Google AdWords on Tri­al: ACCC estab­lish­es mis­lead­ing or decep­tive conduct

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In Brief

In what is like­ly to be her­ald­ed as a land­mark deci­sion for Aus­trali­a’s con­sumer watch­dog, the Fed­er­al Court of Aus­tralia has found that using Google AdWords to trade on a com­peti­tor’s busi­ness or rep­u­ta­tion is not only a breach by the adver­tis­er of the Trade Prac­tices Act 1974 (Cth) (TPA) (now the Com­pe­ti­tion and Con­sumer Act 2010 (Cth)), but also a breach by the search engine pro­vid­ing the adver­tis­ing ser­vice and dis­play­ing the con­tra­ven­ing words in its search results.

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We take a look at the pri­ma­ry and appeal deci­sions and give some guid­ance on what busi­ness­es might expect next.

Pri­ma­ry proceedings

Google’s AdWords pro­gram pro­vides a paid adver­tis­ing ser­vice that enables adver­tis­ers to tar­get spe­cif­ic users on the basis of their search term queries. These paid links, referred to as ​‘spon­sored links’¹ appear either above or along­side organ­ic search results.

In 2007, the ACCC brought an action against the Trad­ing Post and Google for mis­lead­ing or decep­tive con­duct and false rep­re­sen­ta­tions under the Trade Prac­tices Act in rela­tion to spe­cif­ic instances where the Trad­ing Post used the names of com­peti­tors, specif­i­cal­ly the car deal­er­ship ​‘Kloster Ford’, in its spon­sored links on the Google search engine.

The Fed­er­al Court of Aus­tralia hand­ed down its judg­ment in 2011, find­ing that the Trad­ing Post made var­i­ous rep­re­sen­ta­tions which were mis­lead­ing or decep­tive, or like­ly to mis­lead or deceive, includ­ing that:

• there was an asso­ci­a­tion or affil­i­a­tion between Trad­ing Post and Kloster Ford when there was not;
• infor­ma­tion regard­ing Kloster Ford could be found at the web­site www​.trad​ing​post​.com​.au when it could not; and
• infor­ma­tion regard­ing Kloster Ford’s car sales could be found at the web­site at www​.trad​ing​post​.com​.au when it could not.

In its case against Google, the ACCC alleged that the fea­tures that were said to dis­tin­guish organ­ic search results from spon­sored links for the con­sumer were defi­cient, in par­tic­u­lar, the appear­ance of organ­ic search results and spon­sored links on Google’s web pages were fun­da­men­tal­ly the same. The ACCC also argued that Google had made the rep­re­sen­ta­tions as to the car deal­er­ship and also to four oth­er instances of spon­sored links that returned to the user links of com­peti­tors Har­vey World Trav­el, Hon­da Aus­tralia, Alpha Dog Train­ing and Just 4x4’s Magazine.

How­ev­er, the Court was not sat­is­fied that Google con­tra­vened the TPA by fail­ing to suf­fi­cient­ly dis­tin­guish the spon­sored links from organ­ic search results. The Court was of the opin­ion that the ordi­nary and rea­son­able user would be aware that Google was a com­mer­cial enti­ty and that the spon­sored links were advertisements.

Fur­ther, Google was found not to have con­tra­vened sec­tion 52 of the TPA by mak­ing the rep­re­sen­ta­tions. Whilst the tech­nol­o­gy employed by adver­tis­ers online may be dif­fer­ent to that of a pub­lish­er of a news­pa­per, it did not agree that Google’s pub­li­ca­tion online of the adver­tise­ment result­ed in any endorse­ment of the infor­ma­tion con­veyed by that adver­tise­ment. Rather, Google was a mere con­duit of the information.

Accord­ing­ly, the ACC­C’s claims against Google were dis­missed.

¹Since this deci­sion, Google has replaced the phrase ​‘spon­sored links’ with the phrase ​‘Why these Ads?’ which when clicked by the user pro­vides fur­ther infor­ma­tion as to how the links were gen­er­at­ed and, by sign­ing into the user’s Google Account, the abil­i­ty to opt out.

ACC­C’s basis for Appeal

The ACCC appealed the find­ings made in favour of Google — specif­i­cal­ly cit­ing the four instances of alleged mis­lead­ing con­duct regard­ing Har­vey World Trav­el, Hon­da Aus­tralia, Alpha Dog Train­ing and Just 4x4’s Magazine.

Accord­ing to the ACCC, Google was instru­men­tal in com­mu­ni­cat­ing the adver­tis­ing mate­r­i­al to the search engine user. Accord­ing­ly, Google engaged in mis­lead­ing con­duct by tak­ing an active role in the prepa­ra­tion, dis­sem­i­na­tion and pub­li­ca­tion of the adver­tise­ments, rather than just ​‘pass­ing it on for what it was worth’.

