The Australian Competition and Consumer Commission (ACCC), brought a case against Google Inc and Trading Post alleging that they had engaged in misleading or deceptive conduct in connection with the publication of sponsored links on Google's search results pages in contravention of s 52 of the Trade Practices Act 1974 (Cth) (TPA).  An equivalent provision to s 52 of the TPA is now found in s 18 of the Australian Consumer Law (ACL).

In a nutshell, the ACCC's case against Google had two aspects.  The first was that Google failed to sufficiently distinguish sponsored links or advertisements from organic search results.  The second related to certain advertisers using their competitors' names in their advertisements.

Part 1 – failure to distinguish sponsored links

In essence, the ACCC was concerned that the yellow background shaded box and heading "sponsored links" was not sufficient to distinguish sponsored links from organic search results.  As a consequence, the ACCC alleged that Google was engaging in misleading or deceptive conduct because the public expected that the links at the top of a Google search results page were the most relevant links not advertisements which achieved that position, at least in part, by payment.

The Court found however, that users would not be confused by Google's search results page, and would understand the difference between sponsored links and organic search results.

The Court found that the term "sponsored links" was clear to users and that it's positioning on the page would distinguish advertisements from organic results.  Users would understand that sponsored links appearing in the yellow box with the caption "sponsored links" are links for which businesses seeking to promote their goods or services made payments to Google.  Users would therefore understand that these sponsored links are in the nature of advertisements.

Part 2 – use of competitors' names

The second part of the ACCC's case related to 11 specific advertising campaigns in which it alleged that advertisers had used the brand or product name of a competitor in the headline of their sponsored links.  The ACCC alleged that this conduct would give rise to a number of representations which were not true.  These representations included that the advertiser was in some way sponsored or affiliated with its competitor when in fact it was not.  Google argued that it was a mere conduit for the publication of the advertisements and was not on notice that the advertisements would contravene a provision of the TPA.

The Court made a number of significant findings which are set out below.

Advertisers capable of contravening s 52 by procuring publication of misleading advertisements

The Court found that some (but not all) of the advertisements in the 11 advertising campaigns on which the ACCC's case centred were misleading or deceptive in that they conveyed, contrary to fact:

  • an affiliation or sponsorship between the advertiser and their competitor whose name had appeared in the headline of the relevant sponsored link;
  • that clicking on the sponsored link would take the user to the competitor's website; or
  • that information about the competitor could be found on the advertiser's website. 

Who makes the representations conveyed by the publishing of advertisements

The Court found that Google was not responsible for the content of the advertisements and representations they conveyed.  It found that Google did no more than represent to the user that any particular advertisement was an advertisement which members of the public would understand that Google was passing on for what it was worth.  The Court found that this followed from its findings that users would have understood that the sponsored links were ads, would have been able to identify the advertiser and would have understood that the advertiser determines the content of the ads.

Advertiser's defence

Google also argued at the trial that in the event it was held to have made any contravening representations, it could rely on the "advertiser's defence" available under s 85(3) of the TPA (now available under s 209 of the ACL).  To make out this defence, Google was required to show that its business was to publish advertisements, that it had received the contravening advertisement in the ordinary course of business and that it did not know, and had no reason to suspect, that the publication of the advertisement would contravene such a provision of the TPA as it had done. 

Although the Court did not need to consider whether Google could rely on the publisher's defence, because it had already found that any misleading representations conveyed by the advertisements were made by the advertiser rather than Google, it nonetheless considered the parties' submissions regarding the "advertiser's defence". 

The Court rejected the ACCC's submissions that the "advertiser's defence" should be given a narrow construction.  Such a narrow construction may have meant that publishers of advertisements could be found liable if they did not have a system in place to detect and prevent publication of misleading advertisements once they were on notice that their advertising system could be used to generate misleading advertisements.  Rather, the Court held that the defence requires an assessment on an advertisement by advertisement basis, of whether or not a publisher knew, or had reason to suspect, that the publication of a particular advertisement would amount to a contravention of a provision of Part V of the TPA (or now of Chapter 4 of the ACL).  On its assessment on this advertisement by advertisement basis, the Court held that the "advertiser's defence" was available to Google in respect of a number of the advertisements the subject of proceedings.

Gilbert + Tobin (led by Colleen Platford and Andrew Floro) acted for Google Inc in these proceedings.

Take out message

Advertisers on search result pages should ensure the appropriate use of competitor names in internet advertising.  Based on the Court's reasoning, appropriate comparative advertising may be permissible but other uses of competitor names in headlines may give rise to a contravention.

Persons who merely publish ads may not have direct responsibility for the content of the ads if the ads are clearly identified as such and the reader/viewer would understand, given the context, that the representations in the ads are made by the advertiser not the publisher.