On 3 April 2012, the ACCC succeeded on appeal in the Federal Court in its submission that Google Inc (Google) had engaged in misleading and deceptive conduct in the publication of “sponsored links” on the Google search website.

Facts

At the time of the alleged misleading and deceptive conduct the Google search website could produce two distinct types of results in response to user’s search enquiries. The first type, “organic” search results, returns a list of web pages in order of relevance determined by a complex algorithm developed by Google. The second type of results were “sponsored links” results. Sponsored links were advertisements created by companies who paid Google for text that directed user traffic to their websites.

The proceedings concerned the sponsored links published by Google between 2006 and 2008 in relation to four classes of user search queries, being:

  • “Harvey World Travel” or “Harvey World”
  • “Honda.com.au”
  • “Alpha Dog Training”
  • “Just 4x4s Magazine”.  

In each case when the search term was entered by a Google user the sponsored link result directed users to a competitor’s webpage. For example when a user entered “Honda.com.au” they were provided with a sponsored link result as follows:  

Honda .com.au

www.carsales.com.au/Honda-Cars Buy/ Sell Your Civic The Fast Way on Australia’s No.1 Auto Website

Decision at trial

The trial judge found that while the advertisers may have engaged in misleading and deceptive conduct by misrepresenting an affiliation or association with a competitor, Google itself had not made such representations. Rather, Google merely communicated what the advertisers represented without adopting or endorsing it. This was because an ordinary and reasonable user would distinguish between organic search results and sponsored links and understand that sponsored links were paid advertisements.  

Decision on appeal

The Federal Court overturned the trial judge’s decision finding that Google acted as “much more than a mere conduit” in providing sponsored link results. In a joint judgment, Chief Justice Keane, Justice Jacobson and Justice Lander reasoned that sponsored links were, in fact, “Google’s response to the user’s query”. Accordingly, the critical conduct was the triggering of the link by Google using its algorithms to cause search results to be displayed in order of relevance.

The court found that even though it was the advertiser who selected the key words that triggered the advertisement’s display, Google’s conduct and the function of its AdWords facility meant that Google was doing more than merely passing on the statements of the advertiser. In effect, the user was being told by Google that the advertiser’s message and the advertiser’s web address were an answer to the user’s query about the subject matter of the keyword. Put simply, the court held that “[t]he enquiry is made of Google and it is Google’s response which is misleading”.  

In these circumstances, the court rejected Google’s argument that its position was analogous to the owners of a billboard. Their Honours reasoned that Google was “much more than a mere conduit”, even if it may have been seen to be so by an ordinary and reasonable user who understood the difference between sponsored links and organic results.

Orders

The Federal Court ordered Google to establish and implement a consumer law compliance programme including requirements that Google:

  • issue a policy statement outlining its commitment to trade practices compliance
  • appoint an external compliance professional to conduct a consumer law risk assessment
  • implement a complaints handling system in relation to external and internal trade practices complaints.

Implications

The intermediary’s conduct must be considered as a whole to determine whether the intermediary, in this case Google, was merely passing on information or engaging in conduct that was likely to mislead and deceive. According to the Full Court, Google’s own conduct meant that it was acting as a principal and not merely a conduit in relation to the misleading and deceptive conduct alleged. Clearly this decision places an onus on publishers to ensure that the content they elect to publish does not breach consumer protection laws. At the time of writing Google were considering the merits of an appeal to the High Court.