Watchdog wins against advertiser but loses against Google

In Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd ([2011] FCA 1086, September 22 2011), the Federal Court of Australia has held that Trading Post Australia Pty Ltd had engaged in misleading conduct and made false representations as to an affiliation and association that did not exist by causing Google to publish advertisements in response to searches of the keyword ‘Kloster Ford’ which led users to Trading Post’s website and not to Kloster Ford’s site. However, the court held that Google, by publishing Trading Post’s 'sponsored link', had not itself engaged in misleading conduct.
This report focuses on the dismissal of the Australian Competition and Consumer Commission (ACCC)'s allegations against Google.
The Google search engine is well known for displaying search results in order of decreasing relevance as determined by Google’s software algorithm. These search results are known as 'organic' search results and are to be distinguished from 'sponsored links' (ie, advertisements) which may also appear on the search results webpage.             
There were two parts to the ACCC’s case against Google. The first part concerned the overall layout and appearance of the results page, which the ACCC alleged failed to distinguish sufficiently between organic search results and advertisements.
The second part of the case concerned the use of keywords in the headlines of particular advertisements. Certain headlines consisted of keywords selected by the user that corresponded with keywords selected by the advertiser which may, according to the ACCC, also be a business or product name of the advertiser’s competitor. The ACCC alleged that when the user clicked on the headline consisting of such keywords, he or she was likely to be taken to a website that has no association with the keywords selected. According to the ACCC, the use of keywords in this manner was misleading or deceptive and implies, contrary to the fact, that there is an association between the business or product that is known or identifiable by the keyword and, on the other hand, the advertiser or the advertiser’s website.
In summary, the court rejected on various grounds the ACCC’s allegations. In particular, the court held as follows:
  • The representations conveyed by the advertisements in question were made by Trading Post and not by Google. Google merely communicated what Trading Post represented without adopting or endorsing any of it.
  • Google did not otherwise engage in misleading conduct by using its system of sponsored links and organic search results. The court was satisfied that the inference which ordinary and reasonable members of the public would draw from the caption 'sponsored links' is that the results so described would be links for which businesses seeking to promote their goods or services made payments to Google. They would therefore understand that these sponsored links were in the nature of advertisements.
  • In any event, Google was entitled to rely on the so-called 'publisher’s defence' (under what was then Section 85(3) of the Trade Practices Act 1974 (Cth)).
In relation to the 'publisher’s defence' under Section 85(3), the court followed and adopted the reasoning of Justice Franki in Universal Telecasters (Qld) Ltd v Guthrie ([1978] FCA 9), in which his Honour held as follows:
I consider that the defence provided by this section... is available whether or not a defendant is able to show that he took reasonable precautions and exercised due diligence to avoid any relevant contravention. What is necessary under this defence is not a setting-up and policing of a system, but in relation to a particular advertisement, that he did not know and had no reason to suspect that its publication would amount to a contravention of a provision of Pt V [of the Trade Practices Act]. Nowhere in the act is it said that the knowledge of any servant is the knowledge of a company or that a company shall be deemed to suspect something if any servant of the company suspects it.”
On this basis, the court was satisfied that Google did not know and had no reason to suspect that the publication of the advertisements in question would amount to a contravention of any relevant provision of the act. Hence, even if the court had come to the view that Google had itself made the misleading representations (and not just Trading Post), Google would have been entitled to succeed in its defence under Section 85(3).
Notwithstanding its loss in this case, the ACCC noted that:
"Since the ACCC instituted these proceedings, Google has changed the description of its advertisements on its search results pages from 'Sponsored Links' to 'Ads'."
“… on the first day of the hearing, March 8 2010, Google released a 'Business Names Policy' which prohibited advertisers’ use of unrelated business names in the first line of ad text, when they are using that name to imply a special relationship with any unrelated third party. This policy was initially applied by Google in Australia and New Zealand only and was expanded to apply to all countries in mid-July 2010."
Julian Gyngell, Kepdowrie Chambers, Wahroonga

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