On 6 February 2013, in a much anticipated judgment, the High Court of Australia unanimously allowed Google's appeal from a decision of the Full Court and found that Google was not responsible for the content of third party "Adword" advertisements (formerly sponsored links) displayed on Google search result pages.

The ACCC's case against Google

In July 2007, the Australian Competition and Consumer Commission ("ACCC") issued proceedings against Google in the Federal Court of Australia alleging that Google had engaged in misleading and deceptive conduct within the meaning of the Trade Practices Act 1974 in a new window (via AustLII / ComLaw)" target="_blank" rel="nofollow" class="citation" href="http://www.austlii.edu.au/au/legis/cth/consol_act/tpa1974149/">Trade Practices Act 1974 ("TPA") (Cth) (now the Australian Consumer Law in a new window (via AustLII / ComLaw)" target="_blank" rel="nofollow" class="citation" href="http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html">Australian Consumer Law ("ACL")) by "making" misrepresentations contained in sponsored links (now Google Adwords) that had been purchased from Google by a number of Australian advertisers.

Interestingly, the ACCC did not allege that Google had contravened the TPA by aiding, abetting, counselling or procuring the misleading conduct of the advertisers1 or by publishing the impugned sponsored links.2

The First Chapter: The Federal Court's findings at first instance

At first instance, Justice Nicholas found that the advertisers sponsoring the links were guilty of misleading or deceptive conduct but held that Google was not responsible for the content of such links as it had merely communicated them and had not endorsed or adopted their contents.

The Second Chapter: The Full Federal Court unanimously allows the ACCC's appeal

On appeal by the ACCC, in April 2012, the Full Federal Court unanimously reversed Justice Nicholas' findings and held that Google had in fact engaged in misleading and deceptive conduct

According to the Full Court:

"No user of Google’s search engine presented by Google with a sponsored link in response to a search query would regard the sponsored link displayed by Google with a clickable link to the sponsor’s URL as conveying the message that the sponsored link is a statement by an advertiser which Google is merely passing on. What appears on Google’s webpage is Google’s response to the user’s query. That it happens to headline a keyword chosen by the advertiser does not make it any the less Google’s response. And even that occurs pursuant to the AdWords facility made available to the advertiser by Google. Google’s conduct cannot fairly be described as merely passing on the statements of the advertiser for what they are worth. In those circumstances, it is an error to conclude that Google has not engaged in the conduct of publishing the sponsored links because it has not adopted or endorsed the message conveyed by its response to the user’s query"

"Critical to this conclusion is the fact that the sponsored link is displayed on the screen in response to the user’s query which is made by the entry of selected key words. Thus, the user asks a question of Google and obtains Google’s response."

The final chapter: The High Court unanimously allows Google's appeal and reverses the Full Court's decision

On 6 February 2013, the High Court unanimously found that Google did not engage in misleading and deceptive conduct, and accordingly set aside the Full Court's decision.

The High Court relevantly held that Google did not "make" the misrepresentations contained in the sponsored links in issue.

In reaching this conclusion, the High Court had regard to the following facts:

  • Google does not control the Google search terms entered by Internet users or the material available on the Internet;
  • The sponsored links were created by, or at the direction of the third party advertisers;
  • Advertisers (and not Google) specify the content of Google Adword Ads and also specify the Google search "keywords" which trigger the appearance of the Ad on Google's results pages;
  • Google's automated generation of Adword Ads in response to a user's search query is wholly determined by the Adword keywords and content chosen by advertisers;
  • Google's proprietary algorithms which display Adword Ads merely assemble information entered by Internet users and advertisers;
  • Google may encounter difficulties determining whether a particular Ad is in fact misleading or deceptive;
  • Whilst there was evidence that Google employees had been actively involved in the selection of keywords for some of the Adwords in issue, the evidence "never rose so high as to prove that Google personnel, as distinct from the advertisers, had chosen the relevant keywords, or otherwise created, endorsed or adopted the sponsored links".3 This is in stark contrast to the view taken by the Full Federal Court; and
  • In light of the above, ordinary and reasonable internet users would be unlikely to have understood any information contained in the sponsored links in issue as being endorsed or adopted by Google. Rather, those persons would have understood that the message conveyed was a message from the advertiser which Google was "passing on for what it was worth."4

Publication of misleading and deceptive advertisements

As explained above, the ACCC identified Google's contravening conduct as being the "making" of the misleading representations contained in the sponsored links in issue. The ACCC did not allege that Google had engaged in misleading and deceptive conduct by merely publishing the ads.

The majority of the High Court (Chief Justice French, and Justices Crennan, Kiefel and Heydon) considered that publication of a misleading advertisement will, in general, only constitute misleading or deceptive conduct if the publisher can be said to have adopted or endorsed the misleading statements contained in the advertisement.

On the other hand, Justice Hayne was of the opinion that the mere publication of a misleading and deceptive third party advertisement may constitute misleading and deceptive conduct.

Justice Hayne noted that publishers who engage in such conduct may, however, seek to rely on the defence afforded by s. 85 (3) of the TPA (now s. 251 of the ACL).

Section 85 (3) will apply if a person establishes that:

  • he or she is a person whose business it is to publish or arrange for the publication of advertisements;
  • the advertisement in issue was received for publication in the ordinary course of business; and
  • he or she did not know and had no reason to suspect that the publication of the advertisement would constitute misleading and deceptive conduct.

Whilst the weight of judicial opinion favours the view that the mere act of publication will not constitute misleading and deceptive conduct within the meaning of the ACL, final resolution of the matter will require careful examination of a number of difficult policy considerations.

The fall out from the High Court's decision

The High Court's decision brings the Australian position in relation to Google's responsibility for its sponsored links or Adword Ads into line with the position in the United States and elsewhere (where Google has not been held liable under the trade mark laws in those jurisdictions). Australian Courts have not yet considered whether Google or the advertiser's use of competitor's names in sponsored links constitutes trade mark infringement in Australia. To do so would require a finding that Google's use of the Adwords was "use as a trade mark".5

As a result of the High Court's decision, it is clear that Google cannot be held liable for "making" misrepresentations contained in Google Adword Ads unless it can be shown that it expressly or impliedly adopted or endorsed them. However, the High Court did not conclusively consider whether Google had engaged in misleading and deceptive conduct by "publishing" or aiding, abetting counselling or procuring the misleading conduct of the advertisers, and persons who are aggrieved by such conduct may still legitimately seek to take action against Google on these bases.