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Focus: Technology triumphs: Google not responsible for misleading and deceptive ads

7 February 2013

In brief: The long-running battle with the ACCC over Google's AdWords service has been decided in Google's favour. The High Court unanimously held that Google did not engage in misleading and deceptive conduct by displaying advertisements in the form of 'sponsored links'. Partner Carolyn Oddie (view CV) and Special Counsel Rebecca Sadleir report on the case, which is positive news for companies involved in the dissemination of information on the internet.

How does it affect you?

  • This decision does not affect your responsibility for the content of your advertisements, whether on- or off-line.
  • For in-house counsel, it remains critical to ensure that any use of competitors' trade marks, including as AdWords, is closely monitored, and that marketing departments and external ad agencies are aware of the boundaries of lawful use.
  • For companies that facilitate the publication or dissemination of information, whether over the internet or otherwise, this decision provides some reassurance as to the level of responsibility for third-party advertising and other content.
  • Companies should continue to take care with information disseminated to the public over internet platforms, Facebook or Twitter, whether posted by themselves or others, and take prompt action once complaints are received.

The background

We reported on the facts of this case and the two previous decisions of the Federal Court and Full Federal Court respectively, in two previous articles (Focus: Google Ads not misleading or deceptive and Focus: Google held responsible for misleading and deceptive ads).

When a user enters a search term into the Google search engine, two types of results appear. 'Organic' search results are web pages ranked in order of relevance to the search term. 'Sponsored links' or advertisements 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. In one example, when the search term 'Honda' was entered into the Google search engine, a sponsored link appeared with the headline 'Honda.com.au'. When clicked on, that link led not to Honda's website but to carsales.com.au. This was clearly misleading.

The Australian Competition and Consumer Commission (the ACCC) alleged that Google itself was responsible for the content of the advertisements and, as a result, was engaging in misleading and deceptive conduct in breach of section 52 of the Trade Practices Act 1974 (Cth) (now s18 of the Australian Consumer Law, schedule 2 of the Competition and Consumer Act 2010 (Cth) (the ACL)).

At first instance, the judge held in favour of Google. On appeal, the Full Federal Court disagreed, and found that Google was responsible for the advertisements, because it took an active role in the preparation, dissemination and publication of the ads and was 'much more than a mere conduit' in the process of generating the sponsored links.

The High Court appeal

On 6 February, the High Court unanimously reversed the Full Federal Court's decision and held that Google was not liable for misleading or deceptive conduct regarding the publication of the advertisements. The unanimous decision was given in three separate judgments – the first by Chief Justice French and Justices Crennan and Kiefel, the second by Justice Hayne, and the third by Justice Heydon.

It was accepted by both parties in the appeal that the sponsored links in question conveyed misleading and deceptive advertisements. The question for the High Court was whether Google (as distinct from the advertisers that had paid for the sponsored links) engaged in misleading or deceptive conduct by publishing or displaying the sponsored links.

In the majority decision, the High Court held that the advertiser was the author of the sponsored link and that Google did not author the misleading and deceptive advertisements; it merely published or displayed them, without adoption or endorsement. Their Honours stated that ...

[t]he automated response which the Google search engine makes to a user's search request by displaying a sponsored link is wholly determined by the keywords and other content of the sponsored link which the advertiser has chosen. Google does not create, in any authorial sense, the sponsored links that it publishes or displays.

 

The technical facilities provided by AdWords were different in kind, but not in principle, from the facilities provided by publishers and broadcasters. Any commercial associations that may give rise to misleading representations were known to the advertisers, not Google.

The majority decision also agreed with the original judge's finding that ordinary and reasonable users of the Google search engine would have understood that the representations conveyed by the sponsored links were those of the advertisers, and would not have concluded that Google was responsible for them. In what is becoming an increasing trend, the High Court recognised that the ordinary and reasonable user of the Google search engine had a degree of sophistication and would understand, for example, that because it provides its search engine for free, Google would need to make money by other means, including via paid advertisements on its site.

In separate judgments, Justice Hayne and Justice Heydon agreed that Google's appeal should be upheld, although on different grounds in each case. Justice Heydon rejected a higher standard by reason of technological information and concluded that ...

[i]f Google's provision of its technological facilities to display the advertisements caused it to be the maker of the advertisements, one of two conclusions would follow. Either there would be an exceptionally wide form of absolute liability for those who publish information in the media, or there would be a distinction between advertising in online media and advertising in traditional media. Neither conclusion should be reached.

 

Guidance on what amounts to misleading conduct – s18

The decision of Chief Justice French and Justices Crennan and Kiefel set out a useful summary of some key features of what is now s18 of the ACL, including:

  • that it is not necessary to prove there was actual deception, only that the conduct is 'likely to mislead or deceive';
  • that where the class of people affected by the conduct may 'range from the gullible to the astute', the court should consider whether the 'ordinary' or 'reasonable' members of that class would be misled or deceived;
  • conduct causing 'confusion and wonderment' is not necessarily the same as conduct that is misleading or deceptive; and
  • conduct can be misleading or deceptive even if there is no intention to mislead or deceive, and a breach can occur even if the corporation acted reasonably and honestly.

Implications

Google's global policy for the use of trade mark terms in AdWords provides that 'Google will not investigate or restrict the use of trade mark terms in keywords, even if a trade mark complaint is received'. There is currently an exception to this for advertising campaigns targeting Australia, where advertisers are restricted in using trade marks in keywords, except where the advertiser has been authorised to use that specific term. It seems likely that, as a result of this decision, Google will relax its policy for Australia, making it easier for businesses to bid on their competitors' trade marks as AdWords. This will make it all the more important for in-house counsel to ensure that use of competitors' trade marks as AdWords is closely monitored, and that marketing departments and external ad agencies are aware of the boundaries of lawful use.

Coming as it does after the iiNet decision last year – in which the High Court held that the internet service provider was not responsible for copyright infringement conducted by users of its service – this decision is positive news for companies involved in the dissemination of information, whether over the internet or by other means. While this will not absolve companies from liability in all circumstances, it gives a degree of certainty, and lessens the likelihood of intermediaries being held liable for content they publish or distribute, but for which they are not primarily responsible.

The High Court noted Google's complaints policy and procedure, enabling it, once on notice, to act to stop misleading conduct by advertisers using its AdWords service. The need for companies to take prompt action to minimise misrepresentations once complaints are received about pages they control has been the focus of recent actions by the ACCC and others.1 Companies should continue to take care with information disseminated to the public over internet platforms, Facebook or Twitter, whether posted by themselves or others.

Footnotes
  1. See Seafolly Pty Ltd v Madden [2012] FCA 1346 (29 November 2012), and Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd (No 2) [2011] FCA 74 (10 February 2011).

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