Google AdWords versus the Trading Post: Lessons for search advertisers

Alex Hutchens and Belinda Breakspear
Thursday, 03 November 2011 11:18

IT Policy - Regulation

The recent action by the Australian Competition and Consumer Commission (ACCC) regarding the use of Google AdWords (Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd and Google Inc) is an important one for companies that undertake online search result advertising.

 

The case brought by the ACCC centred around Google's AdWords program and the 'sponsored link' search results that appear on Google's search results page.  The ACCC claimed Google had engaged in misleading or deceptive conduct for displaying search results paid for by advertisers on the same page as organic search results.  The ACCC also claimed that Google had made the misleading representations conveyed by the Trading Post's sponsored link search results.

The Court made a finding against the Trading Post, not Google, which was found not responsible for false or misleading representations made in sponsored links or misleading or deceptive conduct.

The ACCC appealed the decision on 12 October 2011 to the Full Court of the Federal Court of Australia.  Regardless of the outcome of the appeal, the decision is a timely warning of the risks associated with sponsored link and AdWord advertising on Google (and similar functions in other search engines).
 
Claims

The ACCC alleged that the Trading Post (a Telstra subsidiary) had misled consumers in breach of the Competition and Consumer Act 2010 (Cth) (CCA) (or the Trade Practices Act (TPA) as it was then called), by displaying sponsored link search results for the Trading Post when users had searched for the unrelated businesses of 'Kloster Ford' and 'Charlestown Toyota'.

The ACCC also alleged that Google had engaged in misleading or deceptive conduct in breach of the CCA by displaying search results that had been paid for by advertisers on the same page as its 'organic' search results.  The ACCC claimed that Google's practice of highlighting sponsored links in light yellow, and designating them as 'sponsored links' rather than 'advertisements' would be likely to mislead or deceive Google users.

Further, the ACCC claimed that Google had also made the misleading representations conveyed by the Trading Post search results, in which the purchase of AdWords meant that the sponsored links related to a competitor of the product or service actually searched for.
Were the sponsored links misleading?

It was relevant that Google's search results displayed the URL below the headline.  On this basis, the Court held that simply having the name 'Kloster Ford' or 'Charlestown Toyota' appear in the result headline was not sufficient to convey to a Google user that they would be taken to a website operated by Kloster Ford or Charlestown Toyota as the Trading Post URL was clearly visible in the search result.

However, the Court considered that a user would still expect that there was an association or affiliation between the two parties.  Given that the Trading Post had paid for the AdWords and had prepared the advertisements, the Court found that the misleading representations had been made by the Trading Post.

Google's conduct

The Court noted that the term 'Kloster Ford' and the other terms purchased were not selected or recommended by Google.  Rather, Google merely made available the technical facility for the Trading Post and other businesses to purchase those terms.

Importantly, the technical facility did not necessarily result in Google endorsing or approving the content of the associated advertisements, Google only communicated the advertisement.  As a result, Google was held not to be responsible for any false or misleading representations in the sponsored links results.

Advertiser's defence

Although not strictly necessary, the Court went on to consider whether Google could rely on the advertisers defence under the TPA (which is now incorporated in the Australian Consumer Law).  This defence provides that a party that receives advertisements for publication in the ordinary course of business, and does not know, and has no reason to suspect that their publication would contravene the TPA, would not be liable for misrepresentation.

In relation to the Kloster Ford and Charlestown Toyota advertisements, the Court was satisfied that Google could rely on this defence.

Is Google's search results page misleading?

The ACCC also alleged that Google's results page is misleading because it fails to sufficiently distinguish between organic search results and sponsored links.  This page typically contains a small number of 'sponsored links' at the top left of the page, and a separate bank of sponsored links on the right hand side.  The Court found this was sufficient to distinguish the paid advertisements from organic search results.  Accordingly, Google had not engaged in misleading or deceptive conduct in relation to the display of search results.

Lessons

Search providers - it may not always be the case that advertisers will be held responsible for the representations made in paid for search results they have purchased.  The 'advertisers defence' has limits, and may not apply in cases where prominent brand names are chosen by competitors to direct traffic to their own website.

Brand owners need to be diligent in protecting their brand and cannot rely on third party search engines to do so. This is another reason to consider registering business names, brand names and product names as trade marks to improve your chances of protection online.

Advertisers should take care when purchasing keywords or AdWords so they do not infringe any third party rights, or falsely represent that they are affiliated with other brand owners.

As always, professional legal advice is recommended to ensure maximum value is extracted from your intellectual property.

Alex Hutchens and Belinda Breakspear are Senior Associates at McCullough Robertson law firm