06 Feb 2013

No hits in High Court search for Google liability for its advertisers' representations

Google's publication of misleading advertisements by its AdWords customers did not mean that Google itself had breached section 52 of the Trade Practices Act and engaged in misleading or deceptive conduct, according to the High Court this morning (Google Inc v The Australian Competition and Consumer Commission [2013] HCA 1).

The decision is an important one, both for advertisers generally and particularly for online platform providers who allow others to create content on their sites.

Google search results, paid advertisements and its Ad Words program

In response to a query, Google produces search results (called "organic" results) which are generated by its search algorithm. Alongside these results it displays paid advertisements, called "sponsored links", which appear in response to specified search terms.

Advertisers devise the text of the sponsored links and the websites to which their advertisements will link. They also specify the search terms, known as "keywords", which will trigger the appearance of their advertisements . They can also direct Google to insert those keywords into their advertisements. This is managed by Google's AdWords program. Google staff can and do provide a list of common keywords from which advertisers may select.

Google's terms of service specify that their advertisers cannot misleadingly represent an association with unrelated third parties or infringe third party trade marks.

Some advertisers selected keywords containing their competitors' names. For example, a search for Harvey Norman Travel generated an advertisement by STA Travel, which would have the search name (ie. Harvey Norman Travel) as its first line. The Federal Court had no trouble finding this was misleading and deceptive conduct, and breached section 52 of the Trade Practices Act. The question was whether Google has also breached the Act.

Why Google won

The majority of the High Court said that an intermediary or agent who publishes, communicates or passes on someone else's misleading representation will itself be engaging in misleading or deceptive conduct if it would appear to ordinary and reasonable members of the relevant class that the intermediary has adopted or endorsed that representation. This is a question of fact to be decided by reference to all the circumstances of a particular case.

The ACCC said that Google and its search engine do not operate analogously to other intermediaries or agents, and these principles do not apply.

The High Court disagreed:

" each relevant aspect of a sponsored link is determined by the advertiser. The automated response which the Google search engine makes to a user's search request by displaying a sponsored link is wholly determined by the keywords and other content of the sponsored link which the advertiser has chosen. Google does not create, in any authorial sense, the sponsored links that it publishes or displays…That the display of sponsored links (together with organic search results) can be described as Google's response to a user's request for information does not render Google the maker, author, creator or originator of the information in a sponsored link. The technology which lies behind the display of a sponsored link merely assembles information provided by others for the purpose of displaying advertisements directed to users of the Google search engine in their capacity as consumers of products and services. In this sense, Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online), who publish, display or broadcast the advertisements of others. The fact that the provision of information via the internet will – because of the nature of the internet – necessarily involve a response to a request made by an internet user does not, without more, disturb the analogy between Google and other intermediaries. To the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers. "

Furthermore, the ordinary and reasonable user would understand that Google was displaying other people's advertisements, as they were marked as "sponsored links".

What if Google had endorsed or adopted the advertisement and its representations?

The Act provides a statutory defence for a publisher which publishes a third party advertisement in the ordinary course of business where the publisher does not know (or have reason to suspect) that the advertisement would contravene the Act.

As the High Court found that Google did not itself adopt the misleading statements, the High Court did not need to consider this defence. However, it did point out that:

"an intermediary publisher who has endorsed or adopted a published representation of an advertiser without appreciating the capacity of that representation to mislead or deceive may have resort to the statutory defence. In those circumstances, recognising that its business carried a risk of unwitting contravention, an intermediary publisher may need to show that it had some appropriate system in place to succeed in the defence that it did not know and had no reason to suspect that the publication of that representation would amount to a contravention. " [emphasis added]

What does this mean for advertisers?

For advertising in general, this is a useful reassertion of the need to comply with the law when creating advertisements, wherever they appear. An advertiser would ordinarily have thought twice about creating a newspaper advertisement with a competitor's name or trade mark across the top and their own copy beneath. The Google decision shows that the same level of caution should be applied to online activities.

This does not mean however that you can never use a competitor's name or trade mark. Comparative advertising is certainly lawful. That is not, however, what was occurring here. Mere use of the name or trade mark, with no comparison or other connection, may well lead to a breach of the law, whether online or not.

What does this mean for online activities?

Given the high level of automation used in creating online content, and the growth of content generated by users and third parties, any decision will be useful. The Google decision in particular suggests that:

  • the general, long-established principles regarding intermediaries and agents under the Competition and Consumer Act (as the Trade Practices Act is now known) will apply to misleading and deceptive representations; 
  • it will be harder for regulators to hold Google and other search engine providers accountable for misleading and deceptive advertisements displayed on their search results pages; and
  • where the content is wholly in the hands of another, the platform provider is more likely to avoid liability.

The situation may well have been different, however, if the advertiser had been able to ask Google to alter the search algorithm itself. Google then might have been considered to be making the representation.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.