Australian Court Says Google Isn’t Liable for Advertiser’s Misleading Ad–ACCC v. Trading Post (Guest Blog Post)

By Guest Blogger Mark Bender, with some comments by Eric

Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd [2011] FCA 1086 (September 22, 2011, corrected October 10, 2011)

[Eric’s introduction: Mark Bender is a business law lecturer at Monash University in Australia and an expert in Australian online trademark law. When this opinion came out in September, I flagged it for possible blogging. However, I was put off by the opinion’s 357 paragraphs—not unusually long by foreign standards, but it proved too much for me to handle! Fortunately, Mark agreed to write this guest blog post about the opinion:]

History

The Australian Competition and Consumer Commission (‘ACCC’), comparable to the US Federal Trade Commission (FTC), commenced proceedings in the Federal Court of Australia against Trading Post Australia Pty Ltd (‘Trading Post’) and Google Inc., Google Ireland Limited and Google Australia Pty Ltd (collectively, ‘Google’) for breaches of the Trade Practices Act 1974 (Cth) (‘TPA’) in July 2007. As a result of legislative changes, the provisions of this statute are now found in the Competition and Consumer Act.

The ACCC alleged breaches of Section 52 of the TPA, which provides that ‘A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.’ The ACCC also alleged breaches of Section 53(d), which provides that ‘A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services; represent that the corporation has a sponsorship, approval or affiliation it does not have’.

Facts

Trading Post was formerly Australia’s leading classified periodical, and it may be familiar to some from references in the Australian legal film, The Castle. It published weekly and contained advertising by both private sellers and traders. As with other traditional print businesses, it transitioned to the online environment and is entirely web-based. Traditionally, the Trading Post had been a primary method for the sale and purchase of used motor vehicles.

Trading Post used Google’s AdWord service to display some advertisements on Google’s search result pages. An example of the advertisement is:

Kloster Ford

www.tradingpost.com.au New/Used Fords – Search 90,000 + auto ads online. Great finds daily!

Kloster Ford is a Ford motor vehicle dealer. It had no association with Trading Post and did not consent to Trading Post’s use of the Kloster Ford name.

The appearance of ‘Kloster Ford’ in the headline of the advertisement distinguishes this case from the scenario where the use of another’s name or trade mark is used merely as a keyword to trigger the display of an advertisement. The headline in the Kloster Ford advertisement was generated by Google’s keyword insertion tool, based on Trading Post specifying ‘Kloster Ford’ as a keyword.

The Case

The ACCC’s case was comprised of two parts.

Google’s Alleged Failure To Distinguish Adequately Between Organic Search Results and Paid Advertisements

The ACCC alleged that a number of factors contributed to their argument that Google engaged in misleading and deceptive conduct, included that Google failed adequately to distinguish between search results and advertisements and failed to identify advertisements as such, based on the allegedly similar appearance and nature of search results and advertisements.

The ACCC argued that this failure to distinguish was contributed to by:

* both advertisements and organic results being generated by the same search term and pertaining to the same general subject matter of the search term

* both advertisements and search results being listed below the heading and appearing together on the left side of the result page

The ACCC alleged the overall impressions created by these factors was that the contents of the search results page are generated by the Google Search Tool and displayed in order of relevance and are not advertisements.

The ACCC argued that Google’s shading and labeling of the sponsored links were ‘insufficient to counteract the overall impressions’. They further argued that the phrase ‘sponsored links’ is ‘itself ambiguous'; and ‘does not have, as its primary meaning, advertisement’.

In considering whether conduct is misleading and deceptive, the conduct as a whole is to be considered ‘in light of the relevant surrounding facts and circumstances’ (Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60).

The court observed that ‘there was no evidence called to show that any person had been mislead into thinking that the Kloster Ford advertisement or the Charlestown Toyota advertisement (or any of the other advertisements about which the ACCC complained) was not an advertisement. Nor was there any survey or other evidence based upon observation or experiment adduced by the ACCC to show that users of the Google search engine were likely to be mislead into thinking that sponsored links are not advertisements or that they are no different to organic search results’.

In considering all of the circumstances, it was held that reasonable internet users would not be misled or deceived as to the nature of the sponsored links. It was considered unlikely that the ‘sponsored links’ label was likely to go unnoticed, though the judge indicates that advertisement might be a clearer term than ‘sponsored link’. It was observed that there are not ‘likely to be any ordinary and reasonable people within the relevant class who believed that Google was advertisement free’.

The Use of Competitors’ Names in the Headlines

The court considered that the publication of the Kloster Ford advertisement could give rise to eight different possible representations:

A: by clicking on the headline of the Kloster Ford advertisement, a person would be taken to a website associated with Kloster Ford;

B: there was an association between Trading Post and Kloster Ford;

C: there was an affiliation between Trading Post and Kloster Ford;

D: Kloster Ford approved of the link between its name and the Trading Post Site;

E: Kloster Ford had paid for the link between its name and the Trading Post Site;

F: Kloster Ford was a sponsor of the Trading Post Site;

G: information regarding Kloster Ford could be found at the Trading Post Site; and

H: information regarding Kloster Ford car sales could be found at the Trading Post Site.

