap the AI label onto anything. Unfortunately, regulators have taken note.
AI Tech Firms Charged with AI Washing
Firms that claim to make use of artificial intelligence are sometimes just using advanced computing and automation techniques. Unless true AI data science infrastructure is in place with machine learning algorithms, neural networks, natural language processing, image recognition, or some type of Gen AI is in play, the corporate could be putting up smoke and mirrors with their AI claims.
One AI HR tech company called Joonko was shut down by the SEC for fraudulent practices.
Learning from Joonko
Joonko claimed that it could help employers discover near-hires so employers could tap into these pools. The thought was that this could create more diverse candidates to be put in front of recruiters and have a greater likelihood of getting hired. Joonko was so successful at marketing its AI that Eubanks wrote about Joonko in his first book, and the corporate raised $27 million in VC funding between 2021 and 2022.
When the SEC charged Joonko’s former CEO with AI washing securities fraud, it was because he had falsely represented the number and names of their customers. He claimed that Joonka sold to global bank cards, travel, and luxury brands, and forged bank statements and buy orders for investors. The CEO received criminal charges along with the SEC charges against the corporate.
Learning from Codeway
In 2023, the Codeway app was charged for a misleading ad on Instagram that claimed their AI could fix blurry photos. The ad read “Enhance your image with AI” and when challenged by a complainant, the corporate didn’t reveal how their app could fix a blurry image by itself without the assistance of other digital photo enhancement processes. The Promoting Standards Authority (ASA) upheld the criticism and banned the corporate from running that ad or any others prefer it.
Other Examples
Within the US, the FTC and SEC recently carried out the following enforcement actions:
- Multiple business schemes were halted after claiming people could use AI to generate profits with online storefronts
- A claim for over 190k was actioned for ineffective robot lawyer services
- An organization called Rytr LLC falsely claimed that it could create AI-generated content
- A settlement motion against IntelliVision Technologies for misleading claims about its AI facial recognition
- Delphia Inc. and Global Predictions Inc. were charged for making false claims about AI on their website and social media accounts
Emerging Regulations
The expansion of AI technology, and AI washing, have caught the eye of regulators around the globe. Within the UK, the ASA is already setting a precedent by litigating against unsubstantiated AI-related ads.
In Canada, regulators are targeting unsubstantiated claims about AI as well and in addition marketing material that’s misleading or overly promotes AI technology. The Canadian Securities Administrators released a staff notice on November seventh, 2024 that shared some examples of what it considers to be AI washing:
- An AI company making the claim that their issuer is disrupting their industry with essentially the most advanced and modern AI technology available
- An AI company making the claim that they’re the worldwide leader of their AI category
- An AI company over-exaggerating its usage or importance to the industry
Within the US, there are state-specific regulations, like Latest York City’s mandatory AI bias audits that each AI tech company operating there may be required to have. Nonetheless, there are not any comprehensive federal regulations that restrict the event or use of AI. In December 2024, the US Congress was considering greater than 120 different AI bills. These regulations would cover all the things from AI’s access to nuclear weapons to copyright, but they’d depend on voluntary measures reasonably than strict protocols that would slow technological progress. While these bills are debated, there may be a patchwork of US federal laws inside specific departments, akin to the Federal Aviation Administration that claims AI in aviation should be reviewed. Similarly, there have been executive orders on AI inside the White House. These orders put in place to mitigate the chance of AI use and ensure public safety, label AI-generated content, protect data privacy, ensure mandatory safety testing and other AI guidance have all just been removed by the Trump administration as recently as January 2025. The US-based AI corporations that serve international markets will still must adhere to their regulations.
Don’t Be an AI Poser
As regulators proceed to implement various varieties of actions against culprits of AI-washing, tech corporations should take note. Any company that does claim to make real AI technology should give you the chance to back up their claims. Their marketing teams should avoid overexaggerating the aptitude of their company’s AI products, in addition to the outcomes, the purchasers, and the revenue. Any company that’s unsure of its own technology or marketing should review emerging laws locally and inside the markets they sell to. Consumers or corporations pondering of buying AI technology should look very closely on the product before buying it. With the 2024 cases of AI washing still within the early stages of litigation, the story remains to be unfolding, but one thing is certain, you don’t want your organization to be an element of it.
