Appeal Court finds Google in breach of Trade Practices Act

The Australian Competition and Consumer Commission (ACCC) have had a win in in The Full Federal Court of Australia which has upheld the ACCC’s appeal against Google for misleading and deceptive conduct relating to Google’s “sponsored links”.

Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49 (3 April 2012)

Federal Court Decision

In an action by the ACCC against Trading Post Pty Ltd and Google Inc., Nicholas J considered whether use by the Trading Post’s use of its competitor’s names “Kloster Ford” and “Charlestown Toyota” as keywords for “Sponsored Links” on the Google search engine constituted misleading and deceptive conduct under s.52 of the Trade Practices Act 1974. Whilst it was found that Trading Post’s conduct did breach s.52, it was found that there was no breach by Google.

Nicholas J found that the Sponsored Links, which were paid advertisements under Google’s AdWords program appearing above or to the right of the “organic” search results located by Google’s search algorithms, were sufficiently distinguished from the organic search results. He further found that whilst there was a representation made by Trading Post that the two business names were associated with Trading Post, the representation was not made by Google, which did no more than provide a conduit for the representations made by Trading Post. He found that Google has not “endorsed or adopted” the advertiser’s statements. Similarly, several other instances where competitors’ names were used as keywords by other companies were found not to be representations by Google. The ACCC appealed the decision to the Full Federal Court (Keane CJ, Jacobson J and Lander J).

The Appeal

In the appeal, the ACCC did not press the use of the Kloster Ford and Charlestown Toyota names, but instead concentrated its submissions in relation to four of the other names: “Harvey World Travel” used as a keyword by STA Travel,  “” used by CarSales, “Alpha Dog Training” used by The Dog Trainer Pty Ltd (Ausdog) and “Just 4x4s Magazine” used by Trading Post.


The Court looked at the way the Sponsored Links were presented on the Google search results page. It noted that in each case, the search term keyword appeared in blue, the advertiser’s message in black and the web address in green. Before a particular Sponsored Link was displayed, the entry of a search term into the Google search engine resulted in an “auction” in relation to which Sponsored Links to show, what order to show them in, and how much Google charges the advertiser if the link is clicked on by the person conducting the search. The auction was determined partly on the amount to be charged but also upon whether the keywords were chosen as “exact match”, “phrase match” or “broad match”. The Court also noted that clicking on a Sponsored Link took the user directly to the advertiser’s website.

On this basis the Court found that no user of Google’s search engine would regard a Sponsored Link presented by Google with a link to the sponsor’s website as a statement by the advertiser that Google is merely passing on. They stated: “What appears on Google’s webpage is Google’s response to the user’s query. That it happens to headline a keyword chosen by the advertiser does not make it any the less Google’s response. And even that occurs pursuant to the AdWords facility made available to the advertiser by Google.” Critical to the process of which Sponsored Links were displayed was the triggering of particular links by Google using algorithms applied to its AdWords program. This was a further reason that the Court found that Google’s conduct was as a principal, not merely as a conduit for the statements made.

The Court found that what a user was being told by Google in response to a search query was that there was a connection between the searched term identifying the competitor and the website of the advertiser. The highlighting of the keyword in large blue font as part of the Sponsored Link suggested that the following advertiser’s message and the link to the advertiser’s webpage are an answer to the user’s query. The conduct was held to be Google’s because Google was responding to the user’s query and providing the link to the advertiser’s website.

In accordance with the trial judge’s findings, it was noted that even if an ordinary and reasonable user may not have understood that the representations were made by Google, this was not solely determinative of the issue and would not exclude Google from the scope of s.52. It was also noted that Google could not avail itself of the “publisher’s defence” under s. 85(3), because Google had not fulfilled the onus of showing that it did not have any reason to suspect that the publications were likely to mislead or deceive. In particular, Harvey World Travel (also a client of Google’s AdWords services) was known to the Google representative creating the STA Travel AdGroup to be one of STA Travel’s competitors, and it was found that a reasonable person would have known that use of a well-known competitor’s name as a keyword triggering an advertisement for STA Travel could lead searchers to wrongly believe that the businesses were associated.

The Court concluded that the trial judge had been in error in failing to find that Google had engaged in misleading and deceptive conduct.

In accordance with the Australian Consumer Law, (which replaced the Trade Practices Act during the course of this case), the Court ordered that Google institute a compliance program in accordance with a proposal set out by the ACCC in a Schedule to the Notice of Appeal. This program requires Google to appoint a Compliance Officer; to conduct a risk assessment of current procedures to identify prospective risks of breaching the Australian Consumer Law; to issue a compliance policy statement; to establish a complaints handling system and training program; to conduct annual independent reviews of the compliance program and to issue reports on these reviews to Google and to the ACCC.

The term “Sponsored Links” was criticised in the original trial, as it was said to be unclear who the “sponsor” of the link was. Whether it was due to this criticism or not, it is noted that Google now uses the expression “Ads for ”. It will be interesting to see what changes are made to nomination of keywords in the Google AdWords program as a result of the appeal decision.