Australian Competition and Consumer Commission v Trading Post Australia Pty Limited
[2009] FCA 828
•12 June 2009
FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Trading Post Australia Pty Limited [2009] FCA 828
Trade Practices Act 1974 (Cth) s 85(3)
AUSTRALIAN COMPETITION & CONSUMER COMMISSION v TRADING POST AUSTRALIA PTY LIMITED ACN 001 821 156 and ANOR
NSD 1323 of 2007
EMMETT J
12 JUNE 2009
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1323 of 2007
BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION
Applicant
AND: TRADING POST AUSTRALIA PTY LIMITED
ACN 001 821 156
First RespondentGOOGLE INC
Second Respondent
JUDGE:
EMMETT J
DATE OF ORDER:
12 JUNE 2009
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The motion be dismissed.
2.Until further order, the publication of the information contained in paragraphs 15 to 18 of the extract of the affidavit of Katherine Nicole Fowler sworn on 9 March 2009 (Extract) and access to those paragraphs of the Extract, be restricted to:
(a) the Second Respondent and its external legal advisers;
(b) the external legal advisers of the Applicant who have signed a confidentiality undertaking in the form agreed by the parties;
(c) officers of the Applicant (as agreed by the parties) who have signed a confidentiality undertaking in the form agreed by the parties; and
(d) secretaries and other necessary support staff for any of the persons referred to in (a) or (b) who have signed a confidentiality undertaking in the form agreed by the parties.
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IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1323 of 2007
BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION
Applicant
AND: TRADING POST AUSTRALIA PTY LIMITED
ACN 001 821 156
First RespondentGOOGLE INC
Second Respondent
JUDGE:
EMMETT J
DATE:
12 JUNE 2009
PLACE:
SYDNEY
REASONS FOR JUDGMENT
I have before me an Amended Notice of Motion by the applicant seeking further discovery or, in the alternative, an order requiring the respondent to answer interrogatories in the form annexed to the Amended Notice of Motion. The applicant (the Commission), has pressed the application for leave to administer interrogatories on the basis that, if that application is granted, there will be no need for discovery. As I understand it, the Commission accepts that, if the interrogatories are refused, there will be no discovery either.
The interrogatories are directed to allegations in the Third Further Amended Statement of Claim that the second respondent, Google Inc (Google), has engaged in misleading and deceptive conduct, and the defence raised by Google, in answer to the Third Further Amended Statement of Claim, based on s 85(3) of the Trade Practices Act 1974 (Cth) (the Act). In general terms, the allegation in paragraphs 124 to 127 of the Third Further Amended Statement of Claim is that Google, in dealing with actual or prospective advertisers, has provided its AdWords program, which creates advertisements for its websites when a person’s search term matches keywords selected by an advertiser.
It is alleged that Google has suggested keywords that may include names of businesses, or has permitted advertisers to create advertisements for display on the Google websites that insert keywords, which are business names or trademark names of businesses. The allegation is that Google has done so in circumstances where the suggested keywords, and business names or trademark names of businesses had no relationship, sponsorship approval or affiliation, or any other connection with the advertisers, and that Google has published such advertisements on its websites.
Particulars are given in respect of eight specific advertisements. The Commission alleges that, by publishing on its websites results that are advertisements, where there is a business name in the headline of the result, Google makes a representation that a person who clicks on the result will be taken to a website associated with the business whose name corresponds with the search term entered, that there is an association or affiliation between the business name whose name corresponds with the search term entered, and the contents of the website to which a person is taken, that the business, whose name corresponds with the search term, has approved the link, or has paid for the link, or is a sponsor of the business to which a person is directed when that person has clicked on the result, and that information regarding the business, whose name corresponds with the search term, could be found at the website to which a person is directed after clicking on the result.
Section 85(3) of the Act relevantly provides as follows:
In a proceeding in relation to a contravention of a provision of Part V or Part VC of the Act 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.
Google has filed all of its evidence in relation to its defence under s 85(3). The Commission has also outlined its case as to whether or not that material will afford the defence contemplated by s 85(3). Specifically, the Commission relies on correspondence and media releases that it says would have brought to the attention of relevant officers of Google the alleged misleading nature of the advertisements in question. For example, on 11 January 2005, the Commission wrote to Google concerning a complaint received by the Commission by Stickybeek Australia Pty Limited. Google responded on 6 April 2005 specifically in relation to the Commission’s inquiry as to Google’s policies in relation to advertisers. Google provided details of the terms and conditions applicable to Australian advertisers.
The Commission wrote again on 20 October 2006, and Google responded on 29 November 2006. On 6 March 2007, the Commission wrote again, and Google responded on 19 March 2007. As an attachment to its letter of 19 March 2007, Google included a copy of its AdWords program terms. Google draws attention, specifically, to provisions of those terms providing that the customer is to be solely responsible for the selection of keywords, and that the customer represents and warrants that there is no infringement of intellectual property rights by the relevant advertisements. On 12 July 2007, the Commission published a news release in which allegations were made of misleading and deceptive conduct by Google in relation to the practice to which I have briefly referred and which is the subject of the allegations of the Third Further Amended Statement of Claim. The Commission’s interrogatories are generally directed to ascertainment of the hierarchy of authority within Google, and seek information as to the identity of officers within Google who became aware of the communications that I have described and other similar correspondence.
