Google “victorious” in Sponsored Links dispute with ACCC; appeal on foot

Google “victorious” in Sponsored Links dispute with ACCC; appeal on foot

Google “victorious” in Sponsored Links dispute with ACCC; appeal on foot

This article first appeared in the Chinese-language edition of Managing Intellectual Property. To download the article in Chinese, please click here.

Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd and Google, Inc [2011] FCA 1086

In a highly anticipated decision handed down on 22 September 2011, Justice Nicholas of the Federal Court ruled that Google, Inc had not engaged in misleading and deceptive conduct by failing to adequately distinguish between “organic” search results and paid advertisements (commonly known as Sponsored Links) nor by failing to identify that Sponsored Links were in fact paid advertisements.

Justice Nicholas did however make declarations that Trading Post Australia Pty Ltd had engaged in misleading and deceptive conduct and made false or misleading representations. Trading Post had published an advertisement (Sponsored Link) which included a competitor’s name (Kloster Ford a New South Wales car dealer) in the headline. When users clicked on the headline they were taken to the Trading Post website which did not contain any information regarding Kloster Ford or Kloster Ford car sales.

The Court looked at ten other Sponsored Links some of which it also considered were misleading and deceptive. However, in all instances, the Court considered that the advertiser and not Google had made the representation contained in the advertisement and that Google had merely communicated the advertisement and was, as such, not liable for misleading or deceptive conduct or for making false or misleading representations.

The ACCC’s case against Google and Trading Post

The ACCC had initiated action against Google and the Trading Post on two grounds:

  1. that Google’s failure to sufficiently distinguish paid advertisements, commonly known as Sponsored Links, from “organic” search results on Google’s search result pages and to identify that the Sponsored Links were in fact advertisements, amounted to misleading and deceptive conduct contrary to section 52 of the Trade Practices Act 1974 (Cth) (now section 18 of the Australian Consumer Law);
  2. that the use of third parties’ trading or product names in the headlines of Sponsored Links in circumstances where the website link included in the Sponsored Link did not include information regarding the third party or its products or services, was misleading and deceptive and amounted to a false and misleading representation that the advertiser was somehow associated or affiliated with the third party or its products and/or services (in contravention of sections 52 and 53(d) of the Trade Practices Act 1974 (Cth) (now sections 18 and 29, respectively of the Australian Consumer Law).

Had Google failed to adequately identify Sponsored Links as paid advertisements?

The appearance of Google’s Sponsored Links

Sponsored Links are advertisements which appear either above the organic search results or on the right hand side of the results page. An example is below:

ACCC alleged that consumers would be misled or deceived into believing that the results at the top of the page were the most relevant links and were not advertisements. Justice Nicholas found that Google had not contravened section 52 of the Trade Practices Act 1974 (Cth).

The Court’s findings

Justice Nicholas considered that consumers would understand the difference between Sponsored Links and “organic” search results. The Court did not accept the ACCC’s contention that the expression “Sponsored Link” was ambiguous to describe the advertisements or that the shading and the expression “Sponsored Link” was insufficient to counteract the impression otherwise created by display of the advertisements and search results together. (It is worth noting that Google has now renamed its Sponsored Links “Ads”).

Was use of a competitor’s name in Sponsored Link headlines misleading and deceptive?

The second part of the ACCC’s case related to the use of competitors’ trading or product names in headlines of Sponsored Links (which are the blue underlined headings appearing as the first line of Sponsored Links). Specifically, the ACCC alleged that eleven Sponsored Links were misleading or deceptive or likely to mislead or deceive because they included a headline which linked to the advertiser’s web page rather than to a web page of the advertiser’s competitor whose trading or product name featured in the Sponsored Link headline.

These advertisements were created by the process of purchasing a Google AdWord which may be a competitor’s trade mark (provided that a Google complaint has not previously been made by that trade mark owner), trading name or product name. After the keyword/s had been selected, the advertiser provided Google with the text of an advertisement into which a keyword/s would be inserted. In each of the Sponsored Links about which the ACCC complained it appeared that the advertiser had opted to use keyword insertion facility offered by Google such that keywords selected by the advertiser were automatically inserted in the headline of the Sponsored Link as it appeared on the results page.

Three of the eleven claims related to advertisements published by Trading Post while the remaining eight related to advertisements by advertisers who were not parties to the Court proceeding. Below is an example of a Trading Post advertisement for Kloster Ford.

Kloster Ford
New/Used Fords – Search 90,000 auto ads online. Great finds daily!

The Trading Post did not have any association or affiliation with Kloster Ford which was a Newcastle car dealer. Essentially, customers who clicked on the Sponsored Link for Kloster Ford were taken to the Trading Post website which did not contain any information about the Kloster Ford car dealer nor Kloster Ford car sales on site.

The Court’s findings

The Court held that Trading Post had engaged in misleading and deceptive conduct and made false and misleading representations by publishing an advertisement using the keyword “Kloster Ford” (1 of the 3 relevant advertisements) in response to Google searches for the keyword “Kloster Ford” in circumstances where:

  • each advertisement included a headline consisting of the words “Kloster Ford”;
  • each advertisement included a link to the Trading Post website;
  • no information regarding Kloster Ford could be found on the Trading Post website; and
  • no further information regarding Kloster Ford car sales could be found at the Trading Post website.

His Honour found that Google had not made any of the representations alleged by the ACCC to have been made in the eleven Sponsored Links. All representations were found to have been made by the advertisers (not Google). Google had merely communicated representations made by the advertiser.

Appeal to the Full Federal Court underway

ACCC lodged an appeal against Justice Nicholas’ decision in so far as it related to Google on 12 October 2011. The appeal focuses on representations made in four of the eleven advertisements.

Finally, the case concerned breaches of our consumer protection laws and did not consider the issue of whether Trading Post’s or Google’s conduct constituted trade mark infringement.

For a more in depth report on this case including the Court’s findings in relation to the remaining Sponsored Links, please see our December edition of our IP Update eMag.