Focus: Google held responsible for misleading and deceptive ads
5 April 2012
In brief: The Full Federal Court has unanimously upheld an appeal by the Australian Competition and Consumer Commission, concerning Google's AdWords service. It found that Google was responsible for the content of certain misleading advertisements appearing on its website, and that it, therefore, directly engaged in misleading and deceptive conduct. Partners Miriam Stiel (view CV) and Carolyn Oddie (view CV) and Special Counsel Rebecca Sadleir (view CV) report on the decision.
- The background
- The appeal
- The Full Court's decision
- The 'publisher's defence'
How does it affect you?
- If you advertise online, you should review your use of competitors' trade marks as keywords and in advertisements.
- If you offer advertising online, you should check whether you need to update your clearance procedures.
- Helpfully, for companies involved in providing more traditional forms of advertising, the court specifically drew a distinction between what it considered to be Google's active involvement in responding to Google search queries; and billboard owners, newspaper publishers, television broadcasters and the like, which act as a more passive conduit for advertisements.
- Nevertheless, publishers and broadcasters should be alert to the possibility that they can be held responsible for the contents of ads that they publish, if they are doing more than merely passing on the advertiser's message without adopting or endorsing it.
- Google has been ordered to implement a compliance program under the Australian Consumer Law, so we can expect to see changes to its AdWords policies in the near future.
On 3 April 2012, the Full Federal Court handed down its decision in ACCC v Google Inc1 in relation to Google's AdWords service. This was an appeal by the Australian Competition and Consumer Commission (the ACCC) against the Federal Court's decision that Google did not itself engage in misleading and deceptive conduct as a result of misleading advertisements or 'sponsored links' appearing on Google's website. The decision was made under section 52 of the Trade Practices Act 1974 (the Act), now s18 of the Australian Consumer Law 2 .
The Full Court upheld the appeal, finding that Google was responsible for the content of certain misleading advertisements appearing on the results page of the google.com.au website, and that, by publishing or causing the publication of those advertisements, it directly engaged in misleading and deceptive conduct.
We reported on the facts of the case, and the first instance decision by Justice Nicholas, in our Focus: Google Ads not misleading or deceptive.
Briefly, when a user enters a search term into the Google search engine, two types of results appear. The first, so-called 'organic' search results, are web pages ranked in order of relevance to the search term. The second type, the subject of this case, are advertisements or 'sponsored links', which appear at the top or on the right-hand side of the results page. A Google algorithm determines which advertisements will appear in response to a particular search term or AdWord, based on which advertiser has agreed to pay Google the highest price-per-click for the relevant AdWord.
The case arose because some advertisers had bid on, and were using, their competitors' trade marks as AdWords. The ACCC alleged that Google was responsible for the content of the advertisements, and was engaging in misleading and deceptive conduct in breach of s52 of the Act. At first instance, the judge held that Google was not responsible for the contents of advertisements, because ordinary and reasonable users of the Google search engine would understand that it is the advertiser, not the publisher, who usually determines the content of an advertisement. The ACCC appealed that decision.
At first instance, the ACCC also argued that Google's sponsored links were misleading and deceptive, because their appearance was not sufficiently distinguished from the organic search results. That argument did not succeed, and the ACCC did not pursue it in the appeal.
The ACCC's appeal focused on four specific AdWord sponsored links: a Harvey World Travel sponsored link, a Honda sponsored link, an Alpha Dog sponsored link and a Just 4x4 Magazine-sponsored link. The Harvey World Travel-sponsored link appeared when the search term 'Harvey World Travel' was entered into the Google search engine. It had a headline reading 'Harvey World Travel' but, when clicked on, linked to statravel.com.au, a competitor's website. In the Honda-sponsored link, a headline 'Honda.com.au' in fact linked to carsales.com.au. The other two advertisements were of a similar nature.
Google's principal argument was that it was not responsible for the misleading effect of the sponsored links displayed on the search results page. It contended that its position was analogous to that of the owner of a billboard or telephone network, and that consumers would understand that advertisements carried on those media were statements by the relevant advertiser, not Google.
