30 April, 2012

 

In brief

 

  • On 3 April 2012, the Full Federal Court upheld the appeal by the Australian Competition and Consumer Commission (ACCC) against the decision of Justice Nicholas in which his Honour held that Google’s conduct in publishing various advertisers’ “sponsored links” was not misleading or deceptive, even though the advertisements themselves were held to be misleading. His Honour had found that Google was not endorsing or adopting the information conveyed by the advertisements, but was merely communicating them.
  • In contrast, the Full Court held that by publishing and returning as search results the four misleading advertisements the subject of the ACCC’s appeal, Google was not a “mere conduit” of the advertisements and had therefore engaged in conduct that was misleading and deceptive in contravention of the Trade Practices Act 1974 (Cth) (TPA) (now the Competition and Consumer Act 2010 (Cth) (CCA), although the predecessor Act applied). 
  • Google was ordered to implement a consumer law compliance program and had costs orders made against it. 

 

Implications

 

  • Google and other search engine providers which use automated, algorithm technology could be held directly liable for misleading or deceptive conduct for publishing misleading paid search results. 
  • In light of the Full Federal Court’s decision, it appears that where a search engine provider responds to search terms entered by a user with results that are intended to be relevant to the user’s search terms by publishing advertisements which include the keywords searched, the search engine provider will not be treated as a mere conduit of the advertiser, but rather as having endorsed the publication of such advertisement. If the advertisement is misleading, the search engine provider could therefore be held liable for misleading or deceptive conduct.
  • To rely on the “publisher’s defence” in section 85(3) of the TPA (or section 209 of Schedule 2 of the CCA) , search engine providers will bear the onus of showing that they had no reason to suspect that their publication of advertisements would be misleading or deceptive. This could give rise to evidentiary issues for search engine providers

 

Case summary: Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49 (3 April 2012)

 

On 3 April 2012, the Full Federal Court handed down its judgment in the proceedings commenced by the ACCC against Google for alleged breaches of section 52 of the TPA. The matter related to Google’s online search engine service which provides two types of results when a user enters a search query using keywords: organic results and sponsored links.

 

Sponsored links are advertisements that include a headline (which corresponds to the search terms entered by a user), advertising copy and a link to a website address for the advertiser.

Advertisers pay a fee to Google each time its sponsored links are clicked on by a user. Sponsored links are produced using the AdWords program developed by Google.

 

AdWords offers advertisers the ability to use “keyword insertion”, whereby the search term entered by the user is automatically inserted as part of the headline in a sponsored link.

 

Advertisers must agree to be bound by the Google’s AdWords Program Terms to participate in the AdWords program. For present purposes, the relevant terms are that:

 

  • the advertiser is solely responsible for all advertising targeting options and keywords and all advertising content, advertising information and advertising URLs; and
  • the advertiser’s advertisements and keywords must “directly relate” to the content on the landing page for the advertiser’s advertisement.

 

At first instance

 

At first instance, the ACCC alleged that Google had engaged in misleading or deceptive conduct by publishing certain advertisements on Google’s search results page. The headline of each of the advertisements in question comprised a business name of a competitor’s business which was not sponsored by or affiliated or associated with the particular advertiser. When a user clicked on the headline of the advertisement, the user was taken to the advertiser’s website. Each of the advertisements utilised the “keyword insertion” technique.

 

The ACCC argued that use of the competitor’s name conveyed representations to consumers that there was an association or affiliation between the advertisers and the corresponding competitors, or that information about the competitor could be found on the URL accessed via the sponsored link, neither of which was correct.

 

The primary judge found that, although a number of the advertisements themselves were misleading or deceptive, Google merely communicated the advertisement, without adopting or endorsing it, and did not itself make the representations contained in the advertisement.

 

Justice Nicholas at first instance found that ordinary and reasonable users would understand that the advertiser determined the content of the advertisement, not Google. Therefore, it was held that Google was not liable for engaging in misleading or deceptive conduct. For a detailed case summary of the judgment at first instance, please see our IP publication, dated 26 September 2011 “Google wins another battle in the search engine marketing war“.

