AI Washing: Types and Regulatory Trends

As consumer interest in products and services that use artificial intelligence (“AI”) has grown, companies have increasingly highlighted the use of AI in their products and services for marketing and promotional purposes. Consequently, concerns have been raised about the practice of exaggerating or falsely advertising AI utilization, even when AI technologies are not properly employed or are only minimally related to the core functions of a product. This has led to increasing calls for regulation in response to the emergence of “AI washing.”

In its 2025 major work plan, the Korea Fair Trade Commission (the “KFTC”) stated that, to expand consumer protection in new types of transactions, it would monitor AI‑washing practices – i.e., falsely or exaggeratedly advertising the use of AI despite its irrelevance or limited role – and carry out fact‑finding investigations. Since then, the KFTC has begun to formalize the regulation of AI washing, including monitoring incidents and conducting consumer perception surveys.

As the KFTC’s intent to regulate AI washing has become clear, companies should exercise greater caution in their business activities. The main types of AI washing and regulatory trends in Korea and abroad are outlined below.

1.	Main Types of AI Washing The main types of AI washing include: (i) abuse of technical terminology, (ii) exaggeration of the scope of AI use, and (iii) failure to present a basis for AI technology. The detailed subcategories are as follows:

Main Type	Details
Abuse of Technical Terminology	Exaggerating or unnecessarily using technical terms such as “AI,” “machine learning,” “deep learning” and “generative AI,” to create the impression that highly advanced technology has been applied Example: Promoting a simple data-analysis tool as an “AI-based predictive model”
Presenting Partial Use as Full-Scale Adoption	Exaggerating the company’s usage of AI, even though AI was used only in a limited way by a specific department or for a project Example: Promoting a shoe factory that generates product quotations using AI as an “AI company”
Applying Technology Unrelated to Core Function	Actively marketing a product as “AI-based” even though AI was used only incidentally and is unrelated to the core functions of the product/service Example: Advertising a voice-recognition massage chair as an “AI massage chair”
Misrepresenting Third-Party Technology as Proprietary Technology	Using an external company’s AI solution or service while representing it as their own proprietary AI technology Example: Integrating ChatGPT into a company’s product and promoting it as a “proprietary AI product”
Provision of Unclear Information	Using vague phrases such as “a system powered by AI technology” and making verification difficult by not disclosing the specific methods or principles of technological application Example: Advertising an “AI-driven big data analysis investment program” without providing information about the AI algorithm or the data
Unverified Performance Claims	Claiming to have achieved innovative results through AI while failing to present objective data or verification materials Example: Asserting that “AI predicted an increase in sales” without presenting concrete data or case examples

2.	Domestic and International Regulatory Trends Related to AI Washing The regulatory trends and notable enforcement cases of domestic and foreign regulators are as follows:

(1)

Regulatory Trends in Korea: AI washing advertisements may be regulated under the Act on Fair Labeling and Advertising (the “Fair Labeling and Advertising Act”) as false, exaggerated or deceptive indications/advertising, or under the Act on Consumer Protection in Electronic Commerce (the “E‑Commerce Act”) for providing consumers with false or exaggerated facts or for using deceptive methods leading to consumer misunderstanding or prohibited transactions.

Although there are no identified cases in Korea to date in which AI washing has been the basis for formal sanctions, regulators could nevertheless initiate investigations and crackdowns to prevent consumer harm arising from AI washing. The KFTC recently conducted an AI washing fact‑finding survey together with the Korea Consumer Agency (the “KCA”). Based on the results, the KFTC is expected to prepare concrete guidelines on the standards for determining AI washing and on imposing sanctions for unlawful conduct.

(2)

Regulatory Trends in US: In the United States, the Federal Trade Commission (the “US FTC”) and the Securities and Exchange Commission (the “US SEC”) have actively addressed AI washing through enforcement actions, including issuing prohibitory orders and imposing criminal fines for related business activities.

For instance, the US FTC found that Company A, a legal service provider, advertised that it provided professional legal services through AI that could substitute human lawyers but failed to substantiate the performance or reliability of those claims. Accordingly, on February 11, 2025, the US FTC imposed sanctions, including approximately USD 193,000 in monetary relief and an order prohibiting false advertising. In addition, the US FTC found that Company B, which provides content-recognition services, advertised that its “AI content detector” could identify whether a given text was AI-generated with 98% accuracy but did not present sufficient empirical evidence. Therefore, on April 28, 2025, the US FTC issued a settlement order requiring that advertisements claiming effectiveness or performance, including accuracy, be supported by “objective and reliable evidence.” Similarly, the US SEC charged Company C and Company D, investment advisory firms, with making false claims regarding their use of AI to predict the stock market, when they actually relied on traditional statistical models. In this case, the companies settled with the US SEC by paying fines of USD 225,000 and USD 175,000, respectively.

