The Fair Trade Commission (FTC) is establishing criteria to address 'AI washing,' where products are advertised as utilizing artificial intelligence (AI) technology without actually employing it or exaggerating AI capabilities. Even when AI is used, failing to adequately inform consumers about operational conditions or performance limitations may constitute false advertising.
Starting today, the FTC will gather feedback from stakeholders and experts on a draft of the 'Guidelines for AI-Related Labeling and Advertising' until November 11.
These guidelines are a response to the increasing prevalence of misleading advertisements as AI technology expands across consumer markets, often exaggerating product functions and performance, leading to consumer misconceptions.
A consumer perception survey conducted by the Korea Consumer Agency last November revealed that 57.9% of respondents expressed a willingness to purchase AI-enabled products, even at a higher price than standard products. On average, these consumers indicated they would pay about 21% more.
The FTC recognizes that consumers tend to highly value the performance and reliability of AI products. Therefore, misleading advertisements that falsely represent technology application or exaggerate performance could distort purchasing decisions. The draft guidelines categorize false advertising into four types: falsehoods and exaggerations, deception, unfair comparisons, and defamation. It also includes 16 examples across various sectors, such as electrical goods, household items, food and cosmetics, and educational, legal, and financial services.
Previously, the FTC amended related regulations last month to clarify that objective empirical data is necessary for advertising the performance of new technology products, including AI. The current guidelines build on existing empirical obligations, detailing how to demonstrate whether AI is genuinely applied, the extent of performance validation, and what limitations must be communicated to consumers through specific examples.
One notable example of misleading advertising is promoting a product without AI technology as if it possesses AI capabilities. For instance, advertising a cat litter box equipped only with a basic weight sensor and preset analysis functions as a product that uses AI to learn pet waste patterns and diagnose diseases in advance could be considered false or exaggerated advertising.
Even when AI is utilized, failing to properly inform consumers about usage conditions can lead to issues. A common example is advertising a robot vacuum cleaner that requires a dedicated app to activate its AI object recognition feature as if it can automatically recognize all obstacles without such conditions being disclosed.
Introducing a virtual expert generated by AI as a real person or using deepfake technology for false reviews and endorsements may also constitute deceptive practices.
Advertising claims of superior performance compared to competing products without objective comparison standards or disparaging other companies' technologies without basis are also included in the types of false advertising.
The guidelines provide an eight-item checklist for businesses to self-assess the appropriateness of their advertising. This includes verifying whether AI technology is genuinely applied, ensuring that external technologies are not misrepresented as proprietary developments, explaining operational conditions and performance limitations, and confirming that performance can be substantiated by objective test results.
The FTC developed the draft after expert discussions in August and business meetings in September. After collecting feedback until November 11, the final version will be confirmed following consultations with relevant departments. The guidelines will be continuously updated to reflect advancements in AI technology and the accumulation of related case law.
* This article has been translated by AI.
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