Internet advertising can inexpensively and effectively reach thousands of consumers worldwide. It comes as no surprise that many businesses are now utilising this tool to promote and sell their products and services.

The recent decision in Australian Competition and Consumer Commission v Trading Post Australia holds particular importance for businesses that wish to or are currently undertaking online search result advertising.

The Australian Competition and Consumer Commission (ACCC) alleged that Trading Post Australia Pty Ltd (Trading Post) and the search engine Google Inc (Google) had engaged in misleading or deceptive conduct that contravened section 52 of the Trade Practices Act 1974 (Cth) (Act). The ACCC also alleged that the Trading Post contravened section 53 the Act, which deals with false and misleading representations.

Advertised Sponsored Links

Google is a search facility website that lists results to a user after they have entered their search terms. The results of any search enquiry will result in ‘organic’ search results, which usually occur in order of descending relevance. The user’s search will also result in ‘sponsored links’, tailored to the search terms of the user’s enquiry. These ‘sponsored links’ were distinguished by being located in a yellow shaded box above the ‘organic’ search results and in a column to the right. Both the shaded box and the column were titled ‘Sponsored Links’.

When particular search terms are commonly used, an advertising tool, AdWords, places those terms in a tailored advertisement in the sponsored link, column or box. Here, when prominent Newcastle car dealerships “Kloster Ford” and “Charleston Toyota” were searched in Google, results appeared in the sponsored links as below:

Kloster Ford www.tradingpost.com.au New/Used Fords – Search 90,000 + auto ads online. Great finds daily!

Charleston Toyota www.tradingpost.com.au New/Used Toyota Cars – See 90,000+ auto ads online. Great finds daily!

Argument by the ACCC

The ACCC alleged that seven different representations were made by the publication of the Kloster Ford and Charleston Toyota advertisements including:

  1. By clicking on the headline of the advertisements a person would be taken to a website associated with Kloster Ford or Charleston Toyota; 
  2. There was an association between the Trading Post and Kloster Ford or Charleston Toyota;
  3. There was an affiliation between the Trading Post and Kloster Ford or Charleston Toyota; 
  4. Kloster Ford or Charleston Toyota approved of the link between their name and the Trading Post site;
  5. Kloster Ford or Charleston Toyota had paid for the link between their name and the Trading Post Site;
  6. Kloster Ford or Charleston Toyota was a sponsor of the Trading Post Site; 
  7. Information regarding Kloster Ford or Charleston Toyota and the companies’ car sales could be found at the Trading Post Site.

Types of Consumers

The court assessed the type of consumers likely to come across these advertisements as being people who have: 

  • Access to the Internet; 
  • Basic knowledge of computers; 
  • Basic knowledge of the Internet and search engines including Google;
  • Some degree of familiarity with the Trading Post and its advertising activities.

The ACCC submitted that there would be ordinary and reasonable members of that class who would not expect to be taken to the Trading Post website if they clicked on the sponsored headline of the ad. The ACCC’s argument relied on the assumption that the ordinary and reasonable members of the relevant class would not have understood the sponsored links as being advertisements. Nevertheless, the court said “I do not consider it [the URL] analogous to what might be referred to as the “fine print”. It is not likely to escape the attention of the ordinary and reasonable member of the class. Further, the court said that the ad would be viewed as a whole and that the user would expect to be taken to the website www.tradingpost.com.au, which they undoubtedly would assume to be that of the Trading Post.

Outcome of the Case

The court also found that the representations made in points 2, 3, 7 of the ACCC arguments conveyed by the Trading Post, were incorrect and likely to mislead or deceive ordinary and reasonable members of the class of people who would be likely to come across the advertisements. The court found that Google had not engaged in misleading or deceptive conduct or conduct likely to mislead or deceive by either failing adequately to distinguish between organic search results and advertisements, or by failing to identify advertisements as such.

The ACCC has said it will appeal against the decision to the full bench of the Federal Court, on the basis that “Google’s key word insertion system, plus the role of Google staff” were vital to the false advertisements being placed.