06 February 2013

Google Inc v Australian Competition and Consumer Commission

The decision in Google Inc v Australian Competition and Consumer Commission [2013] HCA 1 (6 February 2013) was handed down today by the High Court of Australia.

This is the third and final round in the legal fight between Google and the Australian Competition and Consumer Commission over "sponsored links", which were later to become known as "advertisements". The Commission claimed that the sponsored links (that is, paid advertisements which are displayed based on keywords used in a search term) were misleading and deceptive within the meaning of S.52 of the Trade Practices Act 1974.

At first instance the Commission failed, and upon appeal to the Full Court of the Federal Court it was successful. Google then appealed to the High Court of Australia, which found in favour of Google.

Section 52 of the Trade Practices Act 1974 is perhaps the most famous part of that legislation, and is now s.18 of the Australian Consumer Law. It requires that a person must not engage in conduct that is misleading or deceptive, or is likely to mislead or deceive. It does not require intentional conduct — a person can contravene the section without intending to do so.

The Commission had claimed that Google's AdWords program, which displayed sponsored links in the search results, had deceived or was likely to mislead or deceive users of Google's search. The problem was that if you searched for travel agent A, the search results would include a sponsored result for travel agent B. This was because travel agent B had used the name of travel agent A in its keywords for its AdWords campaign. So, if you search for Harvey World Travel you would also see a sponsored result for its competitor, STA Travel.

The commission said this was misleading or deceptive because it implied that there was a commercial association between the two travel agents where one did not exist. Car advertisements and dog training were also used as examples of this conduct.

Each of the decisions is worth reading (by lawyers) for useful summaries of the relevant law.

The first instance decision

His Honour Justice Nicholas of the Federal Court found that the advertisements contained representations which were misleading or deceptive or likely to mislead or deceive. Ordinary users of the search engine would have understood that these sponsored links were advertisements as opposed to ordinary search results, but he found that the relevant class of consumers could have been deceived into thinking there was an association between the advertiser and the competitor search term that the user actually entered.

However, he found that Google had not made the misrepresentations — it was a "conduit" which passed on the advertisements of others without endorsement or approval. Therefore Google was not liable.

The Full Court of the Federal Court

The Commission appealed to the Full Court. The Full Court found that Google was liable.

It found that Google had made the misrepresentations, as it had applied its own labour in accepting the users search terms and returning the result set. So, while it was an automatic process, Google had engaged in relevant conduct. "The enquiry is made of Google and it is Google's response which is misleading."

The Full Court also rejected the claim by Google that it had a defence under S.85 (3) which provides that a person in the business of publishing advertisements will not be liable if it did not know and had no reason to suspect that the advertisements would be a contravention of the Act.

The High Court of Australia

The High Court looked closely at the way Google personnel assisted advisers in selecting keywords. If you use AdWords you will be contacted by a Google representative who will try to help you choose appropriate keywords that may work best for you. The Court hinted that if Google had actually chosen the keywords it may have been liable –

"(the evidence) never rose so high as to prove that Google personnel, as distinct from the advertisers, had chosen the relevant keywords, or otherwise created, endorsed or adopted the sponsored links."

The Court also noted that Google has a system to stop certain keywords when Google is on notice of possible misrepresentations, but ascertaining this in every case would be very difficult without any notification.

The Court therefore "considered… that Google did not itself engage in misleading or deceptive conduct, or endorse or adopt the representations which are displayed on behalf of advertisers."

The Court did not need to make a finding in relation to the S.85 (3) defence, but it took the opportunity to clarify the scope of the defence. In particular it noted that a publisher who actually has endorsed or adopted a representation of an advertiser,  but without appreciating the capacity of the representation to mislead or deceive, may still be able to use the defence.

Justice Hayne and Justice Hayden delivered separate judgements agreeing with the joint judgement of Justices French, Crennan and Kiefel.

Justice Hayne found that Google should succeed in the appeal on the very simple basis that any reasonable user would have "understood that these sponsored links were advertisements made and paid for by the advertisers and that the representations made in them were not endorsed or adopted by Google." By taking this approach he was agreeing with the first instance decision of Nicolas J. There was simply no conduct by Google.

Justice Hayden considered that the Full Court had made an error of law and an error of fact. The law provides that Google will not necessarily have contravened S.52 if  it does anything more than "repeat or pass on" material. It was already clear that merely repeating or passing on material was not a contravention, but the Full Court erred in saying that anything more would be a contravention.

The error of fact was that Google did not "create 'the message' sent by means of that technology." Google merely received the advertisements created by advertisers, and the keywords were chosen by the advertisers. His Honour rejected the Commission's submission that "dynamic" insertion of keywords was an active participation in the relevant conduct.

Time has not committed me to fully digest the ramifications of the decision, but it is a useful case in interpreting what is now section 18 of the Australian Consumer Law. Although the High Court tends not to take on  particularly decided cases, it is probably restricted to the particular facts of how Google operates its AdWords program. It is the user that has complete control over the keywords, and Google has a system to prevent abuse of keywords where it is notified. Google did not play a part in creation of the advertising, and therefore there was no "conduct" by Google.

However, this still leaves open claims against the advertisers who use the keywords of their competitors to create an impression of false associations between the advertiser and its competitors. I wouldn't be surprised if we see claims by competitors for damages relying on S.18, provided that they are able to quantify the damage.