The court found that representations B, C, G and H had been conveyed by Trading Post and were likely to mislead or deceive ordinary and reasonable members of the relevant class. Google was held not have conveyed these representations.

The court held that Google was not liable for the use of the Kloster Ford name as it was

satisfied that the keyword “kloster ford” was not selected or recommended by Google. Of course, Google made available to Trading Post and other advertisers the technical facility that enabled keywords to be uploaded which, if made the subject of a search by a user of the Google search engine, might then generate top left or right side sponsored links. And Google also made available to Trading Post and other advertisers the technical facility which allowed for keyword insertion to occur. However, it was Trading Post, not Google, that choose to use these facilities to produce headlines containing the name Kloster Ford in response to search queries including those words.

It was also held that ‘Google merely communicated what Trading Post represented without adopting or endorsing any of it’ and that

the technology employed in on-line advertising may be quite different to that associated with the publication of advertisements in newspapers or magazines or the broadcasting of television or radio advertisements, it is nevertheless clear that the publisher or broadcaster of such advertisements always provides at least some of the technical facilities that permit the relevant advertisement to be seen or heard. It does not follow that these publishers or broadcasters have thereby endorsed or adopted any information conveyed by the advertisement or that they have done anything more than pass it on for what it is worth.

The court considered previous decisions where a range of intermediaries, including real estate agents (Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60), television broadcasters (Universal Telecasters (Qld) Ltd v Guthrie [1978] FCA 9) and newspapers (Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd [(1985) [1985] FCA 37), had not been liable for misleading and deceptive conduct for merely displaying advertising.

Outcome

Although the ruling was good news for Google, the news is mixed for advertisers. The court declared that using an unrelated businesses name in the headline of an advertisement can be misleading and deceptive and can represent an affiliation where none exists. I would have this said was fairly well-settled law.

Whilst there is some discussion of the unique nature of search, the issue of whether the use of another’s business name or trade mark as a keyword can amount to misleading and deceptive conduct was not definitively stated (this was not at issue in the case). Even so, it does appear that any such liability would not be Google’s. The court says that ‘Trading Post, not Google, that choose to use these facilities to produce headlines containing the name Kloster Ford in response to search queries including those words’ .

The court ordered Trading Post to pay $28,000 to the ACCC ‘by way of agreed contribution to the applicant’s costs’. Obviously, $28,000 is a minuscule fraction of the cost of the proceeding. Before the action, Trading Post was acquired by our largest telco (their first-half net profit was just under $1.2 billion), so the payment amount is trivial to them.

Meanwhile, the court ordered the ACCC to pay Google’s costs, making this a money-losing lawsuit for the Australian public.

Appeal

The ACCC have appealed the decision (see their press release), insofar as it related to Google’s liability, and are expected to argue that ‘Google would have been unable to show that it had no reason to suspect that publication of these advertisements was a breach of the Act’.

The ACCC ‘considers that the Full Court may find that Google made the representations in question and find Google directly responsible for the publication.’

In their appeal, the ACCC also put the view that Google’s role, including the keyword insertion system, were fundamental to the representations being made.

The ACCC are also questioning the extent to which the previous Federal Court decisions considered by Justice Nicholas, which related to publishers of advertisements in traditional media (real estate agents, television broadcasters and newspapers), can be applied to search engine advertising.

___________

Eric’s Comments

I’m struck by how much the court’s analysis depends on empirical questions about consumer perceptions. In the Internet context, consumer perceptions, of course, are constantly changing. As time passes, consumers learn how to navigate and parse new user interfaces, plus Google keeps changing its interfaces (such as changing the ad labeling from “sponsored links” to “ad”). Trying to track these changes over the four years of litigation seems futile!

This case is a win for Google, but perhaps only superficially. Obviously, the court dismissed Google’s liability, and surely Google is pleased about that. However, like the Google ECJ opinion, the opinion throws Google’s advertisers under the bus—and what’s bad for Google’s advertisers could be bad for Google’s revenues. To the extent advertisers feel liability exposure from running ads on Google, they may reduce their advertising. Fortunately, it seems like the opinion could be read to apply only when an advertiser uses a third party trademark as the ad headline, which I suspect is a fairly rare occurrence.

As for Google’s culpability when it suggests ad copy for advertisers to include in their ads, this case reminded me a little of the Roommates.com case and its predecessor, the Carafano case. In all of these cases, the website gave prompts to the “speaker” about what to say, but the speaker ultimately adopted the words as its own. I expect situations like this will continue to give courts some trouble, but it sounds like the court made a sensible ruling in this case.

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