Publications / Technology, Media and Telecommunications

30 Sep 11
Google not responsible for AdWord infringement

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But Trading Post responsible for misleading representations in sponsored links


  • The Federal Court decision confirmed that Google’s practice of displaying organic search results along with ‘sponsored links’ does not mislead or deceive consumers because it is sufficiently clear that the two types of results are of a different nature. There is no implied representation that all results are ‘organic’ search results.
  • However, the purchaser of certain keyword advertising using the name and trade marks of its competitors, was held to have engaged in misleading or deceptive conduct and to have falsely represented an affiliation which did not exist.
  • Be careful in selecting search terms, particularly involving the names and trade marks of competitors, when buying online advertising.
  • You should be diligent in registering your trade mark rights. You do have redress if your registered rights are used by competitors in misleading or deceptive ways.

The case was brought by the Australian Competition and Consumer Commission (ACCC) in relation to conduct that occurred in 2005, and centred around Google’s AdWords program and the ‘sponsored link’ search results that appear on Google’s search results page.

In particular, the ACCC alleged that the Trading Post (a Telstra subsidiary) had misled consumers in breach of the Competition and Consumer Act 2010 (Cth) (CCA) (or the Trade Practices Act (TPA) as it was then called) by displaying sponsored link search results for the Trading Post when users had searched for the unrelated businesses of ‘Kloster Ford’ and ‘Charlestown Toyota’. Those search results were alleged to have misled consumers that they would find relevant information about Kloster Ford and Charlestown Toyota at the Trading Post website. It was also alleged that the search results falsely asserted that there was an affiliation between Trading Post and Kloster Ford and Charlestown Toyota.

The ACCC also alleged that Google had engaged in misleading or deceptive conduct in breach of the CCA by displaying search results that had been paid for by advertisers on the same page as its ‘organic’ search results. The ACCC claimed that Google’s practice of highlighting sponsored links in light yellow, and in designating them as ‘sponsored links’ rather than simply calling them ‘advertisements’, would be likely to mislead or deceive a class of users of the Google search engine.

Further, the ACCC claimed that Google had also made the misleading representations conveyed by the Trading Post search results, as well as various other search results unrelated to the Trading Post, in which the purchase of AdWords meant that the sponsored links related to a competitor of the product or service actually searched for. These included, for instance, the purchase of:

  • various ‘Honda’ AdWords by online car site
  • various ‘Harvey World Travel’ AdWords by STA Travel, and
  • various ‘Playstation 2’ AdWords by competitor Microsoft xbox360.

Prior to the hearing, the ACCC and the Trading Post settled the case against the Trading Post. His Honour needed to make a decision about whether the Trading Post had contravened the CCA to decide the case against Google, but having found Trading Post’s conduct was misleading, made no orders as to penalties against Trading Post as they were no longer the focus of the proceedings.

Google’s AdWords program

Google’s AdWords program is the means by which Google’s ‘sponsored links’ are generated, and by which Google generates much of its advertising revenue. It allows advertisers to nominate keywords that can be used to generate sponsored links. Google also employs staff to manage the accounts of large AdWords customers, and to analyse and recommend effective AdWords to those customers.

When those keywords (or associated phrases) are entered into Google’s search engine, an auction occurs to determine which sponsored links show, in which order they show, and how much the advertisers are charged.

The AdWords program is subject to terms of use, which include a requirement that AdWords participants not use any trade mark or similar get up of any organisation in a way that is likely or intended to cause confusion about the owner or authorised user of that mark or get up.

Were the sponsored links misleading

This decision provides the first comprehensive judicial analysis of the impression created by online search results and sponsored links.

It is settled law in Australia that the question of whether conduct is misleading or deceptive or likely to mislead or deceive is a question of fact, to be determined in the context of relevant surrounding facts and circumstances. In this case, Justice Nicholas said that that principle required Google’s search results to be read as a whole. That is, the headline link was not the only relevant factor. It was also relevant that the search result displayed the URL below the headline.

On this basis, His Honour held that simply having the name ‘Kloster Ford’ or ‘Charlestown Toyota’ appear in the result headline was not sufficient to convey to an ordinary and reasonable Google user that they would be taken to a website operated by, or on behalf of or with the approval of Kloster Ford or Charlestown Toyota. This is because the Trading Post URL was clearly visible in the search result.

However, His Honour considered that the ordinary and reasonable user would still expect that there was an association or affiliation between the two parties, and that information regarding vehicles sold by Kloster Ford could be found at the Trading Post website. These representations were false. For evidentiary reasons, it was not established that these representations were false in respect of Charlestown Toyota.

Given that the Trading Post had paid for the AdWords and had prepared the advertisements, His Honour found that the misleading representations had been made by Trading Post.

