Google’s AI falsely declares Japanese company bankrupt

Google’s AI-generated search summary falsely claimed that a textile wholesaler had ceased operations and entered court-ordered special liquidation.

On July 10, a Google search for the mid-sized textile wholesaler Iwate Sen’i, which says it employs around 90 people and generates annual revenue equivalent to about 12 million US dollars, displayed an AI summary at the very top of the results falsely claiming that the company had ceased operations and was undergoing court-ordered special liquidation. An employee discovered the error and immediately informed the company’s management. In the following days, the company received numerous concerned calls from customers and suppliers, and four business partners even showed up in person at the company’s headquarters to ask about the situation.

According to research by Japanese executive Yoshitaka Watabe and the newspaper Asahi Shimbun, the error likely stems from a genuine article by the regional newspaper Iwate Nippo, which had reported on the actual court-ordered special liquidation of a different clothing wholesaler based in the same town. Because the company’s name was not mentioned in the headline of this paywalled article and the text itself sat behind a paywall, Google’s system apparently misattributed the report to the similarly named company Iwate Sen’i.

Google points to general limitations of AI summaries

In a statement to the Asahi Shimbun, Google said only in general terms that AI systems can sometimes misinterpret information from the internet or fail to adequately account for its context. The company did not comment on the specific circumstances of the case. It was not until July 19 that Google finally flagged the statement as unsubstantiated information. Makoto Kato, a professor of library and information science at the University of Tsukuba, said Google should have a mechanism in place that completely suppresses the display of an AI summary in such cases from the outset.

According to Watabe, the company suffered no direct financial damage, but the false report did harm the company’s credibility. The case adds to a longer series of publicly known misinterpretations by Google’s AI search feature.

(red)