Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd

[2011] FCA 1086

FEDERAL COURT OF AUSTRALIA

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

Citation:

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

Parties:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v TRADING POST AUSTRALIA PTY LIMITED (ACN 001 821 156) and GOOGLE INC

File number:

NSD 1323 of 2007

Judge:

NICHOLAS J

Date of judgment:

22 September 2011

Corrigendum:

10 October 2011

Catchwords:

TRADE PRACTICES – misleading and deceptive conduct – on-line advertising – where provider of internet search engine published advertisements in the form of “sponsored links” displayed on search results page in response to search queries – whether provider of internet search engine engaged in conduct that was misleading or deceptive or likely to mislead or deceive by failing to adequately distinguish between advertisements and organic search results – consideration of expression “sponsored link” –  whether provider of internet search engine made implied  representations that sponsored links were not advertisements – whether provider of internet search engine made implied  representations that sponsored links were organic search results – whether provider of internet search engine made implied representations that position of sponsored links on search results page was the result of their relative relevance to search queries as determined by the search engine – consideration of layout of search results page – consideration of relevant class of consumer – consideration of impact on ordinary and reasonable members of relevant class of consumer

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 headline of sponsored link replicated third party’s business name, trade mark or website address – whether advertiser made implied representations of association or affiliation – consideration of relevant class of consumer – consideration of impact of sponsored links on ordinary and reasonable members of relevant class of consumer – whether representations conveyed were misleading or deceptive or likely to mislead or deceive – whether search engine provider also made implied representations of association or affiliation by publishing sponsored links or by adopting or endorsing representations conveyed – significance of “keyword insertion” when used to generate headline which replicated terms of search query

TRADE PRACTICES – misleading and deceptive conduct – on-line advertising – where provider of internet search engine published advertisements in the form of “sponsored links” displayed on search results pages in response to search queries – 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) (the Act) – whether advertisements in the form of sponsored links were advertisements received by the search engine provider in the ordinary course of business – whether search engine provider knew or had reason to suspect that publication of advertisement would amount to contravention of s 52 of the Act – whether search engine provider could discharge onus of proof without showing that it took reasonable precautions or exercised reasonable diligence to avoid such contravention

Legislation:

Trade Practices Act1974 (Cth) ss 52, 53, 65A(1), 75B and 85(3)
Trade Marks Act1995 (Cth) ss 41(5) and 44(3)
Evidence Act 1995 (Cth) ss 81, 88 and 135
Federal Court of Australia Act 1976 (Cth) s 50

Cases cited:

Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305
BM Auto Sales Pty Ltd & Anor v Budget Rent A Car System Pty Ltd (1976) 12 ALR 363
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397
Campomar Sociedad Limitada & Anor v Nike International Limited & Anor (2000) 202 CLR 45
Cassidy v Saatchi & Saatchi (2004) 134 FCR 585
Domain Names Australia Pty Ltd v .au Domain Administration Ltd (2004) 139 FCR 215
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No. 1) (1988) 39 FCR 546
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216
National Exchange Pty Ltd v Australian Securities and Investment Commission (2004) 49 ACSR 369
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Platz v Osborne (1943) 68 CLR 133
Re Alcan Australia Limited; Ex Parte Federation of Industrial, Manufacturing and Engineering Employees (1994) 181 CLR 96
SAP Australia Pty Ltd v Sapient Australia Pty Ltd (2000) 48 IPR 593
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Universal Telecasters (Qld) Ltd v Guthrie (1978) 18 ALR 531
Yorke v Lucas (1985) 158 CLR 661

Heydon JD, Trade Practices, Deceptive Conduct and Consumer Protection (Thomson, subscription service)
Donald BG and Heydon JD, Trade Practice Law, Vol. 2 (The Law Book Company Limited, 1978)

Date of hearing:

8, 10-12, 15-17, 22-25, 29-31 March and 1 April 2010  

Date of last submissions:

16 September 2011

Place:

Sydney

Division:

GENERAL DIVISION

Category:

Catchwords

Number of paragraphs:

357

Counsel for the Applicant:

Ms CE Adamson SC with Ms AM Seward

Solicitor for the Applicant:

Corrs Chambers Westgarth

Counsel for the First Respondent:

The First Respondent was excused from appearing at the trial

Solicitor for the First Respondent:

Mallesons Stephen Jaques

Counsel for the Second Respondent:

Mr AJ Bannon SC with Mr C Dimitriadis

Solicitor for the Second Respondent

Gilbert + Tobin

FEDERAL COURT OF AUSTRALIA

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

CORRIGENDUM

1.In paragraph 29 of the Reasons for Judgment, in the second sentence, the words “a licence” should be inserted after the word “hold”.

2.In paragraph 139 of the Reasons for Judgment, in the third sentence, the word “as” should be omitted.

3.In paragraph 200 of the Reasons for Judgment, in the third sentence, the word “not” should be inserted after the word “does”.

4.In paragraph 241 of the Reasons for Judgment, in the first sentence, the word “Travel” should be inserted after the word “STA”

5.In paragraph 282 of the Reasons for Judgment, in the first sentence, the word “accounts” should read “account”.

6.In paragraph 314 of the Reasons for Judgment, in the second sentence, the words “there were” should read “there was”.

7.In paragraph 339 of the Reasons for Judgment, in the first sentence, the words “Just Magazine” should read “Just Magazines”.

I certify that the preceding seven (7) numbered paragraphs are a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Nicholas.

Associate:

Dated: 10 October 2011

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1323 of 2007

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

TRADING POST AUSTRALIA PTY LIMITED
(ACN 001 821 156)
First Respondent

GOOGLE INC
Second Respondent

JUDGE:	NICHOLAS J
DATE OF ORDER:	22 September 2011
WHERE MADE:	SYDNEY

THE COURT DECLARES THAT:

1.By publishing or causing to be published advertisements on or about 28 August and 30 August 2005 in response to searches undertaken using the search engine at the website at for the keyword “Kloster Ford” in circumstances where:

(a)each advertisement included a headline consisting of the words “Kloster Ford”;

(b)each advertisement included a link to the website at

(c)no information regarding Kloster Ford could be found at the website at and

(d)no information regarding Kloster Ford car sales could be found at the website at first respondent, in trade or commerce, engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 52(1) of the Trade Practices Act 1974 (the Act) by representing, contrary to the fact, that:

(i)there was an association or affiliation between the first respondent and Kloster Ford;

(ii)information regarding Kloster Ford could be found at the website at and

(iii)information regarding Kloster Ford car sales could be found at the website at publishing or causing to be published advertisements on or about 28 August and 30 August 2005 in response to searches undertaken using the search engine at the website at for the keyword “Kloster Ford” in circumstances where:

(a)each advertisement included a headline consisting of the words “Kloster Ford”;

(b)each advertisement included a link to the website at information regarding Kloster Ford could be found at the website; and

(d)no information regarding Kloster Ford car sales could be found at the website

the first respondent, in trade or commerce, in connection with the supply or possible supply of goods or services, represented that it had an affiliation which it did not have and thereby contravened s 53(d) of the Act.

