Read about the Tort Law of Defamation and Injuries Falsehood which is common in most civilized countries. Defemation occurs when the defendant makes a false statement that may lead to someone having a lower opinion of the plaintiff (the person suing) and Injuries falsehood occurs whenever the defendant's makes a statement that results in the plaintiff's business suffering a loss.
It's not 'illegal' in any sense.
I don't really know how you got to defamation and libel. Defamation isn't applicable and libel isn't really either. To prove libel, you have to show that I, knowing said something about you or your product that I knew was false, and that you suffered as a result. That really has no relevance to simply showing a product in a game.
The only real issue is copyright law and fair use, which is something greyelf touched on.
There is no simple answer to this question because the usage laws related to both Copyright and Trade Mark can be very specific based on which Legal Region (eg. Country, State, Union, etc..) and which particular License the product is covered by. It can become even more complex when more than a single Legal Region is involved.
Long story short, you do have the right to showcase someone elses product in your game or your art, as long as the artwork is otherwise a completely original idea of yours.
That being said, don't do it anyways. If you put a Coca-cola bottle in your game for example, even if you didn't do anything with it, they could still open a lawsuit on you. You would probably eventually win if you took it to court, but there's no reason to open yourself that form of litigation.
