Google AdWords: Victory for Google against the ACCC in the High Court of Australia

Services: Competition & Consumer Law, Corporate & Commercial, Intellectual Property & Technology
Date: 07 February 2013
Author: Michael Sutton, Senior Associate

Google has emerged victorious in its six year battle with the Australian Competition and Consumer Commission (“ACCC”) over the extent of Google’s liability for misleading and deceptive conduct in relation to its AdWords program.

The High Court of Australia [1] has overturned the decision of the Full Court of the Federal Court in 2012 [2] and denied businesses an easy target when defending their brands from misuse under the Google AdWords program.

We have previously written about the earlier decisions in this case here and here.

The history

The ACCC brought proceedings against Trading Post Australia Pty Limited and Google Inc under the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)) for misleading and deceptive conduct in relation to the “sponsored links” in Google search results.

The origins of the issue lay in Google’s AdWords program and the ACCC’s concerns that Google’s search results were misleading or deceptive, or were likely to mislead and deceive, because:

  • “organic” search results were not properly distinguished from the paid for advertising “sponsored links” and

  • the sponsored links published by Google consisted of a headline containing a trading name or brand name of an advertiser’s competitor but which also served as a clickable link to the advertiser’s website.

In 2011, the Federal Court decided in Google’s favour on both these issues.[3] Even though the advertisements in question contained representations which were misleading or were likely to mislead or deceive, Google had not made the representations conveyed by the advertisements. Its view was that Google had merely acted as a conduit, passing on the advertisements of others without endorsing or approving them.

On appeal, however, the Full Court of the Federal Court unanimously found that Google had itself engaged in misleading and deceptive conduct. It agreed with the ACCC’s argument that by taking an active role in preparing, creating, approving, disseminating and publishing the advertisements, and controlling the content of results, Google had itself made misleading and deceptive representations.

That finding would have had a significant impact on the Google AdWords program and, unsurprisingly, Google appealed to the High Court of Australia.

The High Court decision

The High Court decision came down unanimously in Google’s favour. The High Court agreed with the primary judge's findings that:

“ordinary and reasonable users [of the Google search engine] would have understood the sponsored links to be statements made by advertisers which Google had not endorsed, and was merely passing on for what they were worth...”

The High Court described these findings of the primary judge as “plainly correct”.

The commercial implications if the High Court found against Google were also addressed.

The High Court sympathised with the practical difficulties Google would face in determining whether a trader whose name appears in the headline of an advertiser’s sponsored link is a competitor or associate of the advertiser.

Heydon J also considered that if the Full Court’s reasoning meant that a trader in Google’s position always made the representations in third party advertisements, it would be “a very extreme conclusion” that would put traders in Google’s position at risk of committing numerous contraventions of the legislation. This could lead to an exceptionally wide form of absolute liability for those who publish information in the media.

What does this mean for Google?

Google (and other publishers of ads) will be delighted with this decision. If the Court had found against Google, then it may have had detrimental implications for Google’s AdWords program and potentially forced Google to adopt a checking process of all key words requested by an advertiser.

It reinforces that those active in the online advertising space are not at a disadvantage to more traditional print and broadcast advertisers: for the purposes of considering the issues at hand there is no distinction between advertising in online media and advertising in traditional media.

However, just because Google was not found liable in this particular case, does not mean that publishers cannot be held responsible for the content of an advertisement. If a publisher does more than merely pass on the advertiser’s message, then the publisher could be held liable for the content of that message if it is likely to mislead or deceive. On that basis, publishers should take care to only act as a mere conduit and continue to seek appropriate assurances from advertisers as to the content of an advertisement.

What does this mean for brand owners?

The decision is less helpful for brand owners. If Google had been found liable, brand owners would also have had an easy target, with deep pockets, to sue if their brand was misappropriated by a competitor and used as a key word in that competitor’s advertising.

Those brand owners whose names and trade marks are being misappropriated by competitors as part of the AdWords program still have other options available to them if they have this type of complaint, including:

  • invoking Google’s trade mark policy to prevent an advertiser from using their trade marks (registered or common law)

  • suing the entity that is actually misusing their brand through misleading and deceptive conduct and/or

  • making a complaint to the ACCC.

The case remains a reminder to brand owners that advertise online of the need to take care when using competitors' names and trade marks as key words, as this may expose them to action under the Australian Consumer Law. The advertisements that were the subject of these proceedings were still found to be misleading or deceptive or likely to mislead and deceive (it was just that Google itself was not responsible for their content). With Google off the hook, those whose rights are being infringed will need to turn their attention to the direct infringer.

What next?

This decision is clearly a blow to the ACCC and highlights the challenges the ACCC faces when testing the boundaries of the application of consumer laws to developing technologies against a well-resourced corporate.

With the risk pushed back firmly into the camp of the advertiser, the Association for Data-Driven Marketing and Advertising has already announced that it plans to release a new set of guidelines in April or May this year to assist them in dealing with online advertising and AdWords type programs. This guidance will no doubt be welcome.

For more information, please contact:

Michael Sutton | Senior Associate
T +61 2 8233 9587
F +61 2 8233 9555

Scott Sloan | Partner
T +61 2 8233 9554
F +61 2 8233 9555

1. Google Inc v Australian Competition and Consumer Commission [2013] HCA 1.
2. Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49.
3. Australian Competition and Consumer Commission v Trading Post Australia Pty Limited [2011] FCA 1086.
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