THE COURT ORDERS THAT:

3.The fourth further amended application filed 1 April 2010 be otherwise dismissed.

4.The first respondent pay $28,000 to the applicant by way of agreed contribution to the applicant’s costs of the proceeding.

5.The applicant pay the second respondent’s costs of the proceeding.

6.None of the orders previously made in this proceeding under s 50 of the Federal Court of Australia Act 1976 (Cth) shall prevent any person from publishing the whole or any part of these reasons for judgment.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1323 of 2007

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

TRADING POST AUSTRALIA PTY LIMITED
(ACN 001 821 156)
First Respondent

GOOGLE INC
Second Respondent

JUDGE:	NICHOLAS J
DATE:	22 September 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[1]
BRIEF OVERVIEW OF THE ACCC’S CASE AGAINST GOOGLE........ ........ ........ ..	[3]
SOME PRELIMINARY MATTERS........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[17]
THE RELEVANT STATUTORY PROVISIONS........ ........ ........ ........ ........ ........ ........ ..	[24]
SECTION 52 OF THE ACT: SOME WELL SETTLED PRINCIPLES........ ........ ........	[31]
SOME BACKGROUND FINDINGS........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[41]
Google’s search engine........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[43]
Google’s AdWords........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[52]
Geographic targeting of advertisements........ ........ ........ ........ ........ ........ ........ ........ ......	[61]
Google’s AdWords Terms of Service........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[62]
Google’s trade mark policy........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[69]
THE FIRST PART OF THE ACCC’S CASE:  GOOGLE’S ALLEGED FAILURE TO DISTINGUISH ADEQUATELY BETWEEN ORGANIC SEARCH RESULTS AND PAID ADVERTISEMENTS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[76]
THE SECOND PART OF THE ACCC’S CASE:  THE USE OF COMPETITORS’ NAMES IN THE HEADLINES........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[85]
THE TRADING POST ADVERTISEMENTS........ ........ ........ ........ ........ ........ ........ .......	[93]
The Kloster Ford Advertisement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[94]
What representations were conveyed by the Kloster Ford advertisement?........ ....	[118]
Representation A - by clicking on the headline of the Kloster Ford advertisement a person would be taken to a website associated with Kloster Ford........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[129]
Representation B - there was an association between Trading Post and Kloster Ford........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[130]
Representation C - there was an affiliation between Trading Post and Kloster Ford........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[131]
Representation D - Kloster Ford approved of the link between its name and the Trading Post Site........ ........ ........ ........ ........ ........ ........ ........ .....	[132]
Representation E - Kloster Ford had paid for the link between its name and the Trading Post Site........ ........ ........ ........ ........ ........ ........ ........ .....	[133]
Representation F - Kloster Ford was a sponsor of the Trading Post Site........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[134]
Representation G - information regarding Kloster Ford could be found at the Trading Post Site........ ........ ........ ........ ........ ........ ........ ........ ......	[135]
Representation H - information regarding Kloster Ford car sales could be found at the Trading Post Site........ ........ ........ ........ ........ ........ .....	[136]
The Charlestown Toyota Advertisement........ ........ ........ ........ ........ ........ ........ ........ .....	[137]
DID GOOGLE MAKE REPRESENTATIONS THAT THE TRADING POST ADVERTISEMENTS WERE NOT ADVERTISEMENTS?........ ........ ........ ........ ........ .	[151]
DID GOOGLE MAKE THE REPRESENTATIONS CONVEYED BY THE TRADING POST ADVERTISEMENTS?........ ........ ........ ........ ........ ........ ........ ........ ......	[175]
Butcher v Lachlan Elder Realty Pty Ltd........ ........ ........ ........ ........ ........ ........ ........ ......	[176]
Universal Telecasters (Qld) Ltd v Guthrie........ ........ ........ ........ ........ ........ ........ ........ ..	[179]
GOOGLE’S DEFENCE UNDER S 85(3) OF THE ACT........ ........ ........ ........ ........ .......	[196]
THE OTHER ADVERTISEMENTS........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[209]
The Harvey World Travel advertisements........ ........ ........ ........ ........ ........ ........ ........ ...	[209]
What representations were conveyed by the Harvey World Travel advertisements?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[227]
Did Google make the representations conveyed by the Harvey World Travel advertisements?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[239]
Section 85(3)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[242]
The Honda.com.au Advertisement........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[243]
Section 85(3)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[252]
The Fowlers Auction Advertisements........ ........ ........ ........ ........ ........ ........ ........ ........ .	[258]
The Playstation 2 Advertisement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[263]
Section 85(3)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[279]
The Jobsguide Advertisement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[281]
The Just Listed Advertisements........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[289]
The Alfa Dog Training Advertisement........ ........ ........ ........ ........ ........ ........ ........ ........	[304]
Section 85(3)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[319]
The Nilsen Advertisement........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[320]
The Just 4 x 4s Magazine Advertisement........ ........ ........ ........ ........ ........ ........ ........ ....	[332]
Section 85(3)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[343]
EVIDENTIARY RULINGS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[346]
CONFIDENTIALITY........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[353]
CONCLUSION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[354]
SCHEDULES
Schedule 1 – The Harvey World Travel Advertisement published 18 July 2007
Schedule 2 – The Honda.com.au Advertisement published 28 May 2007
Schedule 3 – The Playstation 2 Advertisement published 10 May 2007
Schedule 4 – The Just 4 x 4s Magazine Advertisement published 29 May 2007

INTRODUCTION

1. The second respondent, Google Inc (Google), operates the well known internet search engine also known as “Google” (the Google search engine).  The first respondent, Trading Post Australia Pty Limited (Trading Post), has paid Google, or a related entity, to advertise in the manner and circumstances which I will later describe.  The applicant (the ACCC) alleges that Google and Trading Post have, in trade or commerce, engaged in conduct that is misleading or deceptive or likely to mislead or deceive and that each of them contravened s 52 of the Trade Practices Act1974 (Cth) (the Act). The ACCC alleges that Trading Post also contravened s 53(d) of the Act. The ACCC seeks declarations and injunctive relief against Google and declaratory relief against Trading Post.

2. The proceeding has been settled as between the ACCC and Trading Post.  It was agreed between all parties that no declarations should be made as between the ACCC and Trading Post until the claims made against Google were determined in order to allow for the possibility that I came to the conclusion, in light of the evidence, that it would not be appropriate to make them. 

   BRIEF OVERVIEW OF THE ACCC’S CASE AGAINST GOOGLE

1. Google operates various websites throughout the world, including the websites google.com and google.com.au, which provide search facilities accessible in Australia.  Some of the webpages generated by means of these search facilities in response to search requests are alleged by the ACCC to be misleading or deceptive or likely to mislead or deceive.

