Advertisers, not Google, are responsible for misleading content of sponsored links

On 6 February 2013, the High Court delivered a landmark decision in proceedings between Google Inc. and the Australian Consumer and Competition Commission (ACCC). The decision is globally significant for:

  • Google, other search engines and online advertising services and publishers; and
  • all businesses which advertise using those providers.
 

Overview

The recent decision of the High Court in Google Inc. v Australian Competition and Consumer Commission[1] overturned a unanimous Full Federal Court decision. The High Court held that, even though representations contained in sponsored links displayed on Google search results pages were misleading or deceptive - and contravened section 52 of the Trade Practices Act 1974 (Cth) (Act)[2] - it is the advertiser who commissions the sponsored link who is responsible for its content, not Google.

You can read the full case here.

The facts

What is a sponsored link?

When a user enters search terms into Google, two types of results are displayed: 'organic' search results and 'sponsored links'.

Sponsored links are advertisements which are created by, or at the direction of, advertisers willing to pay Google to display these links as advertising text. The links direct users to the advertiser's chosen website.

Sponsored links are generated by a program called 'AdWords'. One feature of AdWords is 'keyword insertion'. This allows advertisers to select keywords which trigger their advertisements. An ad will only be displayed on a Google search results page if it contains the advertiser's selected keywords.

In contrast, organic search results are those which Google generates from its internet searching function, absent any arrangements with sponsors or advertisers.

What were the proceedings about?

The ACCC alleged that Google had engaged in misleading and deceptive conduct, in breach of section 52 of the Act, by publishing sponsored links which falsely suggested a commercial association between the advertiser and a competitor.

The offending advertisements falsely represented that by clicking on the sponsored link, the user would be taken to the website of the business that the user had searched for, when in fact the user would be taken to the competing advertiser's website.

The practice is still relatively commonplace. The author has recently advised property developers in circumstances where a user may search for a particular property development. The sponsored link repeats the name of that development, but the website to which the user is directed is a nearby, competing, property development.

What were the earlier Court findings?

The relevant ads were found by the Trial Judge to be misleading or deceptive, or likely to mislead or deceive. However, the Trial Judge found that Google had not made the representations, and had acted merely as a conduit, passing on the advertisements of others without endorsing or approving them.

On appeal, the Full Federal Court likewise held that the representations were misleading or deceptive, or likely to mislead or deceive, but also found that Google had made the representations. In reaching this conclusion, the Federal Court:

  • noted that Google's search engine called up and displayed the response to the user's search query;
  • noted that it was Google's technology that created what was displayed; and
  • found that Google had not merely repeated or passed on a statement by the advertiser as a mere conduit, but that Google acted as a principal and made the representations.

Issue in dispute - did Google engage in misleading or deceptive conduct?

On appeal to the High Court, the parties did not argue about whether or not the sponsored links conveyed misleading or deceptive representations: the parties accepted that they did (this fact itself should serve as a warning to those who still engage in this practice).

What the parties did argue about was whether Google had made the representations which were found to be misleading or deceptive, or likely to mislead or deceive.

ACCC's arguments

The ACCC relied on the fact that Google used its technology to display the sponsored links in response to search requests made by users of the Google search engine.

The ACCC therefore contended that Google had done more than merely pass on the sponsored links: Google made or created the sponsored links, and thus made the misleading or deceptive representations.

Google's arguments

Google contended that displaying the sponsored links in response to users' search requests did not mean Google itself made the misleading representations, or otherwise engaged in misleading and deceptive conduct.

Google submitted that:

  • it was the advertiser who specified each relevant aspect of a sponsored link, being the headline, advertising text, advertiser's website address, keywords and use of keyword insertion;
  • Google merely implemented each advertiser's instructions as a conduit; and
  • the technical facilities it provides through the AdWords program were not different in principle from facilities provided to advertisers by other intermediaries.

Google further submitted that any commercial association or affiliation between an advertiser and another trader was something peculiarly within the knowledge of the advertiser, and was not within Google's expertise.

The decision

The High Court rejected the ACCC's submission that Google 'produced' (in the sense of making or creating) the sponsored links and held that the advertiser is the author of a sponsored link.

The Court noted that Google had no control over a user's choice of search terms or an advertiser's choice of keywords. The Court found that Google merely provided an automated response to a user's search request which was wholly determined by the content of the sponsored link which the advertiser supplied.

The Court therefore held that Google does not create, in the sense of an 'author', the sponsored links that it publishes or displays.

The majority judgment found that Google's involvement in the sponsored links was not relevantly different from other intermediaries, such as newspaper publishers or broadcasters, who publish, display or broadcast the advertisements of others.

Additionally, the Court found that each sponsored link clearly indicates that its source is an advertiser, not Google. The Court therefore upheld the Trial Judge's finding that the ordinary and reasonable users of the Google search engine would have understood the sponsored links to be statements made by advertisers which Google had not endorsed, and was merely passing them on.

Maddocks comment

Since this litigation commenced, the Trade Practices Act 1974 has been superseded by the Competition and Consumer Act 2010 (CCA). The prohibition on misleading and deceptive conduct is now found in section 18 of the Australian Consumer Law, which has effect under the CCA. However, the provisions are the same for all relevant purposes and the outcome of the decision would be the same today.

The decision reinforces that there are no special rules for online advertising compared with newspapers, television and print. It therefore suggests that, as long as a website publisher does not create the advertisement or endorse its contents, it appears unlikely that the publisher will be found to have engaged in misleading or deceptive conduct by displaying an advertisement that is misleading or deceptive, or likely to mislead or deceive.

However, the decision in this case turned very much on its particular facts, and there remains a risk that a greater level of involvement by a website publisher may lead the publisher itself to be found to have engaged in the misleading or deceptive conduct by publishing an advertisement that is misleading or deceptive, or likely to mislead or deceive.

More information from Maddocks

For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Information, Communications and Technology or Advertising, Brands and Marketing teams.

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[1] 2013 HCA 1.

[2] Now section 18 of the Australian Consumer Law.