The High Court has issued a clear and instructive judgment in favour of Google Inc (Google) in the litigation with the Australian Competition and Consumer Commission (ACCC) regarding the appearance and content of ‘sponsored links’ on the results page of Google’s much used  search engine (Australian Competition and Consumer Commission v Google Inc [2013] HCA 1) (ACCC v Google).

The High Court (French CJ, Hayne, Heydon, Crennan and Kiefel JJ) unanimously held that Google had not engaged in misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (The Act) by publishing or displaying on its website sponsored links which included the name of a competitor or competitor’s product in the headline of an advertiser’s sponsored link as a result of advertisers using Google’s ‘AdWords’ program. This was despite a finding by the trial judge (unchallenged on appeal) that the content of the sponsored links in issue were misleading or deceptive. The implication of the High Court’s decision is that it is the advertiser in this situation that is responsible for the misleading content.

The journey

This litigation commenced in 2007 with the ACCC bringing proceedings against both the Trading Post (an advertiser) and Google in the Federal Court of Australia. The ACCC alleged that Google had engaged in misleading or deceptive conduct in contravention of s 52 of The Act. A settlement was reached between the ACCC and the Trading Post, but the case between the ACCC and Google proceeded to hearing.

The case against Google included allegations that it had engaged in misleading and deceptive conduct by publishing or displaying on its website 11 ‘sponsored links’. The sponsored links were created using Google’s ‘AdWords’ program which allows advertisers to create, edit and monitor the performance of sponsored links. One of the features of the Adwords program is ‘keyword insertion’, where the search phrase entered by a user is then used as the clickable headline for the sponsored link. In the case of the 11 sponsored links in issue, the headline used the trading or product name or website address of a competitor, but directed a consumer to the advertiser’s website.

As an example, one of the advertisements considered by the Court was for STA Travel. STA Travel had purchased the name of a competitor, Harvey World Travel, as a keyword. Accordingly, at that time a Google search for Harvey World Travel would return a sponsored search result for STA Travel in the following terms.

Harvey World Travel Unbeatable deals on flights, Hotels & Pkg’s Search, Book & Pack Now!

At first instance, Justice Nicholas found that although a number of the advertisements appearing as sponsored links in question were misleading or deceptive, Google had not made those representations – they had merely communicated the representations made by the advertiser. Consequently, Google had not breached the Act.

The ACCC appealed the decision of Nicholas J in relation to four of the eleven advertisements. The central issue on appeal was whether the primary judge erred in finding that Google did not “make” the representations contained in the four advertisements the subject of the appeal, but had “acted merely as a conduit passing on the advertisements of others without endorsing or approving them”. Importantly, the finding that a number of the advertisements were misleading or deceptive was not challenged on appeal.

The Full Federal Court upheld the ACCC’s appeal, finding that Google had engaged in misleading and deceptive conduct. This was on the basis that it was Google’s technology that provided the results to a user’s search query and created what is displayed. On this basis, the Full Court held that Google was more than a mere conduit.

The decision of the High Court

The issue before the High Court was ‘whether, in all the circumstances, Google (as distinct from the advertisers to whom the sponsored links belonged) engaged in misleading and deceptive conduct by publishing or displaying the sponsored links’ (ACCC v Google at [3]). 

Before the High Court, the ACCC argued that Google had engaged in misleading and deceptive conduct on the basis that:

  • Google utilises its technology to create the sponsored links, including providing the functionality of a clickable headline and informing users that the sponsored links were responsive to the users requests; and
  • Google were therefore actively engaged in ‘making’ the sponsored links (and hence the relevant representations).

As a result of Google’s involvement in this process, the ACCC argued that Google was more than a mere publisher or ‘conduit’ who merely passed on the links.

Before the High Court, Google argued that:

  • each relevant aspect of a sponsored link – the headline, the advertising text, the advertiser's URL, the keywords and the use of keyword insertion – was specified by the advertiser, and that Google merely implemented the advertiser's instructions;
  • simply stating that the sponsored links were in response to the user’s request was an insufficient basis to find that they had made the misleading representations;
  • the technical facilities it provided were not different in principle to the facilities provided to advertisers in other mediums, such as publication or broadcasts, thus relying on the exception for publishers in section 85(3) of the Act;
  • commercial relationships between the advertisers and other traders were “peculiarly within the knowledge of the advertiser,” and was not within Google’s expertise.

The High Court unanimously upheld Google’s appeal, finding that Google had not engaged in misleading and deceptive conduct by publishing or displaying the sponsored links in question. In allowing the appeal, the High Court emphasised that:

  • Google cannot be construed to be the author of the sponsored link. Google merely provides an automated response to the user’s search query by displaying sponsored links based on the keywords which have been selected by the advertiser. Google has no control over a user’s choice of search terms or an advertiser’s choice of keywords. In this way, the High Court stated that Google  ‘does not create, in any authorial sense, the sponsored links that it publishers or displays’. Rather, each relevant aspect of a sponsored link is determined by the advertiser not Google (per French CJ, Crennan and Kiefel JJ at [67]-[68]).
  • In this case, each sponsored link appeared under a heading ‘Sponsored Links’, indicating that the content was a statement made by the advertiser, not by Google. In those circumstances, the Court held that ordinary and reasonable users of Google’s search engine would understand sponsored links, and that they were created by advertisers and were merely being ‘passed on’ by Google (per French CJ, Crennan and Kiefel JJ at [70]).

The ACCC has been ordered to pay Google’s costs of the appeal to the High Court, as well as the costs of the proceedings in the Federal Court.

Implications for advertisers and publishers

  • This case clarifies who is the ‘maker’ of a representation in a published advertisement for the purposes of determining who has engaged in conduct which is misleading or deceptive. Search engines such as Google (and other publishers of advertisements) will not generally be regarded as the ‘maker’ of representations contained in advertisements where they are merely ‘passing them on’. Rather, it is the advertiser who will be considered responsible for any representations (or misrepresentations) made in advertisements such as sponsored links published on search engine websites.
  • Businesses should therefore be careful when using sponsored links and other forms of search engine marketing that their advertisements do not mislead or deceive consumers (or infringe the intellectual property rights of another business or person, including, for example, registered trade mark rights). A sponsored link that uses the name of a competitor or a competitor’s product as the headline may constitute misleading and deceptive conduct for which the advertiser may be responsible.
  • The decision of the High Court was based on the particular circumstances of this case, including the evidence as to the level of involvement of Google in determining the content of the sponsored links. There is therefore a risk that a greater level of involvement in the content of an advertisement by the publisher of an advertisement or other misleading and deceptive conduct may lead to a different result for the publisher.