2. The ACCC alleges that at all relevant times Google has had a reputation for displaying search results in order of decreasing relevance as determined by Google.  In particular, Google determines where, and in what order, on the webpage appearing on the screen of the user the search results generated by the Google search engine will appear.  Such search results, known as “organic” search results, are ranked by Google according to relevance.  They are to be distinguished from “sponsored links” which may also appear on the webpage.  It is common ground that a sponsored link is an advertisement. 

3. Google earns income from advertisers who pay for such sponsored links.  How much an advertiser pays depends upon whether, and how often, users of the Google search engine click on the sponsored link when it appears.  Sponsored links do not always appear in response to a search request but when they do so they appear either above or to the right of the organic search results or in both these locations.  While the order of organic search results is determined solely by relevance as assessed by software which drives the Google search engine, the position of any sponsored links appearing on the webpage is determined by different software which takes account of various factors including the price-per-click which the advertiser is prepared to pay to have the sponsored link appear in response to a user’s search request.

4. The ACCC alleges that the appearance of organic search results and sponsored links is essentially the same.  It alleges that the features of the relevant webpages that are said to distinguish organic search results from sponsored links are insufficient to do so.  An example of a results page that includes advertisements on both the left and right side of the results page appears below:

5. The ACCC points to, on the left side of the results page, the subtle yellow shading at the top of the page and the use of what it alleges is the ambiguous expression “sponsored links” to describe the advertisements.  The yellow shading and the expression “sponsored links” are said by the ACCC to be insufficient to counteract the impression otherwise created by the running together of the advertisements and search results.  The ACCC also points to the heading (which in the above example states “Results 1-10 of about 29,200”) in the bar (the results bar) appearing at the top of the results page.  So far as the right side of the page is concerned, the ACCC contends that neither the vertical line immediately to the left of the advertisements nor the expression “sponsored links” just above them is sufficient to distinguish them from organic search results.

6. It is also said by the ACCC that the lack of distinction on the left side of the page is compounded by the expectation that search results will appear in decreasing order of relevance which, according to the ACCC, inclines a class of users, such as those who are inexperienced or inadvertent, to click on an entry that appears at the top left side of the page, believing it to be an organic search result rather than an advertisement.

7. Each of the sponsored links appearing on the results page produced in response to a user’s search request contains a blue headline (the headline) which is itself a link which, if clicked, will ordinarily take the user to a website or webpage the Uniform Resource Locator of which is designated in green.  Looking at the first of the top left sponsored links in the above example, the blue headline “Just Car Insurance” is a clickable link which will take the user who clicks on it to the website at designated in green immediately beneath the “Just Car Insurance” headline. 

8. Sometimes the headline to an advertisement will consist of keywords selected by a user of the Google search engine that corresponds with keywords selected by the advertiser which may, according to the ACCC, also be a business or product name of the advertiser’s competitor.  The ACCC alleges that when the user clicks on the headline consisting of such keywords, he or she is likely to be taken to a website that has no association with the keywords selected. 

9. According to the ACCC, the use of keywords in this manner implies, contrary to the fact, that there is an association between, on the one hand, the business or product that is known or identifiable by the keyword and, on the other hand, the advertiser or the advertiser’s website.  This is said to be so of all such advertisements which are the subject of specific complaint in this proceeding irrespective of whether they appear on the top left or right hand side of the results page.  The ACCC alleges that the use of such keywords in the headline of an advertisement is misleading or deceptive or likely to mislead or deceive.

10. Thus, there are two parts to the ACCC’s case against Google.  The first part of the case is concerned with the overall layout and appearance of the results page which, it is said, fails to distinguish sufficiently between organic search results and advertisements.  This part of the ACCC’s case extends to both advertisements which might appear on the left hand side of the results page immediately above the organic search results and to those advertisements which appear to their right, on the right hand side of the results page.  The second part of the case is concerned with the use of what are said to be misleading keywords in the headlines of particular advertisements which may also appear on the left or right hand side of the results page.

11. The second part of the ACCC’s case is based upon eleven distinct claims involving various advertisers and sponsored links which Google is alleged to have published on its results pages.  In particular, it is the ACCC’s case that these sponsored links were misleading or deceptive or likely to mislead or deceive because in each instance they included a headline consisting of a trading name, a product name or a website address of the advertiser’s competitor but which also serves as a clickable link to the advertiser’s website. 

12. There is an overlap between the first and second parts of the ACCC’s case in that any failure to distinguish adequately between organic search results and advertisements forms part of the context in which the more specific complaints are made in relation to the use of the competitors’ names in keywords inserted into the headlines of advertisements.  It will be necessary to take that overlap into account at least when considering whether the use of competitors’ names in keywords in advertisement headlines is likely to mislead users of the Google search engine. 

13. As to the first part of the ACCC’s case, Google simply says that there is nothing that is misleading or deceptive or likely to mislead or deceive in the way in which it presented advertisements on its results pages.  It says that the expression “sponsored links” and the overall design and layout of its search page sufficiently distinguished such advertisements from organic search results.

14. As to the second part of the ACCC’s case, Google raises various answers. First, Google says that to the extent that any of the twenty sponsored links that are the subject of the second part of the ACCC’s case might be found to convey a representation that is misleading or deceptive or likely to mislead or deceive then any such representation was made by the advertiser and not by Google. Secondly, Google says that it has not in any event been established that any of the twenty sponsored links the subject of the second part of the ACCC’s case conveyed any representation that was misleading or deceptive or likely to mislead or deceive. Thirdly, Google says that if it is established that Google has by publishing a particular advertisement made any representation that is misleading or deceptive or likely to mislead or deceive, then it has a defence under s 85(3) of the Act.

    SOME PRELIMINARY MATTERS

15. There are three matters the subject of concessions made in this proceeding by Google and the ACCC that I must mention because they have considerable significance to some of the questions that arise in this proceeding.

16. First, the evidence discloses that a number of subsidiaries of Google – including Google Australia Pty Ltd (Google Australia) and Google Ireland Limited (Google Ireland) – may have played a role in arranging some of the advertisements that are the subject of complaint by the ACCC.  Google has conceded that it was at all relevant times responsible for determining the appearance of the user interface of the Google search engine available at the google.com.au and google.com websites.  Further, Google has conceded that if the provider of the Google search engine made any of the pleaded representations to users then such representations were made by Google. 

17. Secondly, it is conceded by Google that, to the extent that any employee of any of the Google companies may have had knowledge of any matter that might be relevant to its potential liability under s 52 of the Act, then such knowledge was possessed by Google irrespective of whether the employee concerned was employed by Google. Some of the witnesses called by Google were employees of Google but most were at relevant times employed by Google Australia. Google’s written submissions state:

    In the present case, Google has made admissions to the effect that the knowledge of its employees in relation to the sponsored links the subject of these proceedings was Google’s knowledge.  This means that the knowledge of the customer service representatives who gave evidence in relation to the relevant campaigns can be regarded as the knowledge of Google, without the need to inquire as to whether … they should be treated as the company itself.

18. A written admission referred to by Google in a footnote to this submission does not go quite this far.  However, the case was conducted in accordance with a concession by Google to the effect stated in its written submissions.  Accordingly, the knowledge of the customer service representatives, although they were at relevant times employed by Google Australia, is to be treated as knowledge of Google. 

