Google seeking High Court appeal against liability for misleading and deceptive AdWords links
Australian Competition and Consumer Commission v Google Inc  FCAFC 49 (3 April 2012)
Search giant Google has sought special leave to appeal a decision of the Full Federal Court which held it liable for misleading and deceptive “AdWords” sponsored links appearing in its search results.
Summary of the Full Court’s decision
The Full Federal Court’s decision was an appeal from Justice Nicholas’ decision of 2011,1 which found that classifieds website Trading Post had engaged in misleading or deceptive conduct contrary to section 52 of the Trade Practices Act 1974 (Cth)2 but that Google had not. The Full Federal Court’s decision does not disturb Justice Nicholas’ findings that the advertisers themselves were also directly liable for the misrepresentations.
The Full Federal Court unanimously held that search giant Google engaged in ‘misleading and deceptive conduct’ in contravention of Australian consumer protection laws by publishing advertisements headlined with a competitor’s name, trade mark or domain name, in circumstances where users clicking on the advertisement were taken to the advertiser’s website which contained no information about the competitor.
Consumers who searched Google for the terms “Harvey World Travel”, “Harvey Travel”, “Honda”, “Alpha Dog Training” and “Just 4×4 Magazines” were presented with sponsored links to rival websites. The Full Court has held that consumers would think that Google (in addition to the advertiser) was in some way responsible for the misleading “sponsored link” advertisements appearing in the search result, not that Google was just a mere conduit for the information supplied by the advertiser. This was despite Google’s attempts to limit its liability in the terms and conditions for its AdWords advertising program. Critical to the Full Court’s conclusion was that the advertisements were returned in response to the user’s Google search for a selected key word.
Google’s AdWord program contributes to a very substantial part of Google’s revenue. The decision has significant ramifications for Google’s AdWords program in Australia and is important in clarifying the advertising practices of search engine providers in Australia. The decision also provides aggrieved brand owners with recourse not only against the advertisers but directly against Google.
On 23 April 2012 Google filed an application seeking special leave to appeal to the High Court of Australia seeking to overturn the Full Federal Court’s decision.
Sponsored links in Google search results
Google’s search result pages typically present users with two types of search results: “organic search results” that comprise web pages containing the user’s search query (and which are ordered by relevance), and “sponsored links” which are advertisements that advertisers have paid to have included on particular search result pages. These sponsored links include a headline and the address of the advertiser’s website (also known as its ‘URL’), as shown below:
The AdWords advertising service
Advertisers create sponsored links on Google search result pages by purchasing “AdWords”; which, when entered by the Google user, cause the advertiser’s sponsored link to appear in the search results for that word. The word may be the name or trade mark of another trader unless and until Google receives a complaint under its Google AdWord Complaint Policy from the owner of the name or mark.
Advertisers pay Google a fee if its sponsored link is clicked by a user. Via the program advertisers can select keywords that are expected to be used by persons making inquiries of Google’s search engine.
The AdWords and sponsored links at issue
The Full Federal Court’s decision concerned the following sponsored links:
Alpha Dog Training
Just 4x4s Magazine
The Full Federal Court considered whether Google was liable for making misleading and deceptive representations contained in the four sponsored links.
For example, the Harvey World Travel advertisement (above) was returned in response to searches for “Harvey World Travel” or “Harvey Travel”. When the users clicked on the URL or the headline they were taken to the website of STA Travel (a competitor of Harvey World Travel with no association with the company) at which there was no information available regarding Harvey World Travel.
Had Google engaged in misleading or deceptive conduct?
Section 52 of the Trade Practices Act3 prohibits, in trade or commerce, conduct that is misleading or deceptive or is likely to mislead or deceive. Section 534 contains further prohibitions against making false or misleading representations regarding commercial association or affiliation. The question was therefore whether the sponsored links in question were misleading or deceptive, and if so, whether Google was responsible?
At first instance Justice Nicholas held that the advertisers responsible for the four sponsored links had each misrepresented that they had some commercial association or affiliation with the competitor whose trading name, trade mark or domain name was featured in the headline of the sponsored link. However, he held that in each instance, the advertiser and not Google had made the misrepresentation contained in the sponsored link.