The ACCC made two alternative arguments:
- first, that where a publisher communicates or passes on advertising material, for example, where a newspaper publishes advertisements produced by the advertiser, both the publisher and the advertiser make the relevant representation concurrently; or
- alternatively, if the publisher does not merely pass on the advertisement, but engages in acts to prepare, create or approve the advertisement, then the publisher itself makes the relevant representations.
The ACCC argued that Google took an active role in the preparation, dissemination and publication of the ads and, as a result, Google itself made the relevant representations. In the ACCC's view, this was the case because Google tightly controls the content of results generated by a search, Google's AdWords program permits advertisers to target their advertisements, and Google's internal processes serve to supervise closely the available keywords for an advertisement.
In a unanimous judgment of Chief Justice Keane, Justice Jacobsen and Justice Lander, the Full Court upheld the ACCC's appeal, and found that Google had engaged in misleading and deceptive conduct in breach of s52 of the Act by displaying the offending sponsored links.
The judgment confirms that a party may engage in misleading and deceptive conduct without an intention to mislead or deceive. It is a question of fact as to whether a publisher has engaged in misleading and deceptive conduct or has merely acted as a conduit for another. The publisher's conduct must be considered as a whole, to determine whether the publisher was merely 'passing on' the information, or doing something more. In addition, the court confirmed that a statement being clearly an advertisement for a particular advertiser does not by itself mean that the statement was not made by the publisher.
On the facts, the court decided that Google was 'much more than a mere conduit', by reason of its close involvement in the process of choosing which sponsored links to display in response to a particular search query, as well as the content of those advertisements. It was Google that triggered the link to the competitors' keywords using its algorithms.
As the judges described it, in generating a sponsored link in response to a search query, Google is not simply passing on an advertisement provided to it by the advertiser. The user asks a question of Google, and Google displays the sponsored links in response to that query. For example, a user enters the keyword 'Harvey World Travel' because they are seeking information about Harvey World Travel. Instead, Google provides the user with a link to the website of one of Harvey World Travel's competitors, under the heading 'Harvey World Travel', with the implication that the link will lead to information about Harvey World Travel. The court held that this conduct is Google's – the enquiry is made of Google; Google responds to the query and provides the link, which is misleading; and hence Google has engaged in conduct that contravenes s52 of the Act.
Importantly for those involved in more traditional forms of advertising, the judgment specifically differentiates Google's situation from the case of a billboard owner, newspaper publisher or television broadcaster that simply displays an advertisement of another, 'for what it is worth'. The difference is that, in Google's case, Google created the message it presents.
Google also sought to rely on the so-called 'publisher's defence' in s85(3) of the Act3 in relation to two of the advertisements, on the basis that Google was a person whose business it was to publish or arrange for the publication of advertisements, Google received the advertisement for publication in the ordinary course of business, and did not know, and had no reason to suspect, that the publication of the advertisement would amount to a contravention of the Act.
The court held that Google did not make out this defence.
In the case of the Just 4x4 Magazine-sponsored link, Google had actual notice of the contravention of the Act, as a result of service of the original statement of claim.
In relation to the Harvey World Travel-sponsored link, Harvey World Travel was also a client of Google. The court held that 'no reasonable person in Google's position could have failed to suspect that use by [STA Travel] of the [Harvey World Travel] name as a keyword was likely to mislead or deceive a consumer searching for information on [Harvey World Travel]'. This, along with other comments made by the judges, tends to suggest that the Australian courts will, in future, give very careful scrutiny to any use of competitors' names as keywords.
The Full Court has ordered Google to establish and implement a 'Consumer Law Compliance Program'. This is likely to lead to changes to Google's AdWords policy. In the meantime, the practice of companies using competitors' trade marks as keywords is clearly under scrutiny and should be avoided, or at least approached with extreme caution. For companies offering online services, this case is a reminder of the need to be careful when offering value add services not to become too involved in promotions by third parties.
At the time of publication, Google has not yet indicated whether it intends to seek special leave to appeal the decision to the High Court.
-  FCAFC 49.
- The Australian Consumer Law is Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the ACL), the new name for the Trade Practices Act.
- Now s209 of the ACL.
- Miriam StielPartner,
Ph: +61 2 9230 4614
- Carolyn OddiePartner,
Ph: +61 2 9230 4203
- Tim GolderPartner,
Ph: +61 3 9613 8925
- Fiona CrosbiePartner,
Ph: +61 2 9230 4383