19. Thirdly, the ACCC made clear in its final submissions that it does not contend that any conduct engaged in by Google the subject of its complaints in this proceeding was engaged in by Google with any intention to mislead, deceive or cause confusion.  I shall say more about this concession later in these reasons.  It is sufficient for present purposes to note that the ACCC cannot rely upon the existence of any such intention in support of any aspect of its case against Google. 

20. Another matter I must mention is that the ACCC has not made any claim against Google based upon s 75B of the Act. It is not suggested by the ACCC that Google is liable on the basis that it aided and abetted or was knowingly concerned in any contravention of s 52 of the Act by Trading Post. The ACCC’s case against Google must fail if Google is not shown to have itself engaged in conduct that was misleading or deceptive, or likely to mislead or deceive.

21. Hence, questions of knowledge relevant to accessorial liability under s 75B of the Act do not arise in this proceeding: cf. Yorke v Lucas (1985) 158 CLR 661 at 666. Nevertheless, if Google is shown to have itself engaged in conduct that is misleading or deceptive or likely to mislead or deceive but is to avoid liability by virtue of the defence provided for under s 85(3) of the Act then Google must establish, among other things, that it did not know, and had no reason to suspect, that publication of the sponsored links was misleading or deceptive or likely to mislead or deceive.

    THE RELEVANT STATUTORY PROVISIONS

22. The statutory provisions relevant to this proceeding are set out below.  The Australian Consumer Law (ACL), which is to be found at Schedule 2 to the Competition and Consumer Act2010 (Cth) (the new name of the Act), took effect on 1 January 2011. However, when I refer in these reasons to the Act, it is to the Act as it stood at relevant times which was prior to the ACL taking effect.

23. Sections 52 and 53 are contained in Part V of the Act. Section 52(1) provides:

    A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

    Section 53 relevantly provides:

    A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:

    …

    (d)represent that the corporation has a sponsorship, approval or affiliation it does not have;

    …

24. The Act provides that relief including injunctions, damages and other remedies is available against persons who were involved in a contravention of s 52. Under s 75B of the Act, this includes persons who have aided, abetted or counselled or procured the contravention or have been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention. As I have already mentioned, the ACCC does not rely on s 75B of the Act in this proceeding.

25. Section 85(3) of the Act provides:

    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.

26. Section 65A(1) of the Act provides:

    (1)Nothing in section 52, 53, 53A, 55, 55A or 59 applies to a prescribed publication of matter by a prescribed information provider, other than:

    (a)a publication of matter in connection with:

    (i)the supply or possible supply of goods or services;

    (ii)the sale or grant, or possible sale or grant, of interests in land;

    (iii)the promotion by any means of the supply or use of goods or services; or

    (iv)the promotion by any means of the sale or grant of interests in land;

    where:

    (v)the goods or services were relevant goods or services, or the interests in land were relevant interests in land, as the case may be, in relation to the prescribed information provider; or

    (vi)the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with:

    (A)a person who supplies goods or services of that kind, or who sells or grants interests in land, being interests of that kind; or

    (B)a body corporate that is related to a body corporate that supplies goods or services of that kind, or that sells or grants interests in land, being interests of that kind; or

    (b)a publication of an advertisement.

27. Section 65A(3) defines “a prescribed information provider” as “a person who carries on a business of providing information”.  This is deemed to include various persons who hold or provide services under the Broadcasting Services Act 1992 (Cth).

28. I have set out s 65A(1) of the Act because it was also pleaded by Google by way of defence. Of course, it is clear that the defence under s 65A(1) does not apply to the publication by a prescribed information provider of an advertisement. Section 65A(1) was relied on by Google against the possibility that the ACCC might seek to argue that s 85(3) of the Act could not provide Google with a defence to the second part of the ACCC’s case not because the sponsored links published by Google were not advertisements but because the subject matter of each act of publication relied upon by the ACCC was the whole of the results page upon which sponsored links and organic search results appeared rather than any individual sponsored link. However, the ACCC did not suggest that the subject matter of each act of publication relied upon consisted of anything other than the individual sponsored link. For it to have done so would have been inconsistent with the way in which it pleaded the second part of its case. In those circumstances, I do not see s 65A(1) as having direct relevance to any issue arising in this proceeding.

    SECTION 52 OF THE ACT: SOME WELL SETTLED PRINCIPLES

29. The general principles to be applied in determining whether a corporation contravenes s 52 are well settled and I approach this case having regard to them.

30. The question whether conduct is misleading or deceptive or likely to mislead or deceive is a question of fact that must be determined in light of the relevant surrounding facts and circumstances: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [109] per McHugh J.

31. A corporation may be found to have contravened s 52 even though it lacked any intention to mislead or deceive: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 per Stephen J.

32. But if it is established that the corporation did intend to mislead, a Court may be more likely to find that the conduct complained of was misleading: Campomar Sociedad Limitada & Anor v Nike International Limited & Anor (2000) 202 CLR 45 at 63.

33. Conduct may be misleading or deceptive if it induces error but it is not sufficient merely to show that it may have led to confusion or caused people to wonder: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 per Gibbs CJ.

34. Evidence that some people may have been misled is not essential but it is admissible and may be persuasive if given: Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202 per Deane and Fitzgerald JJ.

35. In order to establish that conduct is misleading or likely to mislead it is not necessary to show that it conveys a misrepresentation.  In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No. 1) (1988) 39 FCR 546 Lockhart J said (at 555):

    Misleading or deceptive conduct generally consists of representations, whether express or by silence; but it is erroneous to approach s 52 on the assumption that its application is confined exclusively to circumstances which constitute some form of representation … [U]ltimately in each case it is necessary to examine the conduct, whether representational in character or not, and ask the question whether the impugned conduct of its nature constitutes misleading or deceptive conduct. This will often, but not always, be the same question, as whether the conduct is likely to mislead or deceive.

36. Of course, if the conduct alleged by an applicant to be misleading or deceptive or likely to mislead or deceive is said to consist of the making of a representation having one or more of those qualities then it will be necessary for the applicant to establish that the relevant representation was actually conveyed, that it was misleading or deceptive or likely to mislead or deceive and that it was made by the respondent. 

37. In the present case the representations complained of are alleged to have been made to the general public or a section of the general public.  In Campomar Sociedad Limitada & Anor v Nike International Limited & Anor (2000) 202 CLR 45, the High Court stated at 85:

    102.It is in these cases of representations to the public, of which the first appeal is one, that there enter the “ordinary” or “reasonable” members of the class of prospective purchasers. Although a class of consumers may be expected to include a wide range of persons, in isolating the “ordinary” or “reasonable” members of that class, there is an objective attribution of certain characteristics. Thus, in Puxu Gibbs CJ determined that the legislation did not impose burdens which operated for the benefit of persons “who fail[ed] to take reasonable care of their own interests”. In the same case, Mason J concluded that, whilst it was unlikely that an ordinary purchaser would notice the very slight differences in the appearance of the two items of furniture in question, nevertheless such a prospective purchaser reasonably could be expected to attempt to ascertain the brand name of the particular type of furniture on offer.

