Australian Competition and Consumer Commission v Google Inc

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FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49

Citation: Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49
Appeal from: Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd [2011] FCA 1086
Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION  v GOOGLE INC
File number: NSD 1759 of 2011
Judges: KEANE CJ, JACOBSON & LANDER JJ
Date of judgment: 3 April 2012
Catchwords:

TRADE PRACTICES – misleading and deceptive conduct – on-line advertising – where advertisers sought to promote their goods or services by means of sponsored links on search results pages – significance of “keyword insertion” when used to generate headline which replicated terms of search query – where headline of sponsored link replicated third party’s business name, trade mark or website address – whether advertiser made representations of association or affiliation – whether advertiser represented that information regarding a competitor could be found by selecting the advertiser’s web address

TRADE PRACTICES – misleading and deceptive conduct – on-line advertising – where advertisers sought to promote their goods or services by means of sponsored links on search results pages – where sponsored links conveyed misleading and deceptive representations – whether search engine provider had a defence under s 85(3) of the Trade Practices Act 1974 (Cth)

Legislation: Competition and Consumer Act 2010 (Cth)
Federal Court of Australia Act 1976 (Cth)
Trade Practices Act 1974 (Cth) ss 52 and 85(3)
Cases cited:

ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 applied
Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd [2011] FCA 1086 referred to
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 distinguished
OBG Ltd v Allan (2008) 1 AC 1 cited
Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326 cited
Universal Telecasters (Qld) v Guthrie (1978) 18 ALR 531 approved
Yorke v Lucas (1985) 158 CLR 661 explained


Date of hearing: 27-28 February 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 117
Counsel for the Appellant: S. T. White SC with K. Morgan
Counsel for the Respondent: A. J. Bannon SC with C. Dimitriadis
Solicitor for the Appellant: Corrs Chambers Westgarth
Solicitor for the Respondent: Gilbert + Tobin Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1759 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Appellant
AND:

GOOGLE INC
Respondent

JUDGES:

KEANE CJ, JACOBSON & LANDER JJ

DATE OF ORDER:

3 APRIL 2012

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The appeal be allowed;

2.Order 3 made by the primary judge on 22 September 2011 be set aside.  In lieu thereof, the Court declare in accordance with paras 2(i) to (iv) of the Notice of Appeal;

i.that Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website on 29 May 2007, 18 July 2007, 24 October 2007 and 17 April 2008, results…

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Details
Case
[2012] FCAFC 49
Decision Date

CaseChat Overview and Summary

This case arose between the Australian Competition and Consumer Commission (ACCC) and Google Inc, focusing on whether Google engaged in misleading and deceptive conduct by displaying certain sponsored links on its search results pages. The sponsored links in question had headlines that replicated terms of search queries, such as business names, trademarks, or website addresses, which led to confusion among users about the association or affiliation between the advertisers and the terms used in the headlines. The ACCC argued that Google’s conduct contravened section 52 of the Trade Practices Act 1974 (Cth). Google, on the other hand, claimed that it was merely a publisher of the advertisements and relied on the defence provided by section 85(3) of the Act.

The primary issue before the court was whether Google engaged in misleading and deceptive conduct by publishing sponsored links that contained representations of association or affiliation between businesses that were factually incorrect. Another critical issue was whether Google could rely on the defence under section 85(3) of the Act, which permits a defence if the defendant establishes that they received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that its publication would amount to a contravention of the Act. The court had to determine if Google was merely a passive publisher or actively engaged in misleading conduct by allowing the sponsored links to be displayed.

The court held that Google did engage in misleading and deceptive conduct by publishing the sponsored links. It found that the headlines of the sponsored links, which replicated third-party business names or website addresses, conveyed misleading representations that suggested an association or affiliation between the advertisers and the terms used in the headlines. The court rejected Google's reliance on the defence under section 85(3) of the Act, holding that Google failed to establish that it did not know and had no reason to suspect that the publication of the advertisements would contravene the Act. The court also noted that Google did not need to implement a system of controls to prevent the publication of misleading advertisements to avail itself of the defence. Consequently, the court allowed the appeal and set aside the primary judge's orders, declaring that Google's conduct contravened section 52 of the Trade Practices Act. Additionally, the court ordered Google to establish and implement a compliance program and to pay the ACCC's costs of the trial and appeal.

