Australia: Court ruling cautions use of competitors' names as AdWords

This article was co-authored by Shehana Wijesena, Senior Associate.

In a case brought by the Australian Competition and Consumer Commission (ACCC) against the Trading Post and Google, the Federal Court has found that the Trading Post, by using the trading names of unrelated businesses in its Google AdWord advertising, contravened the Trade Practices Act¹. The key part of this finding was that, in relation to one of the businesses (Kloster Ford), it had never advertised in the Trading Post, and the input of its name in a Google search brought up a link to Trading Post web site, leading consumers to likely believe that there was a connection between Kloster Ford and the Trading Post.

However, in the decision Justice Nicholas dismissed the ACCC's claim that Google had similarly contravened theTrade Practices Act by the mere provision of its AdWords service, or the presentation of the search results on Google (as "organic" search results and "sponsored links").

The case serves as a warning to advertisers and traders alike, that use of keywords that comprise their competitors or third party trading names or trade marks, when there is no connection between the advertiser/trader and the owner of that name or mark, may give rise to a risk of liability of misleading and deceptive conduct.

Background

The ACCC alleged that Trading Post and Google engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and represented that it had a sponsorship, approval or affiliation that it did not in fact have.

This case deals with the ramifications of search results generated from the google.com.au search engine (Google search engine). When a user types a search term into the Google search engine, a list of results is generated, ranked by Google according to relevance. These are known as the "organic" search results.

Sponsored links may also appear on the search results page. Sponsored links are a form of advertising generated as a result of Google's "AdWords" program. This program enables advertisers to pay for advertising text, or "AdWords", which incorporate a link directing a user to a chosen website. Sponsored links appear either above (top left sponsored links) and/or to the right (right side sponsored links) of the organic search results.

Organic search results are distinguished from "sponsored links" by appearing in a shaded background, with "Sponsored Links" as a heading where they appear on the top left or above the organic search results.

The key aspects of the ACCC's case

The ACCC alleged:

• with regard to Google, that the appearance of organic search results and sponsored links were essentially the same, and that the overall layout and appearance of the results page (which included yellow shading around the top left sponsored links and a vertical line separating the right side sponsored links from the organic search results) was insufficient to distinguish between organic search results and sponsored links/advertisements
• with regard to both the Trading Post and Google, that the sponsored links were misleading or deceptive or likely to mislead or deceive because they included a headline consisting of a trading name, a product name or a website address of the advertiser's competitor and served as a link to the advertiser's website. This created false representations of association, affiliation, approval, sponsorship or availability of information.

The ACCC's evidence included various examples of advertising including sponsored links for "Kloster Ford" and "Charlestown Toyota" in which the relevant AdWords were owned by the Trading Post, as well as other advertisements which appeared as sponsored links in Google search results pages, such as advertisements for Harvey World Travel and Honda.

Did Google fail to differentiate between organic search results and sponsored links?

In determining the outcome of the first part of the ACCC's case, the Court held that it was reasonable to infer that most users of the Google search engine would understand that Google generates revenue by causing advertisements to appear on its search results pages.

In relation to the top left sponsored links, the Court held that the combination of the words "sponsored links" above the results, coupled with the yellow box of shading around the results, would reasonably enable users to understand that these top left sponsored links were in the nature of advertisements. Similarly, in the case of the right side sponsored links, the Court found that users would appreciate that they were also in the nature of advertisements, even with the absence of the coloured shaded area.

Consequently, the Court rejected the ACCC's claims that Google failed to adequately distinguish between organic search results and sponsored links, or that Google failed to identify that sponsored links were advertisements.

Representations made in the advertising – findings in relation to Trading Post

The Court held that by publishing, or causing to be published, advertisements in search results for the keyword "Kloster Ford" where:

• the advertisement included a headline consisting of the words "Kloster Ford" and a link to the website at www.tradingpost.com.au
• no information regarding Kloster Ford or Kloster Ford car sales could be found at the website at www.tradingpost.com.au,

The Court also held that as a result of the Kloster Ford advertisements, the Trading Post represented that it had an affiliation which it did not.

In relation to the Charlestown Toyota advertising, the Court found that there was insufficient evidence to show that Charlestown Toyota was not in fact advertising with the Trading Post, therefore the Trading Post was not found to be liable for those advertisements.

Representations made in the advertising – findings in relation to Google

The Court held that there was no evidence to suggest that Google's employees had encouraged the use of keywords which might convey misleading or deceptive representations. Rather, it was found that Google had merely communicated what the Trading Post had represented in its advertisements, without adopting or endorsing any of these representations.

Similarly, in relation to the other advertisements, such as the Harvey World Travel and Honda advertisements, the Court held that any misrepresentations conveyed by these advertisements were also not adopted or endorsed by Google.

Key outcomes

• While businesses can legitimately purchase and use AdWords for key words relevant to their business to increase visibility for online searches, they should be aware that if they use a trading name, product name or a website address of a competitor as an AdWord, this may constitute a breach of consumer protection laws.
• Businesses should be vigilant in monitoring the use of their names, brands and website addresses in their competitors' online advertising.

1. While this decision considers the statutory provisions under the Trade Practices Act 1974 (Cth), the findings will still be relevant under the provisions of the Competition and Consumer Act 2010 (Cth) which came into effect on 1 January 2011.

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