    103.Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of that class. The inquiry thus is to be made with respect to this hypothetical individual why the misconception complained has arisen or is likely to arise if no injunctive relief be granted. In formulating this inquiry, the courts have had regard to what appears to be the outer limits of the purpose and scope of the statutory norm of conduct fixed by s 52. Thus, in Puxu, Gibbs CJ observed that conduct not intended to mislead or deceive and which was engaged in “honestly and reasonably” might nevertheless contravene s 52. Having regard to these “heavy burdens” which the statute created, his Honour concluded that, where the effect of conduct on a class of persons, such as consumers, was in issue, the section must be “regarded as contemplating the effect of the conduct on reasonable members of the class”.

    (Citations omitted)

1. The High Court’s statement of the test to be applied in determining whether a misleading or deceptive representation has been made to the general public or a section of the general public has been considered in a number of Full Court decisions:  see, for example, National Exchange Pty Ltd v Australian Securities and Investment Commission (2004) 49 ACSR 369, Domain Names Australia Pty Ltd v .au Domain Administration Ltd (2004) 139 FCR 215. Those decisions recognise, consistently with what the High Court said, that the class of persons by reference to which the effect of the relevant conduct is to be assessed may be quite large. In particular, the relevant class may cover a wide range of people whose personal capacity, knowledge and experience may vary quite significantly. Nevertheless, all members of the relevant class are presumed to take reasonable care to protect their own interests and the behaviour of those who do not may be disregarded. What steps they may be expected to take in order to protect their own interests will depend upon the circumstances of the particular case.

   SOME BACKGROUND FINDINGS

2. The principal witness called by Google was Mr Daniel Dulitz who has been employed by Google since 2000.  His current job description is “Group Product Manager”.  From 2000 to 2006 Mr Dulitz, who has academic qualifications in computer science, was involved with the computer programs that allow Google to generate automated search results.  Since 2006 his responsibilities have included the “user interface” and “user experience” in relation to sponsored links appearing on search results pages that may appear along with organic search results in response to a search query. 

3. Mr Dulitz was cross-examined mostly, as I perceived it, with a view to having him explain or amplify aspects of his evidence.  It is fair to say that his evidence was not the subject of any significant challenge.  In any event, I found him to be an acceptable witness who was highly knowledgeable about the matters which were the subject of his evidence and quite careful in the way he went about giving it.  Most of his evidence was uncontroversial.  The following matters which, unless otherwise indicated, represent findings made by me, are largely based upon evidence given by Mr Dulitz.

   Google’s search engine

4. The World Wide Web (web) is the vast system of linked documents accessed via the internet.  It is difficult to provide an accurate estimate of the size of the web but it is likely to be made up of many billions of pages generated by millions of people and organisations across the world.  Pages on the web vary substantially in content and nature.  

5. A person wishing to make available documents on the web specifies an address known as a “Uniform Resource Locator” (URL), which appears on the address window of a browser at the top of the screen.  A browser is the software used to navigate the web (e.g. Microsoft Internet Explorer, Mozilla Firefox and Google Chrome).  This software reads the address to locate the information made available by a website operator and deliver it to an end user. 

6. A browser reads the underlying code of the page that is stored on the content owner’s computer (or host) and translates that code into a webpage visible to an end user.  The code commonly used is called the HyperText Markup Language or HTML (HTML), and is translated by the browser into what the user actually sees on his or her computer screen from lines of text bookended by code tags.

7. Google operates a search engine on a number of websites worldwide including google.com and google.com.au (Google search engine).  The google.com.au site is the website directed to users in Australia though both google.com and google.com.au are accessible by users in Australia. 

8. The Google search engine allows users to search for webpages on the web by entering search terms into the search engine’s search bar and clicking a button marked “Google Search” (search button).  Hundreds of millions of searches are conducted by users worldwide per day on the Google search engine.  Millions of search queries per day are conducted on google.com.au.  The Google search engine offers its users a means of locating pages that may be relevant to their needs.

9. When a Google user enters a search term and clicks on the search button, Google returns a list of matching webpages ranked in order of relevance determined by a formula used by Google for that purpose.  Those results (organic search results) are based entirely on relevance.  The exact method of determining relevance by Google is complex.  It is based not only on the content of each webpage, but on many other factors including the number and types of other websites that link to the relevant webpage.  The system uses a large number of signals to determine the ranking of a webpage.  They include the number of times one or more of the user’s search terms appear on the webpages Goggle has indexed, the location of the user’s search terms on such webpages as well as what is referred to as ranking technology which attempts to measure the relative importance of a webpage based on the number of times other webpages link to the webpage, and the importance of the other webpages that link to the webpage.

10. Web search engines are information retrieval systems designed to navigate the extensive information across the web using keywords or queries.  Search engines attempt to guess what a user wants based on his or her queries.  They typically deliver links to other locations on the web that the search engine has previously indexed.  A search engine does not usually provide the user with just one result but rather a list of results.  The results from a particular query might run to several pages or several hundreds of pages depending on the nature of the search and the volume of available information.

11. In order to provide organic search results in response to user queries, Google indexes a large number of the pages available on the web using a robot program that periodically “crawls” across any page that is open for crawling.  The underlying HTML coded text is copied and then indexed.  When a user enters a query and clicks on the search button, Google examines the index and applies a sequence of search algorithms across the index to derive a list of links to webpages which are delivered to the user as organic search results.  Google updates its search algorithms regularly. The index is refreshed continuously as the robot crawls the web so as to provide more up to date results.

12. While the same index may be used to generate results across various Google search domains worldwide, Google’s search algorithms allow Google to deliver results which are specific to a particular region.  Thus, a user who submits a query on may be presented regional results, which would not appear if the query had been submitted on

    Google’s AdWords

13. Google’s revenues are derived primarily from advertising through its program called AdWords.  AdWords advertising appears on the google.com and google.com.au websites as “Sponsored Links” which, when they appear, are located above the organic search results or to the right hand side of them.  Hundreds of thousands of AdWords customers advertise through the AdWords program.

14. A sponsored link is a form of advertisement.  Sponsored links are created by advertisers who are willing to pay for advertising text which incorporates a link that directs a user to a webpage of the advertiser’s choosing. Goggle provides its advertisers with access to the AdWords program which allows them to create, change and monitor the performance of their advertisements.  

15. When a user enters a query into the Google search engine, an “auction” occurs that determines which sponsored links to show, in which order to show them, and how much to charge the advertisers whose advertisements are displayed and clicked on by the user.

16. An AdWords customer may elect to trigger advertisements (or participate in an auction that may have that result) by exact match, phrase match or broad match.  Exact match will trigger sponsored links only if the query entered by the user is exactly the keyword chosen by the AdWords customer.  Phrase match will trigger sponsored links based on any word in the phrase.  Broad match triggers sponsored links based on known associations determined by Google’s search algorithms.

