The Growing Number Of Tech Companies Getting Cancelled For Ai Washing

In 2024, 15 AI exertion companies were deed by regulators for exaggerating their products’ capabilities, and that number has much than doubled from 2023. AI-related filings are connected nan emergence and tech companies could beryllium caught successful nan crossfire if they don’t understand emerging regulations and really to debar them.

What’s Wrong pinch AI Marketing Today?

While galore are acquainted pinch nan building “greenwashing,” it’s only successful nan past twelvemonth that a caller shape has emerged from nan hype astir artificial intelligence, and it’s called “AI washing.” According to BBC the arena of AI washing tin beryllium defined arsenic claiming to usage AI erstwhile successful reality a less-sophisticated method of computing is being used. They explicate that AI washing tin besides hap erstwhile companies overstate really operational their AI is aliases erstwhile a institution combines products aliases capabilities together. For example, erstwhile “firms are simply bolting an AI chatbot onto their existing non-AI operating software.”

Over-exaggerated AI claims are vulnerable for users and different stakeholders. Three evident concerns astir AI washing travel to mind:

• The personification paying for thing they’re not getting
• Users expecting an result that isn’t achievable
• Company stakeholders not knowing if they’re investing successful a business that is genuinely innovating pinch AI

AI washing is simply a increasing rumor arsenic tech companies compete for greater marketplace share. As galore as 40% of companies who described themselves arsenic an AI start-up successful 2019 had zero artificial intelligence technology. The unit to connection precocious exertion is moreover greater now than it was 5 years ago.

What’s Driving AI Washing?

Experts person a fewer theories astir what’s down this increasing phenomenon. Douglas Dick, nan caput of emerging exertion consequence astatine KPMG successful nan UK, told BBC that it is nan deficiency of AI meaning and nan ambiguity that makes AI washing possible.

Experts at Berkely believe that nan sermon of organizational civilization is responsible for AI washing, and nan halfway reasons for this arena include:

• Lack of method AI knowledge successful elder leadership
• Pressure for continuous innovation
• Short-termism and hype
• Fear of missing retired (FOMO)

AI washing tin besides beryllium driven by funding. Investors want to spot accordant invention and outpacing of competitors. Even if brands haven’t afloat developed an AI capability, they tin pull nan attraction of investors pinch half-baked automation devices to gain further capital.

With nan world AI marketplace group to scope astir $250B by nan extremity of 2025, it’s easy to understand why nan bandwagon is successful afloat effect, and startups eager for backing are speedy to slap nan AI explanation onto anything. Unfortunately, regulators person taken note.

AI Tech Companies Charged pinch AI Washing

Companies that declare to usage artificial intelligence are often conscionable utilizing precocious computing and automation techniques. Unless existent AI information subject infrastructure is successful spot pinch instrumentality learning algorithms, neural networks, earthy connection processing, image recognition, aliases immoderate shape of Gen AI is successful play, nan institution whitethorn conscionable beryllium putting up fume and mirrors pinch their AI claims.

One AI HR tech institution called Joonko was unopen down by nan SEC for fraudulent practices.

Learning from Joonko

Joonko claimed that it could thief employers place near-hires truthful employers could pat into these pools. The thought was that this would create much divers candidates to beryllium put successful beforehand of recruiters and person a greater chance of getting hired. Joonko was truthful successful astatine trading its AI that Eubanks wrote astir Joonko successful his first book, and nan institution raised $27 cardinal successful VC backing betwixt 2021 and 2022.

When nan SEC charged Joonko’s erstwhile CEO pinch AI washing securities fraud, it was because he had falsely represented nan number and names of their customers. He claimed that Joonka sold to world in installments cards, travel, and luxury brands, and forged slope statements and acquisition orders for investors. The CEO received criminal charges in summation to nan SEC charges against nan company.

Learning from Codeway

In 2023, the Codeway app was charged for a misleading advertisement connected Instagram that claimed their AI could hole blurry photos. The advertisement publication “Enhance your image pinch AI” and erstwhile challenged by a complainant, nan institution grounded to show really their app could hole a blurry image connected its ain without nan thief of different integer photograph enhancement processes. The Advertising Standards Authority (ASA) upheld nan complaint and banned nan institution from moving that advertisement aliases immoderate others for illustration it.

Other Examples

In nan US, nan FTC and SEC precocious carried retired the following enforcement actions:

• Multiple business schemes were halted aft claiming group could usage AI to make money pinch online storefronts
• A declare for complete 190k was actioned for ineffective robot lawyer services
• A institution called Rytr LLC falsely claimed that it could create AI-generated content
• A colony action against IntelliVision Technologies for misleading claims astir its AI facial recognition
• Delphia Inc. and Global Predictions Inc. were charged for making mendacious claims astir AI connected their website and societal media accounts

Emerging Regulations

The maturation of AI technology, and AI washing, person caught nan attraction of regulators astir nan world. In nan UK, nan ASA is already mounting a precedent by litigating against unsubstantiated AI-related ads.

In Canada, regulators are targeting unsubstantiated claims astir AI arsenic good and besides trading worldly that is misleading aliases overly promotes AI technology. The Canadian Securities Administrators released a staff notice on November 7th, 2024 that shared immoderate examples of what it considers to beryllium AI washing:

• An AI institution making nan declare that their issuer is disrupting their manufacture pinch nan astir precocious and modern AI exertion available
• An AI institution making nan declare that they are nan world leader successful their AI category
• An AI institution over-exaggerating its usage aliases value to nan industry

In nan US, location are state-specific regulations, for illustration New York City’s mandatory AI bias audits that each AI tech institution operating location is required to have. However, there are nary broad national regulations that restrict nan improvement aliases usage of AI. In December 2024, nan US Congress was considering much than 120 different AI bills. These regulations would screen everything from AI’s entree to atomic weapons to copyright, but they would trust connected voluntary measures alternatively than strict protocols that could slow technological progress. While these bills are debated, location is simply a patchwork of US national laws wrong circumstantial departments, specified arsenic nan Federal Aviation Administration that says AI successful aviation must beryllium reviewed. Similarly, location person been executive orders connected AI wrong nan White House. These orders put successful spot to mitigate nan consequence of AI usage and guarantee nationalist safety, explanation AI-generated content, protect information privacy, guarantee mandatory information testing and different AI guidance person each just been removed by nan Trump management arsenic precocious arsenic January 2025. The US-based AI companies that service world markets will still have to adhere to their regulations.

Don’t Be an AI Poser

As regulators proceed to enforce various types of actions against culprits of AI-washing, tech companies should return note. Any institution that does declare to make existent AI exertion should beryllium capable to backmost up their claims. Their trading teams should debar overexaggerating nan capacity of their company’s AI products, arsenic good arsenic nan outcomes, nan customers, and nan revenue. Any institution that is unsure of its ain exertion aliases trading should reappraisal emerging authorities locally and wrong nan markets they waste to. Consumers aliases companies reasoning of purchasing AI exertion should look very intimately astatine nan merchandise earlier buying it. With nan 2024 cases of AI washing still successful nan early stages of litigation, nan communicative is still unfolding, but 1 point is sure, you don’t want your institution to beryllium a portion of it.