In a judgment handed down on Thursday, 22 September 2011 in the proceedings commenced by the Australian Competition & Consumer Commission ("ACCC") against Google, Inc and Trading Post Australia Pty Limited ("Trading Post")1, Justice John Nicholas of the Federal Court dismissed the ACCC's claim against Google, ruling that Google had not engaged in misleading and deceptive conduct by failing to sufficiently to distinguish its "Sponsored Links" (now known as "Ads") from organic search results on its search results pages.
The Federal Court also:
- rejected the ACCC's claim that Google was liable for advertisers using competitors' names and trademarks in the Sponsored Links;
- declared that Trading Post had engaged in misleading and deceptive conduct in breach of section 52 of the Trade Practices Act 1974 (Cth) ("TPA") (now section 18 of the Australian Consumer Law ("ACL")) by publishing the advertisement containing the words "Kloster Ford"; and
- declared that Trading Post had breached section 53(d) of the TPA (now section 29(1)(g) of the ACL) by representing, contrary to the fact, that it had an affiliation with Kloster Ford.
Trading Post was ordered to pay $28,000 to the ACCC by way of agreed contribution to the ACCC's costs of the proceeding. The ACCC was ordered to pay Google's costs of the proceedings.
The judgment refers to the provisions of the TPA as it is the legislation that was in force at the relevant time. The Trade Practices Act has been renamed the Competition and Consumer Act 2010 (Cth) and includes the ACL, which is to be found at Schedule 2 to the Competition and Consumer Act 2010.
A more detailed analysis of the judgment and its implications will be published in our upcoming edition of Connections.
In July 2007, the ACCC filed an action in the Australian Federal Court against Trading Post and Google in relation to advertising practices in Google search results. Trading Post "purchased", through Google AdWords, the names of car dealerships with which it was not affiliated on a price per click basis. As a result, searches for those car dealerships, such as "Kloster Ford" would show the Trading Post website as a 'Sponsored Link' in the Google search results.
Trading Post reached a settlement with the ACCC in April 2008. It was agreed at that time that the making of any orders or declarations against Trading Post would be delayed until the judgment was handed down in the event it was determined by the Court that it would be inappropriate to make an order following the evidence presented in the case against Google.
In bringing its case for breach of section 52 of the TPA, the ACCC alleged that there was insufficient distinction made between organic search results and Sponsored Links or advertising. In particular, it alleged that:
- the appearance of Sponsored Links on the left hand side of the page, followed by organic search results, confused consumers. It was asserted that the use of the words "sponsored links" and the yellow shading over those sponsored results was insufficient;
- consumers have an expectation that search results are listed in decreasing order of relevance, implying that the sponsored results appearing at the top of the website are those of relevance and
- the "sponsored links" that appeared on the right hand side of the search page where not sufficiently distinguished from the organic search results.
The ACCC also alleged that Google's practice of highlighting keywords selected by a user within an advertisement unconnected to the keyword, implied some association between the advertisement and the keyword, and was also a breach of section 52 of the TPA. The ACCC provided twenty specific examples of sponsored links from Google's search results to support its argument.
In response, Google asserted that there was nothing misleading or deceptive in the way it presented its search results, as the term "sponsored links" and the overall design and layout of its search page sufficiently distinguished between results and advertisements. Google argued that, to the extent that any of the twenty sponsored links in the case were found to convey a misleading and deceptive representation, such representation was that of the relevant advertiser(s), and not Google. Google claimed there was insufficient evidence to support the claims made by the ACCC and Google relied upon the defence under section 85(3) of the TPA afforded to publishers in certain instances (now section 209 of the ACL).
In a press release issued soon after the judgment was delivered, ACCC Chairman Rod Sims stated that, "This case is important in relation to clarifying advertising practices in the internet age. All businesses involved in placing advertisements on search engines must take care not to mislead or deceive consumers."
The ACCC now has 21 days to decide whether it wishes to appeal the decision.
1. Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd  FC 1086.
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