17. The factors that influence an auction include which AdWords customers have a sufficient budget to participate and the quality of the advertisement they have created.  Google first determines whether the advertisement is eligible to participate in the auction.  Eligibility is a function of several factors that determine the “Quality Score” of the advertisement.  The Quality Score takes into account factors such as the relevance of the advertisement to the query and the historical user experience of the page associated with that advertisement when it appears as a sponsored link.  The advertisements which are deemed eligible according to their Quality Score are subsequently ranked by virtue of the auction process.

18. The sponsored links which do appear are generated by the AdWords system, not the system that generates organic search results.  Each sponsored link generated by the AdWords system consists of a clickable headline that appears in blue, some text that appears in black, and a URL for the webpage to which the user will be taken if he or she clicks on the headline that appears in green.

19. The sponsored links that appear in a yellow shaded box marked “Sponsored Links” directly above the organic search results are referred to as the “top left sponsored links”.  The sponsored links that appear under the heading “Sponsored Links” on the right hand side of the organic search results are referred to as “right side sponsored links”.  Top left sponsored links occupy the most prominent position on the search results page.  This is because testing has shown that users of the Google search engine are likely to look to the upper left side of the first page. 

20. Not all queries result in top left sponsored links.  A small minority of search queries on the Google search engine worldwide generate top left sponsored links. This is because the auction process for most queries does not produce sponsored links for placement as top left sponsored links.  Mr Dulitz’s evidence did not explain in any detail why this might be so. 

21. Until April 2007, the shaded rectangular box containing the top left sponsored links was coloured blue.  It was thereafter coloured yellow.  Google’s decision to change to yellow followed the completion of a study which it undertook for the purpose of exploring the desirability of making such a change. 

    Geographic targeting of advertisements

22. AdWords allows advertisers to target their advertisements geographically.  If an advertiser prefers to target only Australian users it can indicate this in the AdWords interface.  AdWords also allows advertisers to target their advertisements at particular cities.  The Alpha Dog Training advertisement (referred to later in these reasons) was targeted at Melbourne with the consequence that, subject to special exceptions, it would be shown only to people using computers that had IP addresses located in Melbourne. 

    Google’s AdWords Terms of Service

23. Ms Kerry Barker was a “Policy Specialist” and is now a paralegal at Google.  Her role as a Policy Specialist involved creating, defining and implementing AdWords policies.  She gave evidence about the terms which AdWords customers are required to accept before participating in the AdWords program.  Although her evidence did not directly explain when such terms came into effect, it is apparent from the documents exhibited to her affidavit that Google’s Terms of Service had been in place since at least 16 April 2007 and Google’s AdWords Program Terms had been in place since at least 12 July 2006.  Her evidence, which I accept, was that the AdWords Program Terms had been available on the internet since the inception of the AdWords program in 2000 and that those terms had not been updated since 2006.  This is confirmed by other evidence before me, in particular, that of Mr Dulitz, who indicated that the AdWords program began in about 2000 and that sponsored links had been published on Google’s results pages since that time.  The following findings by me in relation to Google’s AdWords Terms of Service and Program Terms are based on Ms Barker’s evidence.

24. Participation in the AdWords program is subject to Google’s Terms of Service. Any new AdWords customer is prompted to accept the Terms of Service before accessing or activating an AdWords account. The account cannot be activated until acceptance of the Terms of Service has been affirmed. The Terms of Service are accessible by clicking on a link on the page which prompts the prospective advertiser to accept them.

25. Relevantly, Google’s Terms of Service include the following provisions:

    5.2You agree to use the Services only for purposes that are permitted by (a) the Terms and (b) any applicable law, regulation or generally accepted practices or guidelines in the relevant jurisdictions (including any laws regarding the export of data or software to and from the United States or other relevant countries).

    …

    5.6You agree that you are solely responsible for (and that Google has no responsibility to you or to any third party for) any breach of your obligations under the Terms and for the consequences (including any loss or damage which Google may suffer) of any such breach.

    …

    6.2Accordingly, you agree that you will be solely responsible to Google for all activities that occur under your account.

    …

    8.5You agree that you are solely responsible for (and that Google has no responsibility to you or to any third party for) any Content that you create, transmit or display while using the Services and for the consequences of your actions (including any loss or damage which Google may suffer) by doing so.

    …

    9.6Unless you have been expressly authorized to do so in writing by Google, you agree that in using the Services, you will not use any trade mark, service mark, trade name, logo of any company or organization in a way that is likely or intended to cause confusion about the owner or authorized user of such marks, names or logos.

    …

    16.2Google operates a trade mark complaints procedure in respect of Google’s advertising business, details of which can be found at http.//>

    In addition to the Terms of Service, all AdWords customers are required to agree to be bound by Google’s AdWords Program Terms. Prospective advertisers who create their account online are presented with the AdWords Program Terms via a link and are required to affirm their agreement to them, without which they will not be able to continue the process required to activate an AdWords account. Advertisers who wish to receive assistance from a Google customer support representative are usually required to execute a hard copy service agreement which incorporates the terms of the AdWords Program Terms.

26. Relevantly, the AdWords Program Terms include the following provisions:

    1.Policies. Program use is subject to all applicable Google and Partner ad specification requirements and policies, including without limitation the Editorial Guidelines (adwords.google.com.au/select/guidelines.html), Google Privacy Policy ( and Trademark Guidelines ( (collectively, “Policies”) … Google may modify ads to comply with any Policies …

    2.The Program.  Customer is solely responsible for all: (a) ad targeting options and keywords (collectively “Targets”) and all ad content, ad information, and ad URLs (“Creative”), whether generated by or for Customer; and (b) web sites, services and landing pages which Creative links or directs viewers to, and advertised services and products (collectively “Services”) ...

    4.Prohibited Uses; License Grant; Representations and Warranties. Customer shall not, and shall not authorize any party to: ... (c) advertise anything illegal or engage in any illegal or fraudulent business practice ...

    5.(“Use”). Customer represents and warrants that (y) all Customer information is complete, correct and current; and (z) any Use hereunder and Customer’s Creative, Targets, and Customer’s Services will not violate or encourage violation of any applicable laws, regulations, code of conduct, or third party rights (including, without limitation, intellectual property rights) …

    The AdWords Program Terms also contain provisions pursuant to which Google’s liability is limited and the advertiser indemnifies Google in respect of any liability arising out of the advertiser’s use of the AdWords program.

27. As appears from clause 1 of the AdWords Program Terms set out above, advertisers are required to abide by all Google policies including its Editorial Guidelines.  Google’s Editorial Guidelines contain the following provision relevant to the composition and use of sponsored links:

    Accurately represent your product or service.

    Your ads and keywords must directly relate to the content on the landing page for your ad. When users see your ad, they should be able to understand what kind of product, service, or other content they will find on your site. Products or services promoted in your ad must be reflected on your landing page; ads can be disapproved if a promoted product is not offered or available for sale as promised.

