In 2024, 15 AI technology companies were attacked by regulators for exaggerating the functionality of their products, and the number has more than doubled since 2023. Documents related to AI continue to increase, and if they don’t understand emerging regulations and how to avoid them, they may capture technology companies in the firefight.
What’s wrong with today’s AI marketing?
While many are familiar with the term “green”, it wasn’t until last year that a new form emerged from the hype around artificial intelligence, and was called “AI hand washing.” According to the BBC, the phenomenon of AI washing can be defined as claiming to use AI when in fact a lesser calculation method is being used. They explain that AI washing can also happen when companies overestimate how their AI operates or companies combine products or capabilities. For example, when “a company simply plugs an AI chatbot into its existing non-AI operating software.” ”
Excessive AI claims are dangerous for users and other stakeholders. Three obvious questions about AI washing:
- Users pay for what they don’t get
- The user expects results cannot be achieved
- Company stakeholders don’t know if they are investing in a business that is truly innovative with AI
AI washing is an increasingly serious problem as technology companies compete for greater market share. As many as 40% of companies described themselves as AI startups in 2019 with zero artificial intelligence technology. Now, the pressure to provide advanced technology is even greater than it was five years ago.
What is driving artificial intelligence washing?
Experts have some theories about the theories behind this growing phenomenon. Douglas Dick, head of emerging technology risks at KPMG, told the BBC that it is the lack of AI definition and ambiguity that makes AI washing possible.
Experts at Berkely believe that the discourse of organizational culture is responsible for AI washing, and the core reasons for this phenomenon include:
- Lack of technical AI knowledge in senior leadership
- The pressure of continuous innovation
- Short-termism and hype
- Fear of missing out (FOMO)
AI washing can also be driven by funds. Investors want to see consistent innovation and competitors surpassing. Even if brands have not fully developed AI capabilities, they can use half-family automation tools to attract investors’ attention to earn extra money.
Since the global AI market will reach about $250B by the end of 2025, it’s easy to understand why the trend will work well, and startups eager to fund will quickly push AI tags to anything. Unfortunately, regulators have noticed it.
AI technology company is responsible for AI washing
Companies claiming to use artificial intelligence often simply use advanced computing and automation technologies. Unless a true AI data science infrastructure uses machine learning algorithms, neural networks, natural language processing, image recognition, or some form of AI, the company may add smoke and mirrors with its AI proposition.
An AI HR technology company called Joonko was shut down by the SEC for fraud.
Learn from Joonko
Joonko claims it can help employers identify close relatives so that employers can take advantage of the pools. The idea is that this will create more candidates to put them in front of recruiters and have a greater chance of being hired. Joonko is so successful in marketing AI that Eubanks wrote about Joonko in his first book, which raised $27 million in venture capital between 2021 and 2022.
When the SEC accused Joonko’s former CEO of AI-washing securities fraud, it was because he mistakenly represented the number and name of the client. He claims Joonka is sold to global credit card, travel and luxury brands and forged bank statements and purchase orders for investors. In addition to the SEC charges against the company, the CEO has also received criminal charges.
Learn from Codeway
In 2023, the Codeway app was charged with misleading ads on Instagram that claimed their AI could fix blurry photos. The ad read “Enhance Your Image with AI” and when challenged by the complainant, the company failed to show how its app can fix blurry images on its own without the help of other digital photo enhancement processes. The Advertising Standards Administration (ASA) maintains the complaint and prohibits the company from running the ad or any other ad.
Other examples
In the United States, the FTC and the SEC have recently taken the following enforcement actions:
- Multiple business plans have been stopped after claiming that people can make money with online stores
- Claims for invalid robot lawyer services over 190k claims
- A company called RYTR LLC wrongly claims that it can create AI-generated content
- Reconciliation action against Intellivision Technologies to mislead its claims on AI facial recognition
- Delphia Inc. and Global Predivitions Inc. are charged for false claims made by AI on their websites and social media accounts
Emerging Regulations
The growth of AI technology and AI washing has attracted the attention of regulators around the world. In the UK, the ASA has set precedents by opposing unproven AI-related advertising.
In Canada, regulators are also targeting unproven claims about AI, as well as marketing materials that mislead or over-promote artificial intelligence technology. Canadian securities managers issued an employee notice on November 7, 2024, which shared some examples of what is considered an AI wash:
- An AI company claims its issuer is using state-of-the-art and modern AI technology to disrupt its industry
- AI companies claim to be the global leader in the AI category
- AI companies overexamination of their use or importance to the industry
In the United States, there are some state-specific regulations, such as the mandatory AI bias audit in New York City, which requires that every AI technology company operating there must have. However, there are no comprehensive federal regulations that limit the development or use of AI. In December 2024, the U.S. Congress is considering more than 120 different AI bills. These regulations will cover everything from AI acquisition of nuclear weapons to copyright, but they will rely on voluntary measures rather than strict protocols that may slow technological advances. Despite debates on these bills, there is a pieced together U.S. federal laws within specific departments, such as the Federal Aviation Administration said AI in aviation must be reviewed. Similarly, AI in the White House executes orders. These commands have been appropriate to mitigate the risks of AI use and ensure public safety, tag content generated by AI, protect data privacy, ensure mandatory security testing and other AI guidelines have just been removed by the Trump administration.
Don’t be an AI partner
As regulators continue to carry out various types of actions against the culprits of AI washing, tech companies should be aware of. Any company that claims to make real AI technology should be able to support its claims. Their marketing team should avoid over-examination of the company’s capabilities, as well as results, customers and revenue. Any company that is uncertain about its own technology or marketing should be in emerging legislation locally and sold to the market. Consumers or companies that buy AI technology should take the product very carefully before purchasing it. With the AI washing case in 2024 still in the early stages of litigation, the story is still developing, but one thing is certain that you don’t want your company to be a part of it.
