• Google Adwords Appeal
  • April 10, 2012
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • Introduction
    On Tuesday 3 April 2012 the Full Court of the Federal Court of Australia - consisting of Chief Justice Keane, Justice Jacobson, and Justice Lander - handed down a joint decision overturning the earlier decision of Justice Nicholas on 22 September 2011.

    The Full Court allowed an appeal by the Australian Competition and Consumer Commission (“ACCC”) against Google, finding Google liable for engaging in misleading and deceptive conduct under Section 52 of the Trade Practices Act 1974 (Cth); legislation since replaced in form but not in substance by the new Australian Consumer Law within the remodelled Competition and Consumer Act 2010 (Cth).

    At trial, Justice Nicholas had ruled that some aspects of Google's Sponsored Links regime contained misleading or deceptive content, but did not think that Google had ‘made’ that content. The Full Court, upon considering how Google’s AdWords and Sponsored Links operated, disagreed. Google had indeed ‘made’ many of the relevant misleading representations and were not a ‘mere conduit’ or ‘mere carrier’.


    What you need to know
    1. When deciding if content providers are ‘mere carriers’ or if they are ‘making’ representations which may be misleading, the Courts will examine the circumstances surrounding the provision of that information.
    2. There is cause for caution if content providers are manipulating or targeting information based on user-input. Some content providers could be found to be ‘making’ the representations within advertisements if their systems are helping to produce said advertisements.
    3. It will be difficult to establish the defence under the Australian Consumer Law that a content provider, such as Google, received the advertisement in the ordinary course of business and that ‘it did not know and had no reason to suspect’ that the ‘publication of the advertisement would constitute misleading or deceptive conduct’ when content providers have advertising expertise and carefully designed advertising systems in place.

    Despite the Full Court’s unanimous joint decision, Google is said to be considering its options and a High Court challenge may yet be on the horizon.


    The Facts
    As canvassed in our update of 29 September 2011, the original litigation had concerned the usage of the Google AdWords system. In the Sponsored Links and AdWords regime, advertisers pay Google to display Sponsored Links triggered by certain search queries. Those Sponsored Links appear separately but in conjunction with the so-called ‘organic’ unsponsored search results; typically appearing above or to the right of the organic search results. Each Sponsored Link contains a headline which is a link that will ordinarily take a user to a website of the advertiser.

    Sometimes, the headline consists of keywords selected by the advertiser which may be a business or product name of the advertiser’s competitor. A number of specific examples were alleged at trial and on Appeal. For instance, a headline might read ‘Business X’ but the link below would actually display ‘Business Y’. Various representations which were established in that regime were ruled misleading.

    However, for Google, the crux of the decision fell upon whether Google had ‘made’ the representations contained within the Sponsored Links. At trial Justice Nicholas did not think so. The Full Court, on Appeal, disagreed.

    On appeal, the ACCC alleged that Google, in publishing the advertisements, was making the representations concurrently with the advertisers. They also argued that Google was not merely ‘passing on’ the advertisement but were engaging in acts to ‘prepare, create, or approve the advertisement’; also evincing that they were ‘making’ the representations. Their Honours saw three themes in the ACCC’s argument:

    1. That Google ‘tightly’ controls the content of results generated by a search as well as the way the results are presented;
    2. That Google’s AdWords program permits advertisers to target their advertisements; and,
    3. That Google’s internal processes serve to closely supervise the available keywords for an advertisement. 

    Google argued their position was similar to that of a billboard owner - where consumers readily understand that the statement is being made by the advertiser, and not by the publisher. Google also reiterated that it did not believe the content of some of the advertisements was misleading or deceptive. It also believed that it could rely on the so called ‘Publishers Defence’ of Section 85(3).


    The Decision
    The key question was whether Google had ‘engaged’ in conduct that was likely to mislead or deceive. Had Google ‘made’ the representations or had they acted as a ‘mere carrier’? To answer that, the Full Court examined the circumstances surrounding the operation of Sponsored Links.

    Upon consideration of how the system worked, the Full Court did not believe Google could frame itself as a mere carrier or the advertisements. When users search the Google system, they make an enquiry of Google and it is Google that sends the response. The Sponsored Links displayed always corresponded with whatever search the user typed at the relevant time. In the words of the Full Court, ‘the conduct is Google’s because Google is responding to the query’ and is ‘providing’ the link.

    Their Honours also thought the complex systems Google had developed to support the AdWords system was indicative of them ‘making’ the representations. The process of selecting Sponsored Links was not a random event. Advertisers may supply the AdWords, but it was the Google algorithms that triggered the display of the relevant links.

    As such, the Full Court reversed Justice Nicholas’ original finding that Google had not ‘made’ the misleading representations. They had indeed assisted in producing the representations and some of those representations were misleading or deceptive.

    The Full Court gave very limited credence to Google’s argument that the content was not misleading for ordinary consumers, and relied on Justice Nicholas’ findings in that regard.

    For some of the content, Google argued that the misleading decoy links were names that were not well known, and therefore unlikely to be misleading. However, the Full Court pointed out that the mere fact that advertisers had paid to include those business names within the list of words that would activate their advertisements was evidence enough.

    The Full Court also agreed with Justice Nicholas in that Google could not discharge the onus to prove the Publishers Defence; namely, that it did not know and had no reason to suspect that the publication of the advertisement would constitute misleading or deceptive conduct. The Court thought that ‘no reasonable person’ in Google’s position could have failed to suspect that providing a competitor’s name as a trigger was misleading or likely to mislead.

    At trial, Justice Nicholas’ had briefly considered the defence unproved, but because he did not believe Google had ‘made’ the representations its operation was not necessary. But now, unlike in Justice Nicholas’ trial judgment, Google was found to have ‘made’ the representations - and without establishing this defence - was then liable under the Trade Practices Act.