    As a basic rule, use clear, descriptive, and specific ad content that highlights the differentiating characteristics of your product/service. You can distinguish your ad by including your company name, line of business or by highlighting one specific product. If you offer a local service or product, you might want to indicate your location in your ad.

    Example:

    If your alterations business only services Adelaide, you might include ‘Adelaide’ in your ad text, mention your company’s particular specialty (such as ‘experts in reweaving fine garments’), and link to a page that displays this service.

28. I am satisfied that at all relevant times since about 2000 Google’s Terms of Services and the AdWords Program Terms have been to the same general effect as those identified by Ms Barker.

    Google’s trade mark policy

29. Ms Katherine Fowler, who described herself as a “Legal Support Analyst in the AdWords Trade Mark Team” at Google’s head office in Mountainview, California, gave evidence concerning Google’s trade mark policy.  Her evidence in chief was given by way of an affidavit made in March 2009.  She was cross-examined with a view to demonstrating that Google’s trade mark policy was somewhat ineffective and could be easily circumvented.  Ms Fowler’s evidence did not indicate exactly when the trade mark policy came into force but that it had been in place since at least 2006.  It is also clear from other evidence that the policy had been in force by the time that Mr James Brodie of Harvey World Travel raised a complaint in correspondence with a Google employee in May 2006.  The following findings by me regarding Google’s trade mark policy are based on Ms Fowler’s evidence.

30. Google has a trade mark policy to assist trade mark owners to prevent advertisers from using their trade marks in sponsored links. This trade mark policy (referred to in the AdWords Program Terms as the “Trademark Guidelines”) is a policy to which advertisers are expressly required to agree pursuant to clause 1 of the AdWords Program Terms.

31. Pursuant to the trade mark policy Google may, at the request of a trade mark holder, prevent advertisers from making any use of a qualified trade mark as a keyword (in some countries, including Australia) or in the text of a sponsored link. The policy operates on a notification basis, that is to say, on the basis of Google receiving a request or complaint from a trade mark holder relating to the use of its mark in a particular jurisdiction in relation to a particular good or service. A trade mark holder may notify Google about its trade mark rights, and how it wishes its mark to be dealt with, whether or not there has been any alleged infringement by an advertiser.

1. Pursuant to the trade mark policy, Google takes action in cases in which the complainant has trade mark rights in the relevant jurisdiction. For jurisdictions such as Australia, the policy extends to registered trade mark rights as well as common law rights in respect of unregistered marks. For the purposes of assessing common law rights, Google assesses both the use and distinctiveness of the mark.

2. Where it applies the trade mark policy, Google only blocks the use of a notified trade mark in the region and industry that are relevant having regard to the scope of the trade mark holder’s rights (whether those rights are defined by the scope of the registration or the use of the mark). The trade mark holder may indicate to Google that specific persons (such as resellers) are authorised to use the mark.

3. Ms Fowler gave the following evidence in cross-examination concerning Google’s trade mark policy:

   As you understand it, is it Google’s position that unless and until a trademark owner complains about the appearance of a trademark term, there’s nothing wrong with an advertiser using a trademark term in its advertisement including where the term comprises the headline?---We do not encourage use of trademarks as ad words.  Our terms and conditions explicitly state that advertisers are responsible for the content they choose to use in their ads.  However, we will not disapprove the use of trademarks without having received a trademark complaint from trademark owners. 

4. It is important to note that Ms Fowler was not aware of what training Google’s customer service representatives (including those referred to as “maximisers”) received nor was she in a position to know whether any particular customer service representative encouraged the use of trade marks in AdWords advertisements.  My strong impression based upon the evidence given in this case is that some of them do.  However, it does not follow that either the customer service representative or his or her employer has thereby been involved in or, much less, committed a wrong under Australia’s trade marks or consumer protection laws.  There are many circumstances in which the use of trade marks by advertisers, even those belonging to an advertiser’s competitor, is quite legitimate. 

   THE FIRST PART OF THE ACCC’S CASE:  GOOGLE’S ALLEGED FAILURE TO DISTINGUISH ADEQUATELY BETWEEN ORGANIC SEARCH RESULTS AND PAID ADVERTISEMENTS

5. The ACCC’s case based upon the overall appearance of the search results generated by the Google search engine was pleaded in some detail in the ACCC’s third further amended statement of claim (the statement of claim).  Relevantly, the ACCC alleges:

   10.When a person carries out a search on a website operated by Google Inc. the results are displayed on a results page in a format which:

   (a)includes search results:

   (i)generated by the hardware and software owned or licensed by Google Inc. (collectively the “Google Search Tool”) and used by Google Inc. to identify and rank relevant webpages as search results;

   (ii)listed on the left side of the results page in decreasing order of relevance as determined by the Google Search Tool; and

   (iii)the display of which generates no direct income for Google Inc.; and

   (b)may also include advertisements produced by the Adwords Program:

   (i)which appear on the results page only where an advertiser has selected key words that correspond, either exactly or substantially, to the words chosen by the person conducting the search;

   (ii)which appear at either, or both, of the following locations:

   (A)the top left side of the results page; and

   (B)the right side of the results page;

   (iii)in respect of which Google Inc. or one of its subsidiaries is entitled to be paid by the advertiser when a person clicks on the advertisement; and

   (iv)whose position and order on the results page is determined in part by the price per click that the advertiser has agreed to pay.

   Particulars

   [The particulars included a reproduction of the example of a results page set out above.]

   Google Inc’s failure to distinguish between search results and advertisements

   11.The results displayed on any Google Inc. website results page:

   (a)are listings of websites or webpages consisting of:

   (i)a blue underlined headline, which contains a hyperlink that takes a person who clicks on the headline or a part thereof to a predetermined webpage;

   (ii)black text; and

   (iii)a website, or webpage, address in green text;

   (b)show in bold text any part of the search term which generated the results; and

   (c)are listed under a heading in the format set out below:

   Web: Results 1-10 of about [n] for [search term]. (0.x seconds)

   12.Where the results page of a Google Inc. website includes advertisements at the top left of the page, the results page also displays:

   (a)a shaded area at the top of the page; and

   (b)the words “sponsored links” at the top right corner of the shaded area.

   Particulars

   (i)At all material times, there has been a maximum of three advertisements in the shaded area at the top left of the page.

   (ii)Until about April 2007, the shaded area was blue.

   (iii)Since about April 2007, the shaded area has been, and continues to be, a shade of yellow.

   (iv)The hue of the shaded area has at all material times varied according to the angle at which the computer screen is tilted or viewed.

   13.Where the results page of a Google Inc. website includes advertisements at the right side of the page, the results page also displays:

   (a)an advertisement or list of advertisements in a column at the right side of the page;

   (b)a vertical line to the left of the column on the right side of the page; and

   (c)the words “sponsored links” at the top of the column on the right.

   14.At all material times, Google Inc. in maintaining and operating its websites including and purported to rank search results on its results pages according to relative relevance (as determined by the Google Search Tool) to the search term entered;

   (b)has controlled the appearance of the results pages whose format cannot be modified by its advertising customers;

   (c)has published advertisements in the same or similar format as search results; and

   (d)has determined the position of advertisements on a results page proximate to the search results.