Orders

Orders of the court

1. The appeal be allowed;

2. Order 3 made by the primary judge on 22 September 2011 be set aside. In lieu thereof, the Court declare in accordance with paras 2(i) to (iv) of the Notice of Appeal;

i. that Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website on 29 May 2007, 18 July 2007, 24 October 2007 and 17 April 2008, results which were advertisements for STA Travel’s business and website with the headline including “Harvey World Travel” or “Harvey World”, in trade or commerce represented, contrary to the fact, that:

a. there was an association between STA Travel and Harvey World Travel businesses;

b. there was an affiliation between STA Travel and Harvey World Travel businesses;

c. information regarding the Harvey World Travel businesses could be found at STA Travel’s website;

d. information regarding the travel services provided by the businesses associated with the name “Harvey World Travel” could be found at STA Travel’s website;

and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA;

ii. that Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website between March 2006 and July 2007, results which were advertisements for CarSales’ business and website with the headline including “Honda.com.au”, in trade or commerce, represented, contrary to the fact, that by clicking on the headline to the advertisement users of the website would be taken to the Honda Australia website and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA;

iii. that Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website on 27 March 2008, results which were advertisements for The Dog Trainer Pty Limited (Ausdog’s) business and website with the headline being “Apha Dog Training” (the Alpha Dog Training Advertisement), in trade or commerce represented, contrary to the fact, that:

a. there was an association between Ausdog and Alpha Dog Training’s business;

b. by clicking on the Alpha Dog Training Advertisement users of the website would be taken to a website associated with the business carried on under the name Alpha Dog Training or a website at which they could find information concerning that business;

and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA;

iv. that Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website on 29 May 2007, results which were advertisements for The Trading Post’s business and website with the headline being “Just 4x4s Magazine”, in trade or commerce represented, contrary to the fact, that:

a. there was a commercial association between Trading Post and Just 4x4s Magazine;

b. that information regarding Just 4x4s Magazine could be found at the Trading Post website;

and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA;

3. Pursuant to s 246(2)(b)(i) of the Australian Consumer Law, Google must establish and implement a compliance program as provided for in Schedule 1 of the Notice of Appeal which is annexure A to reasons;

4. Order 5 made by the primary judge on 22 September 2011 be set aside (in part). In lieu thereof Google pay the ACCC’s costs of the trial in relation to the Harvey World Travel, Honda.com.au, Alpha Dog Training and Just 4x4s Magazine advertisements;

5. Google pay the ACCC’s costs of the appeal to be taxed if not earlier agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

A defence referred to as “the publisher’s defence” was provided by s 85(3) of the Act. It stated relevantly: In a proceeding in relation to a contravention of a provision of Part V or VC committed by the publication of an advertisement, it is a defence if the defendant establishes that he or she is a person whose business it is to publish or arrange for the publication of advertisements and that he or she received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that its publication would amount to a contravention of a provision of that Part. FACTUAL BACKGROUNDThe sponsored links The Google search engine enables users to search on-line for information. Upon the users entering a search term, Google’s search engine returns a list of matching webpages ranked in order of relevance. The results of this process are called organic search results. A complex algorithm has been developed by Google to cause the results to be displayed in the order of relevance. Each of the four sponsored links in question appeared above the organic search results, or to the right of them in a yellow shaded box, although at the time of the conduct in question, the colour was blue. The shaded boxes are marked “sponsored links”. They are therefore distinguished visually from the organic links. The boxes in which the sponsored links appear are, in some instances, located above the organic search results. These are sometimes referred to as “top-left sponsored links”. Others are located to the far right of the organic search results. They are sometimes called “right-side sponsored links”. The Harvey World Travel sponsored link appears in one instance as a top-left sponsored link and in others as a right-side sponsored link. The terms of the top-left sponsored link for Harvey World Travel and the right-side sponsored link are almost identical, the only difference being the description of the search term. The colours of the text are the same in each instance but their appearance is slightly different depending upon whether the link is on the top-left or the right-side. We will set out the terms of the sponsored link but it is important to bear in mind that the text appears in different colours. The headline, which corresponds to the search term appears in blue, whereas the advertiser’s message appears in black and the URL appears in green. The top-left sponsored link is as follows:-Harvey World Travel Unbeatable deals on flights, Hotels & Pkg’s Search, Book & Pack Now! The only substantive difference in the right-side sponsored link is that in one instance the search term is “Harvey Travel”. In the other, it is “Harveyworld Travel”. The Honda sponsored link is described at [243] of the primary judge’s reasons. We do not need to repeat it. As with each of the four sponsored links in this proceeding, the search term appears in blue, the advertiser’s message in black and the web address in green.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The ACCC also advanced an argument that Google could not avail itself of the defence under s 85(3) unless it showed that it had set up a system of controls which would prevent the publication of misleading advertisements. The primary judge rejected that argument at [204]. Since we agree with the primary judge’s reasons for concluding that Google was not entitled to rely on s 85(3) of the Act, it is not necessary to address this further argument.CONCLUSION In our respectful opinion, the primary judge erred in failing to conclude that Google engaged in misleading and deceptive conduct in the four cases discussed above. We would order that:1.The appeal be allowed;2.Order 3 made by the primary judge on 22 September 2011 be set aside. In lieu thereof, the Court declare in accordance with paras 2(i) to (iv) of the Notice of Appeal;i.That Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website on 29 May 2007, 18 July 2007, 24 October 2007 and 17 April 2008, results which were advertisements for STA Travel’s business and website with the headline including “Harvey World Travel” or “Harvey World”, in trade or commerce represented, contrary to the fact, that:a.there was an association between STA Travel and Harvey World Travel businesses;b.there was an affiliation between STA Travel and Harvey World Travel businesses;c.information regarding the Harvey World Travel businesses could be found at STA Travel’s website;d.information regarding the travel services provided by the businesses associated with the name “Harvey World Travel” could be found at STA Travel’s website;and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA;ii.that Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website between March 2006 and July 2007, results which were advertisements for CarSales’ business and website with the headline including “Honda.com.au”, in trade or commerce, represented, contrary to the fact, that by clicking on the headline to the advertisement users of the website would be taken to the Honda Australia website and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA;iii.that Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website on 27 March 2008, results which were advertisements for The Dog Trainer Pty Limited (Ausdog’s) business and website with the headline being “Apha Dog Training” (the Alpha Dog Training Advertisement), in trade or commerce represented, contrary to the fact, that:a.there was an association between Ausdog and Alpha Dog Training’s business;b.by clicking on the Alpha Dog Training Advertisement users of the website would be taken to a website associated with the business carried on under the name Alpha Dog Training or a website at which they could find information concerning that business;and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA;iv.that Google Inc. by publishing, or causing to be published, on results pages on the Google Australia website on 29 May 2007, results which were advertisements for The Trading Post’s business and website with the headline being “Just 4x4s Magazine”, in trade or commerce represented, contrary to the fact, that:a.there was a commercial association between Trading Post and Just 4x4s Magazine;b.that information regarding Just 4x4s Magazine could be found at the Trading Post website;and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA; 3.Pursuant to s 246(2)(b)(i) of the Australian Consumer Law, Google must establish and implement a compliance program as provided for in Schedule 1 of the Notice of Appeal which is annexure A to the reasons;4.Order 5 made by the primary judge on 22 September 2011 be set aside (in part). In lieu thereof Google pay the ACCC’s costs of the trial in relation to the Harvey World Travel, Honda.com.au, Alpha Dog Training and Just 4x4s Magazine advertisements;5.Google pay the ACCC’s costs of the appeal to be taxed if not earlier agreed.

