Types of AI Washing and Regulatory Trends (Part 1)

Have you heard of the term “AI washing”?

In advertisements for products ranging from smartphones to even financial investment products, you may have come across statements highlighting the use of AI. While there is no problem with providing accurate information regarding the role of AI in products or services, exaggerating or falsely promoting the use of AI when AI is either not used or only minimally relevant to the core functions of the products or services may raise concerns of “AI washing.”

With the rising social and industrial significance of AI, the expression “AI” has become an effective marketing tool for capturing the attention of consumers and investors. This has brought about a growing number of cases in which companies use false or exaggerated AI-related claims to market their products or services. Such practice undermines the trust of consumers and investors and impedes the healthy development of the market.

As the concept of AI is broad and ambiguous, it poses challenges in terms of regulatory compliance – it is difficult to establish clear criteria for identifying AI washing in marketing claims, which in turn may make it challenging for companies to identify and eliminate marketing elements that may expose them to potential AI washing allegations.

In this newsletter series, we will provide an overview of regulatory trends related to AI washing, notable cases from jurisdictions outside of Korea, and key points that companies should be aware of in preventing AI washing-related issues.

In this first newsletter, we explain the key types of AI washing and the regulatory trends in Korea and other major jurisdictions.

(i)

Types of AI Washing and Regulatory Trends

(ii)

Domestic and International Cases Related to AI Washing

(iii)

The Korea Fair Trade Commission’s Market Survey and Guidelines on AI Washing

(iv)

AI Washing Compliance

1.	Different Types of AI Washing The types of AI washing that we often see include (i) misuse of technical terms, (ii) exaggeration of the scope of use of AI technology, and (iii) failure to substantiate the use of AI. The detailed types are as follows:

Key Types

Contents

Misuse of Technical Terms

Exaggerating or using unnecessary technical terms such as “AI,” “machine learning,” “deep learning” and “generative AI” to mislead consumers to believe that such technologies were used.

–	Example: Presenting the use of a simple data analysis tool as an “AI-powered predictive model.”

Limited Use of AI Technology Being Presented as Wider Use by the Entire Company

Promoting as if AI is widely utilized across the entire company, when in reality it is used only to a limited extent in a certain project or by a certain team within the company.

–	Example: Promoting a shoe factory as an “AI company” even though its use of AI is limited to issuing product quotations.

Use of Irrelevant AI Technology

Promoting products or services as AI-based despite the use of ancillary technologies that have little to no relevance to their core functions.

–	Example: Advertising a massage chair with a voice recognition function as an “AI massage chair.”

Use of Another’s Technology as if It Is the Company’s Own

Using another company’s AI solution for a product and promoting the product as if it uses the company’s own technology.

–	Example: A company integrating Chat GPT functions into its product and promoting it as an AI product solely developed by the company.

Failure to Disclose Information

Making vague claims such as “systems powered by AI technology” without specifying the technology used, making it difficult to verify the use of AI.

–	Example: Advertising an “AI big data analytics investment program” without disclosing relevant AI algorithms or data.

Unsubstantiated Claims of Innovation or Performance

Failing to present objective data to support claims of innovation or other performance purportedly achieved using AI technology.

–	Example: Claiming to have predicted a sales increase using AI without presenting specific data or cases.

Laws and Regulations on AI Washing in Korea and Other Jurisdictions

In Korea, false or exaggerated advertisements using AI washing could potentially be regulated as “false, exaggerated, or deceptive labeling and advertising” under Article 3 of the Act on Fair Labeling and Advertising or as “misleading consumers and transacting through deceptive means” under Article 21(1)(1) of the Act on the Consumer Protection in Electronic Commerce.

To date, there has not been an “AI washing” case in Korea that involved a regulatory authority imposing sanctions against relevant conduct. However, as consumer harm from AI washing continues to rise, the risk of enforcement actions by regulatory authorities such as the Korea Fair Trade Commission (the “KFTC”) could increase. AI washing has already come under the focus of the KFTC. In its 2025 Enforcement Plan (dated January 7, 2025), the KFTC announced that it would monitor and conduct market surveys on AI washing.

Likewise, legislative measures and enforcement actions aimed at addressing AI use and AI washing are gaining momentum in other major jurisdictions.

In the US, regulatory authorities have increasingly targeted false and exaggerated AI-related claims. In February 2023, the US Federal Trade Commission (the “US FTC”) announced plans to take strict measures against false and exaggerated advertising that use AI-related claims. In March 2024, Gary Gensler, Chair of the US Securities and Exchange Commission (the “US SEC”), cautioned companies about AI washing, emphasizing the importance of eliminating deceptive AI-related claims. Since then, both the US FTC and the US SEC have taken enforcement actions, including imposing fines and sanctions on companies for making false and misleading statements about their alleged use of AI.

In the EU, the AI Act, the world’s first comprehensive legal framework on AI usage, went into effect on August 1, 2024. In particular, Article 5 of the AI Act sets out certain types of “prohibited AI practices” such as using AI systems that deploy “subliminal techniques beyond a person’s consciousness or purposefully manipulative or deceptive techniques with the objective, or the effect of materially distorting the behaviour of a person or a group of persons by appreciably impairing their ability to make an informed decision.” On February 24, 2025, the European Commission issued draft guidelines on prohibited AI practices, clarifying that such techniques may involve presenting false or misleading information with the objective or the effect of deceiving individuals. Although the AI Act regulates AI use in general, Article 5 may represent an important step toward promoting greater transparency in how companies advertise products or services that use AI.

Considering these regulatory trends relating to the use of AI and AI washing, it would be advisable for companies to set up internal protocols for gathering and keeping detailed records of objective evidence that could corroborate all marketing elements that refer to the use of AI in their products or services, and identifying and eliminating elements that have the potential to mislead or harm consumers. Given the evolving regulatory landscape, it would also be advisable to continue monitoring regulatory developments related to AI washing.

[Korean Version]

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