The Full Federal Court of Australia has allowed the ACCC’s appeal in Australian Competition and Consumer Commission v Google Inc[2012] FCAFC 49. The Full Court declared that Google, by publishing four advertisements on result pages of the Google Australia website, engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in breach of section 52 of the Trade Practices Act 1974 (now replaced by the Competition and Consumer Act 2010).

The appeal related to Google’s practice of selling sponsored links results for businesses and websites which were competitors to the businesses being searched for even though there was no association betwween the businesses.

The original decision was discussed here.

The Full Court also ordered Google to put in place a consumer law compliance programme and pay the ACCC’s costs of the appeal.

Google is likely to appeal to the High Court.

UPDATE 28 April 2012: Google has applied for special leave to appeal to the High Court.
UPDATE 22 June 2012: High Court grants Google special leave to appeal.
UPDATE 12 February 2013: High Court appeal allowed:Google not liable

The central issue for determination on appeal was whether the primary judge erred in finding that Google did not “make” the representations contained in the four advertisements that were the subject of the appeal.

The ACCC argued that, where a publisher communicates or “passes on” advertising material, for example, where a newspaper publishes advertisements produced by the advertiser, the publisher may be said to have made the representation concurrently with the advertiser unless the surrounding circumstances displace that conclusion. Alternatively, if the publisher does not merely “pass on” the advertisement, but engages in acts to prepare, create or approve the advertisement, then the publisher makes the relevant representations.

Google submitted that its position is analogous to that of the owner of a billboard or a telephone network in that advertisements carried on in such media will readily be understood as a statement by the advertiser.

The Full Court said:

Critical to this conclusion is the fact that the sponsored link is displayed on the screen in response to the user’s query which is made by the entry of selected key words. Thus, the user asks a question of Google and obtains Google’s response. Several features of the overall process indicate that Google engages in misleading conduct.

First, the response shows, in large blue font, as part of the sponsored link, the keyword entered by the user. The advertiser’s message in black font and the URL in green, appear immediately below the keyword and as part of the response. What the user is therefore told is that the advertiser’s message and the advertiser’s URL are an answer to the user’s query about the subject matter of the keyword which includes the identification of a competitor of the advertiser. The falsity of the conduct involved in the four responses in the present case is that the advertiser’s URL misrepresents a connection between the searched term identifying the competitor and the URL of the advertiser.

The conduct is Google’s because Google is responding to the query and providing the URL. It is not merely passing on the URL as a statement made by the advertiser for what the statement is worth. Rather, Google informs the user, by its response to the query, that the content of the sponsored link is responsive to the user’s query about the subject matter of the keyword.

The most obvious example of the falsity of the response and of the fact that it is Google’s conduct, is the Harvey World Travel sponsored link. The user enters that keyword because the user is seeking information about Harvey World Travel. Instead, the user is given the URL of one of Harvey World Travel’s competitors. In this example, the user is not told merely that the advertiser has provided Google with this URL. Rather, Google tells the user that the URL provided below is the contact address for information about Harvey World Travel. The whole purpose of the user’s inquiry, to which Google responds by providing organic links and sponsored links, is to answer the user’s query. The enquiry is made of Google and it is Google’s response which is misleading.

This conclusion is reinforced by a consideration of the nature of Google’s search engine, and the AdWords program. Google’s search engine is the information retrieval system which the user employs to navigate his or her way through the web using keywords that deliver links to other locations on the web. Google supplies its advertising customers with the ability to select keywords which are expected to be used by persons making enquiries through Google’s search engine. The ability of advertisers to select “broad match” keywords enables them to trigger sponsored links through Google’s search engine based on known associations which are determined by Google’s proprietary algorithms. Although the keywords are selected by the advertiser, perhaps with input from Google, what is critical to the process is the triggering of the link by Google using its algorithms. That is a further reason to conclude that it is Google’s conduct as a principal, not merely as a conduit, which is involved in each of the four instances that form the subject matter of this appeal.