 

The ACCC appealed the primary judge’s decision in relation to four of the eleven advertisements pleaded at first instance.

The ACCC appealed the primary judge’s decision in relation to four of the eleven advertisements pleaded at first instance.

 

On appeal

 

The central issue for determination on appeal was whether Google had engaged in misleading and deceptive conduct in circumstances where:  it displayed the name of an advertiser’s competitor in the headline of a sponsored link paid for by the advertiser;

 

  • the sponsored link was generated in response to a search query entered by a user using search terms consisting of the advertiser’s competitor’s name; and
  • the sponsored link took the user to the advertiser’s website (and the advertiser was not associated or affiliated with the competitor, and there was no information about the competitor on the advertiser’s website).

 

The ACCC argued that the primary judge, in his factual findings, failed to have regard to the fact that it was the “keyword insertion” facility provided by Google to the advertiser, which caused the headline featuring a competitor’s name to be displayed in collocation with the advertiser’s URL and, that if the user clicked on the headline, they would be taken directly to the advertiser’s website.

 

With respect to the four advertisements the subject of the appeal, when the user clicked on the advertisement for “Harvey World Travel”, “Honda.com.au”, “Alpha Dog Training” and “Just 4x4s Magazine”, for example, the user was taken to websites associated with the advertisers, being STA Travel, Carsales, Dog Training Australia and Trading Post, respectively.

 

Arguments before the Full Court

 

The ACCC argued that where a publisher does not merely pass on an advertisement, but engages in acts to prepare, create or approve the advertisement, then the publisher has made the relevant representations.

 

In relation to this argument, the ACCC contended that Google took an active role in the preparation, dissemination and publication of advertisements via its AdWords program, with the consequence that Google itself made the relevant representations.

In this regard, the ACCC argued that Google tightly controls the content and presentation of results generated by a search and Google’s internal processes serve to closely supervise the keywords available to advertisers.

 

Google argued that the ordinary and reasonable user of its search engine services would recognise that the sponsored links were advertisements made by the advertiser, rather than organic search results.

 

The Full Court’s findings

 

The Court found that Google had contravened of section 52 of the TPA, on the basis that Google was not merely passing on representations made by an advertiser. The Court held that:

 

 By displaying sponsored links in response to a user’s query, Google acted to inform the user that the content of the sponsored link was relevant to the user’s search about the subject matter of the keyword. The Court held that the enquiry by the user was made of Google, and it was Google’s response that was misleading. The keywords which trigger the sponsored links were facilitated through the AdWords program made available to the advertiser by Google and by using Google’s algorithms. Google supplied its advertisers with the ability to select keywords which were expected to be used by users making enquiries via Google’s search engine. For these reasons, the Court held that it is Google’s technology that created what was displayed, and so Google did not merely repeat or pass on a statement by the advertiser.

 Contrary to the Court at first instance, the Full Federal Court held that an ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in response to the user’s search. The Court was of the view that even if it would not be apparent to ordinary and reasonable users that Google was more than a mere conduit – the circumstances showed that Google was much more than a mere conduit.

 

The Court considered that even though the advertisers were in breach of the AdWords Program Terms Google’s conduct was also misleading.

 

Finally, the Court agreed with the trial judge’s opinion that the defence under section 85(3) of the TPA was not available to Google in relation to these particular advertisements, on the basis that Google did not establish that it had no reason to suspect that the publication of the advertisements was likely to mislead or deceive consumers.

 

Conclusion

 

The Court ordered Google to implement a compliance program and made costs orders against it.

 

Given the important ramification the decision has for all search engine providers, many will be watching to see whether Google will seek special leave to appeal the decision.

 

 

For further information, please contact:

 

Marlia Saunders, Ashurst

[email protected]

 

Anita Cade, Ashurst

[email protected]

 

Alysha Salinger, Ashurst

[email protected]

 

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