Misleading or deceptive conduct by using Google AdWords

The Australian Competition and Consumer Commission (ACCC) brought an action against the Trading Post Australia Pty Limited (Trading Post) and Google Inc (Google) in 2007.  Last Thursday 22 September 2011 in Australia Competition and Consumer Commission v Trading Post Australia Pty Ltd [2011] FCA 1086, the Federal Court held that the Trading Post had engaged in misleading or deceptive conduct for advertising in Google’s AdWords the trading names of other businesses which directed consumers to its own website.  However, the Federal Court dismissed the ACCC’s claim that Google had engaged in practices likely to mislead or deceive consumers through its AdWords service, or by failing to adequately distinguish advertisements (Sponsored Links) from search results (Organic Search Results).

Findings of the Trading Post

One of the businesses key to the findings was Kloster Ford, a competitor car dealership in Newcastle.  In 2005, the Trading Post paid Google for a Sponsored Link for the words ‘Kloster Ford’ to be directed its website.
The Federal Court found that the Trading Post had engaged in misleading or deceptive conduct, as consumers who searched for Kloster Ford would click on the Sponsored Link, then to be linked through to the Trading Post’s website.  Thus, this would lead consumers to likely believe that there was a connection between Kloster Ford and the Trading Post, but in reality, the website contained no information about the Newcastle car dealership or the cars it had for sale.
As a result, the Court made it clear that the Trading Post created false representations of association, affiliation, approval, sponsorship or availability of information.  Therefore, the Trading Post contravened sections 52 and 53 of the Trade Practices Act 1974 (Cth) (Act).  Please note that the Competition and Consumer Act 2010 (Cth) is the new name for the Act and it came into effect on 1 January 2011.

Findings of Google

The two (2) allegations the ACCC made against Google, were that Google had engaged in misleading or deceptive conduct by:

  1. publishing the Trading Post’s Kloster Ford advertisements and various other advertisements; and
  2. not clearly distinguishing Organic Search Results and Sponsored Links.

The first allegation

The Federal Court found that Google had not contravened the Act, as it had merely communicated the representations made by the Trading Post without adopting or endorsing those representations.

The second allegation

The Federal Court found that the ACCC had failed to prove that Google did not sufficiently distinguish Sponsored Links from Organic Search Results, or that Google failed to identify that Sponsored Links were advertisements. The Court decided that it was reasonable to infer that most people who use the Google search engine would understand that Google generates revenue by advertising on its search results pages. In relation to the top left sponsored links, the Court found that the combination of the yellow box of shading around the results, along with the words ‘sponsored links’ above the results, would reasonably enable users to understand that these were advertisements. Likewise, in relation to the right side Sponsored Links, even with the absence of the coloured shaded area, the Court found that users would appreciate that they were also advertisements.

Orders

The Trading Post was ordered to pay $28,000 towards the legal costs of the ACCC, but the ACCC was ordered to pay the legal costs of Google.

Disclaimer

This article is general in nature and cannot be regarded as legal advice. It is general commentary only. You should not rely on the contents of this article without consulting one of our lawyers. If you would like advice regarding how the law applies to your individual circumstances, then please contact Dundas Lawyers.

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
Telephone: (07) 3221 0013
Facsimile: (07) 3221 0031
Mobile 0419 726 535

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