Although Google provided the technical facilities (including the keyword insertion facility whereby the competitor’s name was automatically inserted into the headline of the sponsored link) and Google staff had some involvement and input in creating the sponsored links, Justice Nicholas held that Google had merely communicated the advertisement and had not endorsed or adopted the information conveyed in the advertisement. He concluded that an ordinary and reasonable user would understand that Google was a commercial enterprise separate and distinct from the advertisers who make use of it. The ACCC appealed that decision in so far as it related to Google’s liability.
Google’s defence to claims of misleading and deceptive conduct
Google attempted to rely on the Google AdWord’s Program Terms of Service which state, among other things, that:
- the advertiser is solely responsible for all advertising, keywords and URLs; and
- the advertisements and keywords chosen by the advertisers must “directly relate” to the content on the landing page of the advertisement.
However, the Full Court concluded that it did not follow from these Terms that that the conduct in question is solely that of the advertiser.
Google also contended that:
- the Honda, Alpha Dog and Just 4×4 advertisements were not misleading or deceptive because the advertisements were no more than “invitations to seek further information” on the subject matter of the user’s query. The Full Court rejected this contention on the basis that at least one of the purposes of using a competitor’s name in the clickable headline was to divert business from the competitor to the advertiser.
- there was no evidence that Just 4x4s Magazine or Alpha Dog were sufficiently well known that users of Google’s search engine would be misled by sponsored links which headlined the name of these businesses. The Full Court described this submission as “remarkable” given that the advertisers chose as keywords the business names of their competitors and were prepared to pay for these.
- because of the proximity of the clickable headline “Honda.com.au” to the smaller address www.carsales.com.au/Honda-Cars consumers would not believe that clicking on “Honda.com.au” would take them user to the Honda Australia website. The Full Court concluded that a user in these circumstances would indeed think he/she would be taken to the Honda Australia website observing that “[m]any users can be expected to click on the sponsored link without pausing to analyse and reflect upon the information presented in the sponsored link”.
- it could rely on the so-called ‘publisher’s defence’ under section 85(3) of the Trade Practices Act (see below).
On appeal: Full Court finds Google directly responsible for the misrepresentations
The Full Federal Court unanimously held that Google had made the misrepresentations contained in four sponsored links and hence engaged in misleading and deceptive conduct. According to the Full Court:
87. 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 … Google’s conduct cannot fairly be described as merely passing on the statements of the advertiser for what they are worth.
The specific conduct that was said to be misleading and deceptive was Google’s:
88…. display of the sponsored link in response to the entry of the user’s search term in collocation with the advertiser’s URL. The display of the sponsored link is effected by Google’s engine as Google’s response to a user’s search. That which is displayed by Google is called up by Google’s facility as Google’s response to the user’s search. The clickable link, when clicked, takes the user directly to the advertiser’s URL.
The Full Court found that “an ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in collocation with the sponsor’s URL in response to the user’s search … Google is, in fact, much more than a mere conduit”.
The Full Court concluded that Google created the message which it presents. Google’s search engine calls up and displays the response to the user’s enquiry in the form of a sponsored link. The Full Court considered that it is Google’s technology that creates the sponsored link display and most critically, that which is displayed is in response to the user’s search query.
The Full Court observed that whether a corporation has indeed engaged in misleading conduct or has merely acted as a conduit for another will be a question of fact in each case. According to the Full Court “the intermediary’s conduct must be considered as a whole to determine whether the intermediary was merely passing on the information. Whether or not there is an implied disclaimer or an implied adoption or endorsement is a conclusion of fact which follows from a determination based on all the circumstances of the case.” If it is apparent from all the circumstances that the intermediary is merely passing on the statement for what it is worth, the intermediary will not be found liable for misleading or deceptive conduct.
The applicability of the “publisher’s defence”
Google had submitted that even if its role had amounted to being more than simply an intermediary, it could rely on the so-called “publisher’s defence” under section 85(3) of the Trade Practices Act5, which protects publishers (such as magazine and newspaper publishers) from liability for misleading claims made by its advertisers. To satisfy the criteria for this defence, Google needed to establish that its business was to publish or arrange for the publication of advertisements, that it received the advertisements for publication in the ordinary course of business, and that it did not know and had no reason to suspect that its publication was misleading or deceptive. At first instance, Justice Nicholas concluded that if Google had been liable for the misrepresentations made in the four advertisements, the publisher’s defence would not have been available because Google (via its employees) should have known or had reason to believe that its publication of the advertisements would mislead or deceive consumers.