Was Google responsible for the representations made by the search results

Having found that the Trading Post had made misleading or deceptive representations through its ‘Kloster Ford’ sponsored links, His Honour went on to consider whether Google was also responsible for those misleading representations. This centred around an analysis of who was the ‘publisher’ of the relevant representations.

In his analysis, Justice Nicholas noted that the term ‘Kloster Ford’ and the other terms purchased were not selected or recommended by Google. Rather, Google merely made available the technical facility for the Trading Post and other businesses to purchase those terms which resulted in them appearing as sponsored links when a search was performed on Google. Importantly, the technical facility did not necessarily result in Google endorsing or approving the content of the associated advertisements, Google only communicated the advertisement.

For example, His Honour concluded that an ordinary and reasonable Google user would hardly consider that the representation ‘save $1000s on your car with us’ was made by Google or indeed had any endorsement by Google.

In most cases, it was the Trading Post and the other businesses, not Google, that selected the terms so they appeared as sponsored links on Google resulting in the misleading representations. In some cases, Google’s ‘maximisers’ (who worked in the AdWords department and recommended search terms to customers) were more involved in the selection of AdWords. This did not mean that Google made the ultimate representations in the resulting advertisements, however, it did affect the analysis of Google’s defence under section 85(3) of the TPA (now section 209 of the Australian Consumer Law).

His Honour extended this finding to all search results beyond just those involving Trading Post. That is, Google was held not to be responsible for any false or misleading representations in the sponsored links results.

Advertiser’s defence

Although not strictly necessary (because Google was found not to have made the false and misleading representations in the relevant advertisements), His Honour went on to consider whether Google could rely on the advertisers defence under section 85(3) of the TPA (now section 209 of the Australian Consumer Law). That defence provides that a party that receives advertisements for publication in the ordinary course of business and did not know and had no reason to suspect that their publication would contravene the TPA, would not be liable for any misrepresentation in those advertisements.

In relation to the Kloster Ford and Charlestown Toyota advertisements, the Court was satisfied that Google could rely on the defence. However, in his analysis of the other advertisements, His Honour found this defence would not always have been available to Google.

For instance, His Honour found that Google was heavily involved in the account management of STA Travel’s AdWords account. STA Travel purchased AdWords including the name of its major competitor ‘Harvey World Travel’. His Honour found that a reasonable person would have been aware that the use of their major competitor’s trade mark would be likely to mislead consumers as to an association between the two businesses. Accordingly, the defence would not have been available in that case.

Similarly, the purchase by of the AdWord ‘Honda’ was likely to mislead consumers as to an association between the two organisations, and again, the defence would not have been available to Google.

Is Google’s search results page misleading

The ACCC also alleged that Google’s results page is misleading because it fails to sufficiently distinguish between organic search results and sponsored links. Once again, His Honour focused on the overall impression of the Google results page.

This page typically contains a small number of ‘sponsored links’ at the top left of the page, and a separate bank of sponsored links on the right hand side. His Honour considered that the combination of the yellow highlighting of the sponsored links, as well as the inclusion of the words ‘sponsored links’, were sufficient to distinguish the paid advertisements from organic search results. It was not necessary to use the word ‘advertisement’ as such. Accordingly, Google had not engaged in misleading or deceptive conduct in relation to the display of search results.

Lessons learnt

Keywords, AdWords and search engine optimisation are key marketing tools used by modern businesses. However, their use raises potentially significant legal issues for all parties involved.

For search providers, while it is likely that the advertisers, not the search providers, will be responsible for the representations made in paid for search results, there are examples where this may not be the case. The ‘advertisers defence’ under the TPA has limits, and will be less likely to apply in cases where prominent brand names are chosen by competitors to direct traffic to their own website.

Brand owners need to be diligent in protecting their brand and cannot rely on third party search engines to do so. Given the importance of online searching now, this is another reason to consider registering your business name, brand names and product names as trade marks to improve your chances of protection online.

Google does have processes to assist brand owners to prevent the misuse of their trade marks and brands as sponsored links, including a formal complaint process and a formal AdWords policy which prohibits the purchase of third party trade marks as AdWords. Ultimately, Google is willing to prevent businesses from purchasing the trade marks of others as keywords or AdWords on Google in certain circumstances, but the rules vary for different regions.

On the other hand, advertisers must also take care when purchasing keywords or AdWords so they do not infringe any third party rights, or falsely represent they are affiliated with other brand owners when this is not the case. In particular, using the domain names of competitors in the search result appears more likely to be misleading or deceptive, because users clicking on a hyperlink that contains a competitor’s website are more likely to think that they are being directed to that URL.

If you are concerned that your trade mark, brand or product is appearing as a sponsored link on Google, seek advice early as there are a number of steps that can be taken to protect your brand. Conversely, if you want assistance in choosing AdWords or with your online advertising strategy, we can assist in ensuring it is done in a way which maximises your commercial exposure and minimises your legal risk.

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



Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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