Competition watchdog drops suit against Google's subsidiaries

Australia's competition watchdog, the Australian Competition and Consumer Commission (ACCC) has dropped a legal action against Google Inc's subsidiaries, Google Australia Pty Ltd and Google Ireland Limited.

The ACCC commenced proceedings in the Federal Court against Trading Post Australia Pty Ltd, Google, Google Australia and Google Ireland for engaging in misleading and deceptive conduct in breach of the provisions of Sections 52 and 53 of the Trade Practices Act.

Trading Post is the publisher of an advertising publication in hard copy and online, in which advertisers (both private and commercial) list items for sale. A substantial part of the business of Trading Post is in the advertisement for sale of motor vehicles.

In association with its search engine, Google offers paid advertising on a pay-per-click basis. Paid advertisements are brought up in response to keywords chosen by the advertiser, with the assistance of Google's keyword tool. These advertisements usually appear on the right-hand side of Google's search results page under the heading 'sponsored links'. The so-called 'organic' search results appear on the left-hand side of the page and Google represents that those results are ranked by Google according to their relevance. However, the positioning of the paid advertisements is determined by other factors, including the price paid by the advertiser. In the instances forming the subject of the complaint, advertisements sponsored by Trading Post were positioned on the left-hand side of the page at the head of the list of organic search results.

Kloster Ford and Charlestown Toyota are motor car traders in the Newcastle district of New South Wales which operate in the car market in competition with Trading Post. Neither of them advertises through, nor has any connection or affiliation with, Trading Post. The ACCC alleged that by placing at the head of the organic search results links generated in response to entry of the keywords 'Kloster Ford' and 'Charlestown Toyota', Trading Post and Google represented that the links were the most relevant responses to the respective search terms. The ACCC further contended that by placing the links in such a way, Google and Trading Post represented that there was a commercial relationship between Kloster Ford, Charlestown Toyota and Trading Post.

The proceedings against Google Australia and Google Ireland have been discontinued following acknowledgement by Google that it was responsible for the representations complained of. However, the ACCC will continue its lawsuit against Google and Trading Post. It alleges that this is the first case in the world in which this particular type of conduct has been the subject of legal proceedings.

The case will be watched with interest in terms of its effect on the way in which Google and other search providers and advertisers present their results. The pleadings are not yet closed in the case. Currently on Google's search results, advertisements placed at the head of the organic search results appear in a panel of different background colour (yellow) from the rest of the page and under the heading 'sponsored links'.

For background discussion of this case see "Google in hot water with Australian competition watchdog".

Desmond J Ryan, Davies Collison Cave, Melbourne