Unless you’ve been living under a rock for the past year, you know that artificial intelligence (“AI”) is all the rage. Customers expect businesses to incorporate AI into their goods and services to make them quicker, smarter, and more effective; and businesses know that customers will make their purchasing decisions and pay more for AI capabilities. These market forces have created a recent phenomenon known as “AI washing,” where a good or service’s capabilities and features will be exaggerated based on their use of “AI.”
Like any other marketing statements, these representations can expose a company to liability when they go beyond puffery and result in false advertising. False advertising can lead to civil litigation and class actions, as well as government investigations and enforcement by federal, state, and local authorities.
The Federal Trade Commission (“FTC”) recently took a stand against AI washing. Last week, the FTC filed a complaint against Evolv Technologies, a company that advertises and sells security screening systems to detect weapons that are brought into buildings. The FTC alleges that Evolv “misrepresented the extent to which [its] system will detect weapons and ignore harmless items.” (Compl. ¶ 2.) It allegedly made “unsupported claims that its technology, which incorporates artificial intelligence, makes its system more accurate, efficient, and cost-effective than traditional metal detectors.” (Id.) For example, Evolv claimed its system “is ‘AI-driven,’ is ‘AI-based,’ is ‘AI-powered,’ [and] uses ‘proven artificial intelligence,’ . . . to spot potential threats and let security guards know the location of that threat on people or in their bags.” (Id. ¶ 11.) Evolv also marketed that its system uses “advanced sensors and artificial intelligence (AI)” to “screen everyone who enters a venue – without the need to hand over their belongings or even slow their pace.” (Id. ¶ 27(H).)
According to the FTC, however, these statements were not true. The FTC alleges that Evolv’s security system is not more effective than a metal detector: it does not detect all weapons, drastically reduce false alarm rates as compared to metal detectors, or screen visitors “ten times faster than metal detectors.” (Id. ¶ 35.) Evolv allegedly knew this, but made “a very deliberate choice” to market its product “as involving the use of AI” because that “‘is really what distinguish[es] us from competitors.’” (Id. ¶ 12.) Evolv “publicly and repeatedly” claimed that its security system is “a ‘weapons detection’ system and not a ‘metal detector,’” even though “the only things that [Evolv’s] scanners detect are metallic, and its alarms can be set off by metallic objects that are not weapons.” (Id. ¶ 13.)
Evolv’s statements were effective. Evolv specifically targeted schools, sports stadiums, and hospitals. (Id. ¶ 16.) By June 2024, Evolv’s security system was reportedly in over 800 school buildings in the United States. (Id. ¶ 17.) Customers “generally pay several million dollars for [Evolv’s] systems” by agreeing to multi-year, subscription-based contracts that do not give the customer the right to cancel the contract or service. (Id. ¶ 15.)
According to the FTC, these statements were false in violation of the Federal Trade Commission Act, which prohibits unfair methods of competition like false advertising. Virtually every state, including California, has comparable laws that bar unfair competition, deceptive practices, and false advertising.
The FTC’s case against Evolv serves as a reminder that companies need to be careful about their AI-related marketing. Representations concerning AI are subject to the same requirements and limitations that apply to other, more traditional marketing statements. Claiming your product uses AI, was developed with AI, or has more effective features, functionalities, or outputs because of AI when it doesn’t can result in litigation and legal liability, whether you’re selling B2B cloud-computing services, metal detectors, or anything in between.
For more information on artificial intelligence (AI), please contact Jason Kelly, Esq., CIPP/US/E at [email protected].