The Commission referred to a number of propositions as to the effect of s 85(3) and its limitations. The Commission suggests that by acting merely as a conduit, by deliberately refusing to read or consider advertisements and by refraining from instituting any system to detect errors in an advertisement, Google could never know, or have any reason to suspect a problem. The Commission says, however, that s 85(3) may well require a defendant to establish that it had no reason to suspect a contravention, in the sense that the defendant could not discharge the burden if it had closed its mind to the possibility of an advertisement contravening the Act. Rather, the Commission says, Google is probably required to show that, if it recognises that its business involves a frequent risk of contravention, the control system it sets up in response is appropriate. Personnel responsible for receiving and approving the publication need to be instructed about the requirements of the Act (see Heydon Trade Practices Law at paragraph 18.2180).
There are two matters that must be established before the defence under s 85(3) will relevantly be available. The first is that the defendant did not know that the publication would amount to a contravention of the provision of Part V or Part VC. The other is that the defendant had no reason to suspect that the publication would amount to such a contravention. Both of those matters are concerned with a relevant state of mind.
The Commission has foreshadowed, in the way to which I have briefly referred, the case that it would mount in response to a defence under s 85(3). The Commission’s concern, which has led to the application for further discovery or for the administration of interrogatories, is that it would not want to be faced at a hearing with a response that those officers of Google who are called to give evidence did not have the appropriate authority or position in the hierarchy within Google, such that their knowledge did not constitute knowledge of Google. There is no question of intention involved in s 85(3) and the onus on Google will be to prove a negative, or two negatives, according to the way in which one looks at the provision.
First, Google, will need to prove that it did not know that the relevant publication would amount to a contravention. Secondly, it will need to prove that there were no matters known to it that, objectively considered, would give reason to suspect that the relevant publications would amount to a contravention. If there had been no prior provision to the Commission of Google’s evidence, there may be some justification for the Commission exploring those sorts of matters. However, as I have said, all of Google’s evidence upon which it is intends to rely to establish its defence under s 85(3) has been provided to the Commission.
Further, Google has made an admission in terms of the document which I will include as a schedule to these reasons when transcribed, effectively acknowledging that for the purposes of s 85(3) any material to which the Commission has referred was known to Google and that those who knew of those matters were such within the hierarchy of the administration of Google that their knowledge is the knowledge of Google.
The Commission has referred to the possibility that there may have been a wilful decision within Google to turn a blind eye to these matters and to ignore the possibility that advertisers’ material may contravene the Act. Be that as it may, the only relevant matter so far as s 85(3) is concerned is negativing knowledge or material from which reason to suspect might arise on the part of relevant officers of Google. In the light of the admission that has been made, and the evidence that has been provided to the Commission, I am not persuaded that the interests of justice require Google to provide any further discovery in relation to this issue, or to answer the interrogatories formulated by the Commission. In the circumstances I propose to dismiss the motion.
Google asks for its costs of the motion. It says that the admission which it has foreshadowed today does not really go much beyond, if at all, what it had previously proffered to the Commission.
In a letter of 13 March 2009 to the Commission’s solicitors, Google’s solicitors acknowledged that Google had received various communications identified, being communications of the nature relied upon by the Commission as constituting knowledge of Google. Google’s solicitors’ letter also acknowledged receipt of relevant press releases. The letter said that, in the light of those acknowledgements, the Commission was invited to withdraw its motion for discovery. The letter reserved Google’s rights generally including in relation to the question of costs on the motion.
In its submissions of 13 March 2009 in opposition to the motion for further discovery in its original form, Google said that there was no dispute that it was aware, from a date prior to any of the alleged contraventions that are the subject of the Commission’s claim, of the Commission’s views expressed in correspondence received by Google, which dates back to 11 January 2005. In its submissions of 2 June 2009, in response to the amended motion, Google said that it had never indicated an intention, and stated that it does not intend, to hide behind the lack of knowledge of particular employees in relation to the sponsored links that are the subject of the proceedings or to contend that the actions or inactions of its employees were not authorised.
The submissions also said that Google did not suggest that it was unaware of the Commission’s views as expressed in correspondence received by Google from the Commission regarding the use of competitor names in sponsored links, or that Google’s responses to that correspondence were not authorised or did not reflect the view of Google. The submissions asserted that there was no basis for suggesting that Google has been wilfully blind.
While the admission that Google now makes may go slightly further than was foreshadowed in those submissions and in the letter, I do not consider that it goes materially beyond what was proffered. In all of the circumstances I consider that it is appropriate to order the Commission to pay Google’s costs of the motion. I propose to list the matter for directions on 7 August 2009 with a view to being satisfied that the matter is ready for hearing and hopefully allocating a hearing date.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 12 June 2009
Counsel for the Applicant: Ms CE Adamson SC with Ms AM Seward Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Second Respondent: Mr AJL Bannon SC with Mr C Dimitriadis Solicitor for the Second Respondent: Gilbert + Tobin Date of Hearing: 12 June 2009 Date of Judgment: 12 June 2009 Schedule 1
Google admits for the purposes of the proceedings that the knowledge of its employees in relation to the sponsored links, the subject of the proceedings, is and was at all material times the knowledge of Google. Google admits for the purpose of these proceedings that Google received and was aware of the contents of the correspondence from the ACCC dated 11 January 2005, 20 October 2006 and 6 June 2007 and that its responses to that correspondence were authorised by Google.
Read into Court on 17 June 2009
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