Recent lawsuits over
The cases filed against the tech giant earlier this year—the first foray into consumer deception litigation targeting exaggerated AI marketing—show that consumers are growing increasingly savvy and underscore the risk of over-touting AI capabilities.
“We’re in the hype cycle, and we’ve been in it for the last 18 months or so since ChatGPT came to the masses,” said Danielle Bass, a partner at Honigman LLP.
“There’s this gray, vague area where our friends in technology are not talking to our friends in marketing and advertising, and we end up kind of word vomiting the latest fun buzzwords to sell the latest products,” she said.
Regulators targeting such claims have coined the term “AI washing,” a twist on the Federal Trade Commission and Securities and Exchange Commission’s use of “greenwashing” to refer to companies claiming to be more environmentally friendly than they were.
Despite the lack of AI-specific regulations, companies should examine AI marketing statements through the lens of the reasonable consumer standard used to assess misrepresentations generally, said Ioana Gorecki, special counsel at Kelley Drye & Warren LLP.
“When we talk about AI washing we don’t have to do any of these sort of legal gymnastics to fit this new emerging thing that we’ve never thought about into a framework that doesn’t fit it; it’s really about just applying the very traditional standard for deceptive practices,” she said.
That can be “tricky because what consumers expect from AI changes by the day,” but it’s going to be a “net impression analysis,” Gorecki said.
Fallout From Delays
The complaints, consolidated in the US District Court for the Northern District of California, alleged that Apple tricked consumers into buying new iPhone 16s by touting state-of-the-art artificial intelligence features the company knew it couldn’t deliver.
The company promoted new features under its “Apple Intelligence” suite to be unveiled with the iPhone 16 line, including an enhanced Siri function that was the centerpiece of Apple’s annual Worldwide Developers Conference in June 2024, the complaint said.
After numerous internal development delays, the company set an internal release goal for the AI features for spring 2026. The launch delay caused Apple’s stock price to slip earlier this year.
The tech giant’s postponement of the upgrades after struggling to make the features work as promised sparked private lawsuits.
Consumers sued for false advertising and said Apple enticed tech-savvy customers into buying phones that didn’t have the advertised features while knowing the company wouldn’t be able to launch the technology on time.
Shareholders followed and alleged Apple’s leadership hurt the company’s wallet and reputation by making misleading statements and causing the company to overpay by nearly $9 million in stock buybacks.
Representatives for Apple didn’t respond to a request for comment.
Uncertain Federal Enforcement
Regulators previously cracked down on AI washing, particularly during the Biden administration.
Former SEC Chair Gary Gensler repeatedly warned companies against making overblown statements about AI to investors, and in March 2024 the SEC settled charges against investment advisers over claims they made misleading statements to their clients about AI use.
Earlier this year, the SEC also charged the former CEO of Nate Inc. with making false claims about AI, saying he advertised the e-commerce company’s app as a universal digital shopping cart that would autonomously manage the checkout process but in fact relied on teams of human workers. The Justice Department also secured a criminal indictment against him.
Yet those moves are likely to be scaled back in light of President
Part of the plan—aimed at speeding AI development—directs the FTC to review Biden administration enforcement actions, through its “Operation AI Comply” initiative, that the Trump administration said “unduly burden AI innovation.”
“We’re kind of building a plane as it flies,” Bass said of the regulatory landscape. “So proactive compliance is kind of the best defense that you have, and this is a space where conservatism is going to probably pay better dividends than trying to latch on to the latest trend.”
Mitigating Risks
Federal agencies so far have only skimmed the surface of AI deception, but the claims are definitely coming in one way or another, said Megan Scheiderer, a partner at Husch Blackwell LLP.
Some of that will depend on whether and how consumer plaintiffs respond to federal enforcement or lack thereof, she said.
More robust agency enforcement generally signals that AI washing is important to the public, while conversely federal inaction could put a damper on private litigation while consumers wait to see what the government does, she said.
In the meantime, Scheiderer recommends that companies build litigation into their budgets.
“It’s not like there aren’t laws or that there isn’t clarity” on the issue of exaggerating consumer product capabilities, Gorecki said. “There’s an entire body of law on deception and misrepresentations that’s been developed for decades.”
Companies should ensure that whatever they’re promising is backed up with evidence in order to shield themselves from consumer litigation, she said.
“The more specific or more certain your promise is, the more robust your substantiation has to be,” Gorecki said.
Bass also recommended establishing internal governance boards as a way to proactively mitigate some of the litigation risks.
“It’s the least sexy thing in the world,” she said, “but having a constituency of legal, of your marketing teams, of your engineers, your business development folks really understanding this is what the tool does or this is what our product does and what it does not” can be a big help.
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