Google argued that its actions were sim­i­lar to the own­er of a bill­board or a tele­phone net­work in that adver­tise­ments of this nature are read­i­ly under­stood by con­sumers as being rep­re­sen­ta­tions of the adver­tis­er and not the pub­lish­er. Fur­ther, Google argued that the ordi­nary and rea­son­able search engine user would recog­nise that spon­sored links were adver­tise­ments made by the adver­tis­er only.

Appeal Court’s reasons

The Full Court of the Fed­er­al Court reject­ed Google’s claims. The very fact that the spon­sored link is dis­played on the screen in response to the user’s search query sug­gests to the ordi­nary and rea­son­able user that it is Google who was dis­play­ing that spon­sored link and not just the adver­tis­ers. For exam­ple, when a user entered the phrase ​“Har­vey World Trav­el” the results returned a link to STA Trav­el which fea­tured as one of the first links a user would see. The results returned by Google’s search engine mis­rep­re­sent­ed a con­nec­tion between the search term iden­ti­fy­ing a com­peti­tor and the URL of the adver­tis­er. Sim­ply put, the enquiry was made of Google and it was Google’s response which was misleading.

A crit­i­cal part of the process was the trig­ger­ing of the link between the search terms and the results by Google’s algo­rithms. This was fur­ther evi­dence that Google’s con­duct was as prin­ci­pal, and not mere­ly as a con­duit of the adver­tise­ments. It was Google’s con­duct in response to the user’s inter­ac­tion with Google’s search engine that was mis­lead­ing. As such, any anal­o­gy between Google and that of a bill­board own­er who sim­ply dis­plays an adver­tise­ment of anoth­er was not available.

Even though Google’s AdWords Terms stat­ed that the adver­tis­er is respon­si­ble for all adver­tis­ing and must choose words that ​“direct­ly relate” to the con­tent on the land­ing page of the adver­tise­ment, this was not suf­fi­cient to pro­tect Google. The con­duct was clear­ly not sole­ly that of the adver­tis­er, but also of Google.

Noth­ing in this lat­er deci­sion affects or alters the lia­bil­i­ty of the adver­tis­er for using the names or brands of a com­peti­tor as key words in an AdWords program.

Ram­i­fi­ca­tions of the appeal decision

This deci­sion against Google has sig­nif­i­cant impli­ca­tions. Cur­rent­ly, Google’s search engine dom­i­nates approx­i­mate­ly 82 per cent of the mar­ket share of search engines in the world. Cou­pled with the fact that around 97 per cent of Google’s rev­enue is made through its AdWords pro­gram, this deci­sion will change not only the way Google oper­ates its AdWords busi­ness in Aus­tralia, but also around the world.

A sim­i­lar case was recent­ly heard on appeal in the Unit­ed States. Roset­ta Stone, a soft­ware man­u­fac­tur­er, alleged trade mark infringe­ment by Google through the AdWords pro­gram. The Court held that sum­ma­ry judg­ment dis­miss­ing the claim, in favour of Google, was unfound­ed. In par­tic­u­lar, there was not suf­fi­cient evi­dence avail­able to the judge in the first instance to deter­mine whether or not Google intend­ed to cre­ate con­fu­sion, whether there was actu­al con­fu­sion or whether con­sumer sophis­ti­ca­tion was of a lev­el to negate any alleged con­fu­sion. The mat­ter will now pro­ceed with a full tri­al on these issues.

Impli­ca­tions for businesses

Whilst it is unknown as yet whether Google will seek leave to appeal the deci­sion, in the mean­time busi­ness­es can expect Google to respond with tougher require­ments on those wish­ing to use its AdWords ser­vice. All busi­ness­es need to be aware of their own lia­bil­i­ty if using com­peti­tors’ names in their adver­tise­ments using Google’s AdWords program. 

To min­imise risk of lia­bil­i­ty, busi­ness­es should only use the AdWords or any oth­er search engine adver­tis­ing ser­vice in rela­tion to words or phras­es that are spe­cif­ic or relat­ed to the busi­ness and/​or its activities.
Sim­i­lar­ly, to ensure that your busi­ness min­imis­es the risk of infringement:

• busi­ness and prod­uct names should be pro­tect­ed by reg­is­tered trade marks; and
• under­take a review of spon­sored links inter­mit­tent­ly to ensure abuse is caught before dam­age is caused to the busi­ness or its reputation.

For fur­ther infor­ma­tion please con­tact Swaab Attorneys.

Co-authored by M Hall.