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High Court has the final word: Google v ACCC

NewsFlash 07 February 2013

On 6 February 2013, the High Court delivered a unanimous judgment in favour of Google Inc (Google) in its long running dispute with the Australian Competition and Consumer Commission (ACCC) [1].  This decision overturns the April 2012 Full Federal Court judgment in favour of the ACCC [2] and reinforces the position that, generally, it is advertisers and not the website administrators that are liable for the content of web advertising.

What is the issue?

The ACCC argued that Google had displayed a number of misleading and deceptive links on the results page of its search engine between 2005 and 2008. Google search results are separated into two categories; organic search results and sponsored links. Organic search results are links to web pages that are ranked in order of relevance to the search terms entered by a user. Sponsored links are paid advertisements that are often displayed at the top of the search results page. These advertisements account for most of Google’s revenue.

Sponsored links are created by the hundreds of thousands of advertisers who subscribe to Google’s AdWords program. The advertiser specifies the web page to be included in the sponsored link, as well as the headline and text to be used. The advertiser also selects the search terms that will cause the sponsored link to be displayed. This means that the sponsored link will be listed alongside links to the web pages that contain the most relevant hits for the search terms entered by the user. Importantly, Google has no control over an advertiser’s choice of the search terms that will cause the sponsored link to be displayed.

What did the Court say?

Google displayed sponsored links to the websites of STA Travel, Carsales, Trading Post and Ausdog. Sponsored links for these companies were displayed when a user searched for a competitor’s business. For example, a sponsored link to STA Travel’s website was displayed when a user searched for ‘harvey world travel’. The alleged purpose of this was to divert web traffic away from a competitor or to represent that a commercial association existed between the two companies. It was common ground that these sponsored links were misleading; the key question before the High Court was whether Google engaged in misleading or deceptive conduct by displaying the links on its search engine.

The High Court unanimously held that Google did not create or produce any of the four sponsored links. Google simply responds to a user’s request for information and is the means of communication between advertisers and consumers. This is because the technology behind sponsored links merely assembles the information provided by others for the purpose of displaying advertisements. In this way, the High Court held that Google is no different from other advertising intermediaries. This includes newspaper publishers and broadcasters, whether in print, radio, television or online.

The High Court found that a reasonable search engine user would know the difference between a sponsored link and an organic search result. This is because a reasonable user would understand that a sponsored link is a statement made by an advertiser, and that Google had not endorsed or adopted any representation made in the link. This means that Google did not make any misleading or deceptive representations, even though the text of the four sponsored links was misleading.

The High Court also referred to the publisher’s defence in section 85(3) of the Trade Practices Act 1974 (Cth) [3].  A publisher who endorses or adopts a representation of an advertiser may be entitled to the statutory defence if it can establish that it did not appreciate the capacity of that representation to mislead or deceive. In these circumstances, a publisher may need to prove that it has a system in place to detect misleading or deceptive advertisements.

What does this mean for me?

The High Court judgment provides important guidance for everybody involved in online advertising. The decision confirms that websites are likely to be treated the same way as other advertising media, such as print newspapers and billboards. As long as a website administrator does not create the advertisement or endorse its contents, they are unlikely to be found to have made a misleading or deceptive representation. This means that hosting advertisements is likely to remain a lucrative source of revenue for websites and online businesses.

For advertisers, the High Court decision confirms that they alone will be held responsible for misleading or deceptive representations in online advertisements. This highlights the need to carefully review advertising material to ensure it complies with the new misleading and deceptive conduct provisions in The Australian Consumer Law and other relevant legal requirements.

[1] Google Inc v Australian Competition and Consumer Commissioner [2013] HCA 1
[2] Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49
[3] Now section 251 of The Australian Consumer Law

John Petts, Partner

Cindy Tucker, Partner

Article by Chris Spain.

NewsFlash 07 February 2013
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