Ratio Decidendi

Legal Principle Established

In relation to the particular advertisements, Google contends that, even if the advertisements were published by Google, the Honda, Alpha Dog and Just 4x4s advertisements were not misleading or deceptive or likely to mislead or deceive. Further, in relation to the Harvey World Travel and Just 4x4s advertisements, Google contends that it is entitled to the benefit of the defence provided by s 85(3) of the Act.CONSIDERATIONDid Google engage in misleading conduct? At the outset of a consideration of Google’s responsibility for the advertisements, it is as well to recall that a party may engage in misleading conduct so as to contravene s 52 of the Act without an intention to mislead or deceive. The question is whether Google “engaged in conduct” that was likely to mislead or deceive. The second point to be made is that whether a corporation has engaged in misleading conduct or has merely acted as a conduit for another is a question of fact. In that regard, the case law subsequent to the decision in Guthrie has not altered the legal operation of s 52 of the Act as it was explained by Bowen CJ in the passage from Guthrie set out above at [39]. Bowen CJ observed that the fact that a statement is clearly an advertisement for a particular advertiser was not a sufficient basis, in the circumstances of that case, to justify a finding that the statement was not made by the television station. His Honour expressly left open the possibility of a finding that, by necessary implication, the statement would not be seen as that of the television station. The later authorities may have allowed greater scope for the operation of necessary implication than was apparent in the decision in Guthrie. But otherwise there is no tension between the remarks of Bowen CJ and the principles stated by the High Court in the authorities referred to above. The effect of the authorities is that the intermediary’s conduct must be considered as a whole to determine whether the intermediary was merely passing on the information. Whether or not there is an implied disclaimer or an implied adoption or endorsement is a conclusion of fact which follows from a determination based on all the circumstances of the case. In ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [57], Gummow J quoted French J in Gardam v George Wills & Co Ltd (1988) 82 ALR 415, in the passage cited by the primary judge, explaining that the issue is whether - [t]he innocent carriage of a false representation from one person to another [occurs] in circumstances where the carrier is and is seen to be a mere conduit … It will be a question of fact in each case. In Yorke v Lucas (1985) 158 CLR 661 at 666 (Yorke v Lucas), Mason CJ, Wilcox, Deane and Dawson JJ doubted whether a corporation could be said to have engaged in conduct that was misleading or deceptive if it is apparent that the “corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth”. The principle to be drawn from this statement is that if a corporation passes on information supplied by another, which information subsequently turns out to have been false, the corporation does not engage in misleading conduct where the circumstances make it apparent that the corporation was merely passing on information supplied by another for what it was worth.