Google found liable for misleading or deceptive conduct of third party advertisers in court decision

Information is passed between people and businesses all the time, so often in fact, that we do not always get the chance to verify its truth before passing it on. However, if that information is false, or not entirely true, then the person who passes it on to another may be liable for misleading or deceptive conduct under the Competition and Consumer Act 2010 (Cth).

Australian law relating to misleading or deceptive conduct distinguishes between two different methods of communicating information. Firstly, an entity that merely passes on information, such as a courier delivering a letter, will not be liable if that information is subsequently found to be misleading or deceptive. However, an entity that somehow adopts that information, such as by including it in a document on its own letterhead, or making an express statement that it is true, may be liable for misleading or deceptive conduct if that information is actually misleading or deceptive.

The application of this principle was clearly illustrated in the recent decision of the Full Court of the Federal Court of Australia in Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49. In its decision, the Full Court found Google liable for misleading or deceptive conduct because of the content of third party advertisements published on its website.

Factual background

Google allowed businesses to place advertisements on its website, in the form of links to the advertisers’ website displayed on its webpage (Sponsored Links). When submitting an advertisement on Google, an advertiser provided its form of advertisement, and specified a number of key words relating to its business (Key Words). Provided that they passed an automated review process, Google would display the advertisement in the form of a Sponsored Link.

When a user entered a search query, Google’s search engine returned two distinct categories of results. Firstly, it showed “organic search results”, matching webpages directly to the search query and displayed them in order of relevance. Secondly, as a result of the search query being matched to Key Words, it showed Sponsored Links. The text of both organic search results and Sponsored Links were physically separated on the user’s screen, but displayed in the same colour scheme, with headlines in blue, URLs in green, and descriptions in black.

The Sponsored Links displayed were sorted through Google’s “AdWords” program. This program was responsible for determining which Sponsored Links were displayed in response to the search query, and the order in which they appeared.

Further issues arose for Google when its AdWords program caused the display of particular Sponsored Links that were potentially misleading. For example, a Key Word submitted in relation to a Sponsored Link for the Trading Post, an online classifieds website, was “Kloster Ford”, and the link would be displayed using “Kloster Ford” as its headline. Kloster Ford is a car dealership in Newcastle, New South Wales, and is not commercially linked with the Trading Post. The result of this system is that Google’s users could search for the term “Kloster Ford”, click on what appears to be that dealership’s website, and instead find themselves on the Trading Post.

At trial

The Australian Competition and Consumer Commission (ACCC) commenced proceedings in the Federal Court of Australia against both Trading Post Australia Pty Ltd (which operates and maintains the Trading Post website in Australia) and Google1 for misleading or deceptive conduct pursuant to section 52 of the Trade Practices Act 1974 (Cth).2

The ACCC alleged that, in using the name “Kloster Ford” in the headline of a Sponsored Link, Trading Post Australia Pty Ltd was liable for misleading or deceptive conduct. His Honour agreed, and found that the headline “Kloster Ford” would mislead Google users into believing that, amongst other things, there was an association between Trading Post and Kloster Ford, and that information about Kloster Ford and the vehicles it offered for sale could therefore be found on the Trading Post website.

In one claim against Google, the ACCC alleged that it had engaged in misleading or deceptive conduct by publishing an advertiser’s Sponsored Link in response to a search query containing terms directly referring to a competitor of that advertiser. The examples cited by the ACCC included, but were not limited to, the Trading Post/Kloster Ford Sponsored Link. His Honour dismissed this claim on the basis that Google users would be able to discern the identity of the true advertiser of a Sponsored Link through the displayed URL, and that Google did not adopt the contents of these advertisements.

On appeal

The ACCC appealed the primary judge’s findings in relation to this claim against Google (but not any other claim) to the Full Court of the Federal Court of Australia. In doing so, the ACCC argued that where a publisher “passes on” advertising material, it will concurrently make the same representations as the advertiser, and is therefore liable if those representations are misleading or deceptive. The ACCC also argued that, if Google prepared, created or approved the advertisements, then as the publisher, it would also have made the relevant representations.

Google argued that the Sponsored Links amounted to nothing more than a mere communication. It submitted that the ordinary and reasonable user would recognise the Sponsored Links were advertisements, the content of which was attributable to the advertisers. The Full Court rejected this argument, and held that simply because a statement is clearly an advertisement, this is “not a sufficient basis” on which to conclude that the statement was not made by an intermediary party.3

The Full Court went on to find that the Sponsored Links were “Google’s response to the user’s query”,4 and that even though the headline was chosen by the advertiser, this does not change the fact that it was Google’s response, as “even that occurs pursuant to the AdWords facility made available to the advertiser by Google”.5 Accordingly, the Full Court held that, by returning misleading Sponsored Links in response to a search query, Google was adopting the content of those links, and was liable for misleading or deceptive conduct within the meaning of section 52 of the Trade Practices Act.

Lavan Legal comment

The Full Court’s decision clearly demonstrates that Australian courts are willing and able to find parties liable for misleading or deceptive conduct in circumstances where that entity (at least at face value) merely communicated representations made by a third party. Accordingly, in the course of any business dealings, you should not relay such information to others without first ensuring that it is not false or otherwise misleading. If you are unable to check the accuracy of this information, then you should tell the person to whom you are giving it:

  • where you obtained the information;

  • that you are unable to confirm its accuracy; and

  • that you do not endorse the information as being true and correct.

If you do not expressly clarify that you are merely passing on information relied upon by another person, then there is a risk that, like Google, you could be liable for misleading or deceptive conduct as a result of that person’s misrepresentation.

1 See Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd [2011] FCA 1086.

2 As of 1 January 2011, misleading and deceptive conduct is now prohibited by section 18 of Schedule 2 to the Australian Competition and Consumer Act 2010 (Cth).

3 ACCC v Google [2012] FCAFC 49, at [96].

4 Ibid, at [87].

5 Ibid, at [87].

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.