(3)

Regulatory Trends in EU: Article 5 of the EU Artificial Intelligence Act (the “EU AI Act”), which entered into force on August 1, 2024, classifies deceptive or manipulative uses of AI—including falsely representing non-AI systems as AI or overstating performance relative to risk—as “Prohibited AI Practices.” On February 24, 2025, the European Commission (the “EC”) published draft guidelines concerning these “Prohibited AI Practices,” stating that, in principle, assertions of AI use must be supported by scientific and technical evidence.

On October 28, 2023, the UK’s Advertising Standards Authority (the “ASA”), the advertising industry’s self-regulatory body, required Pixelup to undertake corrective action after determining that an Instagram advertisement asserting that AI could sharpen photos lacked evidence that such results could be achieved. On November 22, 2024, the ASA issued a status report on AI advertising, cautioning firms to not make misleading AI claims and that AI-related advertisements should be produced responsibly.

The fact that overseas regulators are actively sanctioning false or deceptive AI-driven advertising is likely to influence the direction and intensity of regulation by domestic authorities, including the KFTC.

KFTC’s AI Washing Status Survey and Guidelines

On November 7, 2025, the KFTC, together with the KCA, monitored suspected instances of AI washing and conducted a consumer perception survey. The KFTC then announced the results of its first status survey. Specifically, the KFTC reviewed suspected AI washing cases involving home appliances and electronic products sold on major domestic open markets and requested voluntary corrections or deletions for a total of 20 suspected cases. Representative corrective actions are as follows:

(1)

Cases in Which Products Included “AI” in Their Product Names Despite Their Functions Being Difficult to Regard as AI Technology or in Which AI Functions Were Advertised in an Exaggerated Way (19 Cases)

The KFTC required that expressions including “AI” in product names or statements that overstated AI functionality—for example, where only simple sensor technologies not based on machine learning were used and thus could not be reasonably described as AI—be revised to more accurate terms such as “automatic temperature control” or removed entirely.

(2)

Cases in Which Operating Conditions and Other Limitations of the AI Function Built Into the Product Were Not Specified, Making Them Difficult for Consumers to Recognize (One Case)

The KFTC required clear disclosure of the AI feature’s limitations where an AI function operates only under specific conditions but those conditions or other limits were not stated, making it difficult for consumers to understand the feature’s capabilities.

Meanwhile, the KFTC also conducted a consumer perception survey to assess the effect of AI washing on consumers’ purchasing choices. The survey found that more than half of respondents said they would be willing to buy a product labeled as using AI even if it were more expensive than a comparable non‑AI product. Those respondents indicated they would, on average, pay 20.9% more. In light of these findings, greater caution is necessary because AI‑related labels and advertising appear to influence consumers’ purchasing decisions, increasing the likelihood of consumer harm.

Item	Main Details
Willingness to Pay More for AI Technology	Willing to purchase AI products/services even if they are more expensive (57.9%)
Ability to Distinguish Products That Use AI Technology	It is difficult to distinguish products/services that use AI technology (67.1%)
Policies Needed to Protect Consumers from AI Washing	Establish guidelines to prevent AI washing and improve understanding among businesses and consumers (31.5%) Develop national standards, technical criteria and certification systems (26.1%) Continuous monitoring of AI washing (19.4%)

Based on the results of the consumer perception survey, the KFTC concluded that (i) preventing consumer harm, and (ii) increasing predictability for businesses are going to be necessary measures moving forward. It also stated that it plans to prepare guidelines on unfair AI-related labeling and advertising in 2026 and to continue taking corrective measures together with the KCA.

Implications

More active monitoring and stronger enforcement against AI washing practices are expected going forward. In particular, because regulatory authorities may reference one another’s approaches to emerging issues of shared global concern, companies should carefully design promotional materials and advertising for new products and technological applications and actively keep abreast of both domestic trends and overseas regulatory developments and precedents.

[Korean Version]

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