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ACCC v Google Inc. appeal decision

Date: 03 May 2012
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Google Inc. has just lost a case on appeal to the Full (Appeal) Court of the Australian Federal Court in relation to the use of misleading "AdWords®" in Google® search results.
 
The case was taken by the ACCC (the Australian Consumer and Competition Commission, the government consumer watchdog) against Google, due to certain advertisers using their competitor's names and trade marks as "keywords" in their AdWords sponsored links on Google.
 
Let us explain what this means with a typical example - a person wants to find the website of Harvey World Travel, their favourite travel agent, so s/he searches for "Harvey World Travel" on Google. The search results pop up, with a list of links to various websites including hopefully www.harveyworldtravel.com.au, the one they are looking for, near the top.  Often though these "organic" search results found by Google's search engine are preceded by "Sponsored Links", i.e. a list of links that various advertisers have paid for using the AdWords service.
 
In this case, the first sponsored link said "Harvey World Travel" with the sub-text “www.statravel.com.au Unbeatable deals on flights, Hotels & Pkg’s Search, Book & Pack Now!” underneath, and so clicking on it took you to the website of STA Travel, a competitor of Harvey World Travel.  STA Travel is a regular user of the AdWords service to advertise on Google and had chosen "Harvey World Travel" as a keyword to draw traffic to its site.  STA Travel’s intention was that when a person searches for "Harvey World Travel", a STA Travel sponsored link is listed at or near the top with the "Harvey World Travel" name in the link followed by STA Travel's web address and some brief content.  As users generally focus most of their attention on the link featuring the keyword, many will think it’s a link to Harvey World Travel's site.
 
The ACCC saw this as misleading and deceptive conduct.  Even though in the majority of cases where this happens the user will realise that the link has taken them to the wrong site, the ACCC’s view was that there were many instances where the user does not realise or simply gives in and uses the competitor’s website they were taken to.
 
The ACCC decided that they didn't like this somewhat misleading practice, and launched its suit against Google at the Federal Court, lost at the first instance so appealed and has now won.  Google will now likely seek leave to appeal the decision to the High Court, the final level of appeal.
 
Depending on what you think of businesses using their competitors names and trade marks to divert business to themselves, you may be wondering why Google won the first case or why the ACCC won the appeal.
 
Google won the first hearing because the Court found that Google was not committing the misleading and deceptive conduct, that it was simply a conduit passing on the advertiser's "information", and it was the advertiser (STA Travel) who had selected the "Harvey World Travel" keyword.  Google was seen to be like a newspaper or TV network that just publishes or broadcasts the ad provided to it. Therefore it was not making the misleading representation, just passing it on.
 
The appeal court has however decided that Google does more than this (and the evidence of Google itself before the first court helped demonstrate this).  Google runs the AdWords advertising business, has staff that assists advertisers select keywords, and also produces the Sponsored Links - it does not simply publish an ad, it creates the links with the misleading keywords.  The appeal court said:
"Google’s conduct consists relevantly of the 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 court accordingly found:
"What appears on Google’s webpage is Google’s response to the user’s query. That it happens to headline a keyword chosen by the advertiser does not make it any the less Google’s response. And even that occurs pursuant to the AdWords facility made available to the advertiser by Google.  Google’s conduct cannot fairly be described as merely passing on the statements of the advertiser for what they are worth."
 
Consequently "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" and "these circumstances show that Google is, in fact, much more than a mere conduit".
Therefore the court found that Google had engaged in conduct that was misleading and deceptive in publishing sponsored links with third party names and trade marks.
 
This reasoning seems solid and the result fair in terms of the justice of the matter.  Third parties have been complaining to Google for years about competitors using their names in this way.  Google has legitimised this behaviour through its Adwords practices and policies, and various courts around the world have until now been finding in Google's favour.
 
This has arguably run counter to fundamental fair trading principles, with the misleading keywords practice generally being approved on the basis that Google was not itself using the third party names/ trade marks or making the representation.  This decision reverses the trend and is a victory for honest business practice, but whether it prevails is far from certain.
 
 
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