You’ve been using Canva’s AI image generator to punch up your Facebook ads. Maybe you’ve played around with Adobe Firefly for a promo banner. Looks great, saves time, job done.

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Here’s the problem: if that AI-generated image shows your product looking better than it actually does (smoother, shinier, more plentiful), you might be handing the ACCC a case against you.

This isn’t hypothetical. Australian Consumer Law penalties for misleading conduct go up to $100 million for companies and $2.5 million for individuals. And “I used an AI tool and didn’t really check” is not a defence.

What the law actually says

Section 18 of the Australian Consumer Law prohibits misleading or deceptive conduct in trade or commerce. Section 29 bans false or misleading representations about a product’s characteristics, quality, or benefits.

Neither section has a carve-out for AI-generated content.

Avinash Singh, principal lawyer at Astor Legal, told Cyber Daily this week: “If an AI-generated image presents a product as having features, quality or benefits that it does not actually have, or if the final image is materially different from the product a consumer receives, there is a real risk the advertising will breach Australian Consumer Law.”

Singh also raised something most small business owners haven’t considered: in serious cases, knowingly using AI to misrepresent a product could cross into fraud territory.

Which tools carry the most risk?

Not all AI image tools are equal here. The risk comes down to how much they change versus how much they enhance.

Canva AI (Magic Media and Magic Expand) is where most small businesses live. The danger zone: using Magic Expand to fill out a product shot and accidentally changing what the product looks like, or generating a lifestyle scene that implies has your product doesn’t have.

Adobe Firefly is integrated into Photoshop’s generative fill. It’s powerful, which makes it easy to drift from “touched up” to “fundamentally different.” A food product that looks more abundant than it is, a tradesperson’s work site that looks far tidier than typical: these are the kinds of details that draw complaints.

Midjourney carries the highest risk for most use cases. It generates images from scratch, which means anything you pass off as your actual product or premises almost certainly isn’t. If you’re using Midjourney to mock up what your café looks like or what your product packaging contains, stop now.

We’ve covered how these tools compare in our Canva vs Adobe breakdown, and if you’re wondering which AI tools are worth using at all, check out our guide to the best AI tools for Australian small businesses.

The disclosure gap

There’s currently no legal obligation in Australia to disclose when AI was used to create or enhance marketing images. Singh confirmed this, Australia’s consumer laws predate generative AI and don’t specifically address it.

That sounds like a free pass. It isn’t. The test isn’t whether you disclosed AI use; it’s whether the image misleads consumers. No disclosure requirement doesn’t mean no liability.

This gap in the law will likely close. Until it does, the smart move is to hold yourself to the standard anyway.

We’ve written about how AI is already distorting Australian business profiles online. This image problem is part of that broader pattern: AI is faking Australian businesses online.

For a wider look at where AI content creates legal exposure, our piece on AI content and legal risk covers it.

Before you post your next AI-generated promo image

Run through this checklist:

Does the image accurately represent the actual product or service? If a customer would feel misled when the real thing turns up, don’t post it.
Has AI changed the product’s apparent quality, size, condition, or features? More coffee in the cup than you serve, a cleaner kitchen than you have, a smoother finish than you manufacture, all of these are risks.
Are there people in the image implying endorsements? AI-generated testimonials or fake “happy customer” scenes are a separate problem.
Can you demonstrate the image is accurate? Singh’s advice is clear: businesses should be able to show that any AI-generated or AI-enhanced marketing reflects what’s actually being sold.
Is it a before/after comparison? These are especially high risk. If the “after” was AI-generated rather than real work, that’s textbook deception.
Is the image of your actual premises or products? If you’re using Midjourney to generate a fake version of your shop or your food, stop.

AI image tools are fine for backgrounds, mood, texture, and generic scenes. They become a legal problem the moment they start representing your product or service as something it isn’t.

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