The Full Court agreed with the conclusion of Justice Nicholas that Google knew or ought reasonably to have known the publication of the sponsored links was misleading or deceptive. Thus Google could not rely on the publisher’s defence on appeal.
With respect to the Harvey World Travel advertisements, the Full Court reiterated Justice Nicholas’ conclusion that the defence would not have been available. Google ought reasonably to have suspected that the use by STA Travel of Harvey World Travel’s name as a keyword triggering an advertisement for STA Travel was likely to mislead or deceive a consumer searching for information on Harvey World Travel. Indeed, Harvey World Travel was also a client of Google.
Full Court’s conclusion: Google was liable for the misleading and deceptive conduct
In the case of the Harvey World Travel advertisement, the Full Court held that by publishing, or causing to be published, on Google Australia results pages advertisements for STA Travel’s business and website with the headline including the words “Harvey World Travel” or “Harvey World”, in trade or commerce misrepresented that:
- there was an association between STA Travel and Harvey World Travel;
- there was an affiliation between STA Travel and Harvey World Travel businesses;
- information regarding the Harvey World Travel businesses could be found at STA Travel’s website;
- information regarding the travel services provided by the businesses associated with the name “Harvey World Travel: could be found at STA Travel’s website;
As such Google had engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the Trade Practices Act.
Similar findings were made with respect to the three other sponsored links.
Google was ordered to establish and implement a trade practices compliance program and ordered to pay the costs of trial in relation to the four sponsored links the subject of the appeal and the costs of the appeal. Interestingly, since the first instance decision, Google has renamed its sponsored links “Ads”.
Special leave to appeal to the High Court
On 23 April 2012 Google filed an application seeking special leave to appeal to the High Court of Australia. Special leave to the High Court is only granted in limited circumstances, for example, where a genuine question of public importance arises or where the interests of justice require it. Thus there are no guarantees that special leave will be granted. The special leave application is due to be heard on 22 June 2012.
Google’s liability in Europe and the United States
The Full Court’s finding that Google is liable for the content of advertiser’s sponsored links in Australia is to be contrasted with the position in Europe and the United States where Google has not been held liable (under the trade mark laws in those jurisdictions)6. Australian Courts are yet to consider whether Google/the advertiser’s use of competitor’s names in headlines of sponsored links constitutes a breach of our trade mark laws. To do so would require a finding that Google’s use of the AdWord was “use as a trade mark”.7
Lessons for brand owners and online publishers
- As a result of the decision, brand owners whose trading, product or domain name is used in the headline of a Google advertisement and have not succeeded in a complaint to Google under the Google AdWord Complaint Policy, now have the option of also taking action directly against Google (as well as the advertiser responsible for the sponsored link).
- In each case the intermediary’s conduct, for example the “publisher” of the advertisement, needs to be considered as a whole to determine if the intermediary is merely a conduit passing on information. In circumstances where the advertisement is returned in response to a query of the intermediary and/or where the intermediary provides the technical facilities and it or its employees are involved in the resulting advertisement, the intermediary may also be liable.
- In light of the decision, search engine providers and content publishers need to have checks in place to ensure that the content they are publishing on their websites is not misleading.
- As a result of the decision, if maintained, Google should be more likely to act on complaints from trade mark owners under the Google AdWords Complaint Policy.
- Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd and Google Inc  FCA 1076
- Now section 18 of the Australian Consumer Law 2010 (Cth).
- This provision is now section 18 of the Australian Consumer Law.
- Now section 29 of the Australian Consumer Law.
- Now section 209 of the Australian Consumer Law.
- See Rosetta Stone Ltd v Google Inc (732 F Supp 2d 628 (ED Va 2010)); Google France SARL, Google Inc v Vaiticum SA, Lutectel SARL and Google France SARL v Centre national de recherché en relations humains CHRRH SARL and ors (C-236/08) to C-238/08) 23 March 2010
- Trade Marks Act 1995 (Cth) section 120.