Imagine this: You want to buy the latest vacuum cleaner, you go to your favorite online store and begin to scroll through your cellphone or tablet. Then, you see a product that claims it is powered by advanced artificial intelligence (AI) technology, which makes it sound super high-tech and smart.

But really, it just has a simple sensor button to make sure it doesn't bump into furniture. Nothing special or groundbreaking. That's AI washing. It means making products sound way cooler or smarter by claiming they have AI when they are just doing regular stuff.

Why is AI washing a problem?

First of all, real AI innovation can get buried under all the hype, making it hard to spot real breakthroughs. Secondly, it makes people skeptical about AI claims, so they stop trusting the technology altogether.

Christoph Lütge, from the Munich-based Institute for Ethics in Artificial Intelligence, says that since the term AI is used in very different ways, there are so many concepts which make it easier for companies to hype it up. 

"The challenge is that it's hard to deal with AI from a legal perspective because the term is too vague. From an ethical point of view, it can work. It's good to have an expert who comes in and guides regulatory bodies and civil society from an ethical point of view," he told DW.

It's also a headache for investors. They might miss genuine projects because of all the noise. Companies may also begin to aim for impossible goals, believing that AI could do more than it really could.

Earlier this year, the US Securities and Exchange Commission (SEC) announced settled charges against two investment firms, Delphia and Global Predictions, for making false and misleading statements about their purported use of artificial intelligence. The firms agreed to settle the SEC's charges and pay a total of $400,000 (€368,000) in fines.

According to the SEC, Toronto-based Delphia made false claims that it "put[s] collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else" when in fact it did not have the AI and machine-learning capabilities that it claimed.

Meanwhile, San Francisco-based Global Predictions had wrongly claimed on its website and on social media that it was the "first regulated AI financial advisor" and misrepresented that its platform provided "expert driven forecasts." 

"We've seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies," SEC chair Gary Gensler said in a press statement. "Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors."

Major companies like Coca-Cola and Amazon have also faced backlash for allegedly engaging in so-called AI washing. In September, Coca-Cola launched the Y3000 drink, a futuristic new flavor of cola that it claims was "co-created" by AI.

Is it a thing in Germany?

Some companies may advertise AI in their products before they launch it. Even though they intend to include AI in the product at some point, they may advertise as if the product already contains AI, which may not be the case.

According to Joerg Heidrich, an AI lawyer and certified AI specialist based in Hannover, Germany, it's not that people are not aware of AI washing in Germany, but rather the concept of how its applied in products and services.

"We are in an era of false advertising, with companies claiming that they do have something which in fact does not exist. I see that really a lot in two areas where I work. First one is in the area of legal tech, where every legal-tech company is advertising that it uses AI which is largely false and another area where I see it, is in cyber security, where I work a lot," Heidrich told DW.

A 2019 report by London-based venture capital firm MMC Ventures found that out of more than 2,830 startups in Europe are classified as AI companies. However, 40% percent had nothing to do with AI at all. 

The EU AI Act

The EU AI Act comes into effect on August 1, 2024, with provisions coming into force gradually over the following six to 36 months. It has a limited risk category, which ensures that users are informed that they are interacting with AI systems, allowing them to make informed decisions. 

However, Heidrich says: "Although the AI Act is not responsible to regulate the area of AI washing, it might be helpful because the act ensures organizations are very transparent about AI so this might help indirectly limit false advertising from companies due to transparency requirements."

The European Consumer Center (ECC) in Germany is the first contact point for all German consumers with cross-border issues and for foreign consumers living in Germany. Having dealt with disputes to do with green and social washing, they are sure that the topic of AI washing will come up.

"[But] consumers must be able to prove this claim and that there is reliable proof of that because now everyone tries to use AI as a buzzword," ECC spokesperson Karolina Wojtal told DW.

Edited by: Uwe Hessler