   15.At all material times, Google Inc. has had, and continues to have, a reputation in Australia for providing a search tool on its websites that ranks search results by reference to their relevance to the search terms entered.

   16.Where the results page of a Google Inc. website displays advertisements (whether on the top left or at the right of the page, or both), Google Inc. engages in misleading or deceptive conduct or conduct that is likely to mislead or deceive:

   (a)by failing adequately to distinguish between search results and advertisements; and/or

   (b)by failing to identify advertisements as such.

   Particulars

   Where advertisements appear only at the top left of the results page

   (i)the appearance of search results and advertisements is essentially the same;

   (ii)there is no appreciable difference between the nature of the results listed on the results page in that:

   (A)each is generated by the same search term; and

   (B)each pertains to a general subject matter that embraces the search term;

   (iii)both advertisements and search results are listed below the heading:

   Web: Results 1-10 of about [n] for [search term]. (0.x seconds)

   (iv)advertisements and search results run together on the left side of the result page;

   (v)the overall impressions created by each of (i), (ii), (iii) and (iv), and any combination thereof, are that the results listed:

   (A)are search results generated by the Google Search Tool and are displayed in decreasing order of relevance; and/or

   (B)are not advertisements;

   (vi)the following features of the results page are insufficient to counteract the overall impressions (referred to in (v) above) otherwise created by the listing of the advertisements and search results:

   (A)the shaded area at the top of the page;

   (B)the words “sponsored links” at the top right corner of the shaded area;

   (vii)the term ‘Sponsored Links’ as it appears on such a results page:

   (A)is itself ambiguous; and

   (B)does not have, as its primary meaning, advertisement.

   Where advertisements appear only at the right of the results page

   The ACCC repeats particulars (i), (ii), (iii) and (vii) above in respect of the results which appear on such a results page and also relies on the following:

   (viii)the overall impressions created by each of (i), (ii) and (iii) and any combination thereof are that the results listed:

   (A)are search results generated by the Google Search Tool and are displayed in decreasing order of relevance; and/or

   (B)are not advertisements.

   (ix)the following features of the results pages are insufficient to counteract the overall impressions (referred to in (viii) above) otherwise created by the listing of the advertisements and search results:

   (A)the column on the right side of the results page;

   (B)the vertical line to the left of the column on the right side of the results page; and

   (C)the words “Sponsored Links” at the top of the column on the right.

   Where advertisements appear both at the top left and the right of the results page

   The ACCC repeats particulars (i) - (iv) and (vii) above in respect of the results which appear on such a results page and also relies on the following:

   (x)the overall impressions created by each of (i), (ii), (iii) and (iv) and any combination thereof are that the results listed:

   (A)are search results generated by the Google Search Tool and are displayed in decreasing order of relevance; and/ or

   (B)are not advertisements.

   (xi)the features set out in particulars (vi) and (ix) above are insufficient to counteract the overall impressions (referred to in (x) above) otherwise created by the listing of the advertisements and search results.

   I make the following observations in relation to this part of the ACCC’s pleaded case. 

6. First, subject to one exception, the matters alleged in paras 11, 12 and 13 of the statement of claim were clearly established by the evidence and by the time of closing address (if not before) were not controversial.  That is to say, there was essentially no dispute between the parties about the particular features of layout and appearance of the results pages of searches conducted with the Google search engine.  The exception to this relates to the allegation made in the particulars to para 12(b) of the statement of claim which asserts that “[t]he hue of the shadowed area [varies] … according to the angle at which the computer screen is tilted or viewed.”  However, this allegation was not the subject of any evidence and the ACCC’s closing submissions make no reference to it.  In the circumstances I consider it reasonable to assume that this allegation is no longer relied upon by the ACCC in support of any aspect of its case. 

7. Secondly, as to the allegations made in para 14(a) of the statement of claim, it is clear that Google does not make any express representation on the search pages at or that the Google search engine produces search results that are ranked according to “relative relevance” nor does it do so on any of its search results pages.  However, the ACCC relies upon an assortment of express representations made by officers and employees of Google on various occasions between 2000 and 2007 as proof of the matters alleged in para 14(a) of the statement of claim.  The evidence relating to these express representations was received by me subject to an objection raised by Google to which I will return later in these reasons. 

8. Thirdly, para 14(b) of the statement of claim is a matter about which I am satisfied provided it is recognised that it is the third parties who advertise with Google through the AdWords program that generally determine what is to appear in the headline or text of the advertisement.  Of course, they do this within limits set by Google which places restrictions on the appearance and content of the headline and text that make up the advertisement as well as when and how often the advertisement will appear. 

9. Fourthly, I am satisfied that the allegations made in para 14(c) and (d) of the statement of claim are essentially correct though para 14(c) must also be read subject to some important qualifications.  In particular, the format of the advertisements are different to the organic search results in two significant respects:

   ·any advertisements appearing above the organic search results appear within a shaded rectangular box in which the words “Sponsored Links” appear;

   ·any advertisements appearing on the right hand side of the results page are headed with the words “Sponsored Links” and separated from the search results appearing on the left by a vertical line.

10. Paragraphs 15 and 16 of the statement of claim are central to the first part of the ACCC’s case.  The starting point is the allegation that Google has a reputation in Australia for providing a search tool that ranks search results by reference to their relevance to the search terms entered (para 15).  It is then asserted that Google engages in misleading or deceptive conduct or conduct that is likely to mislead or deceive by failing adequately to distinguish between search results and advertisements and by failing to identify advertisements as such (para 16).

11. The allegation that Google has a reputation as a provider of a search tool that ranks search results by reference to their relevance to the search terms entered was the subject of considerable discussion at the trial.  But for the way in which the ACCC’s case has been pleaded, I would not have thought that Google’s reputation in Australia as a search engine provider has any relevance to Google’s alleged failure to distinguish advertisements from organic search results.  To the extent that any such reputation might be considered relevant, I think it is mostly likely that which arose out of the extensive use made of the Google search engine by the Australian public.  Subject to the change from blue to yellow that occurred in 2007, Google’s search results were at all relevant times presented to users in substantially the same form, with sponsored links appearing both above and to the right of the organic search results.

12. Significantly, various statements by senior employees of Google relied upon by the ACCC suggested that Google has never actively marketed its search engine apart from issuing press releases and either holding or participating in conferences.  Google apparently prefers to rely on word of mouth much of which, I infer, will consist of recommendations made by people who have used the Google search engine and who are likely to have formed their own views as to how good or bad a search engine it is.

13. I can see that, in theory at least, Google’s reputation in Australia might be relevant to the ACCC’s case if it was established that Google had a reputation in Australia as an advertisement free search engine or as one which clearly distinguished advertisements from organic search results.  But the ACCC did not attempt to prove that Google had any such reputation; on the contrary, it is the ACCC’s case that Google has never clearly distinguished sponsored links from organic search results. 

    THE SECOND PART OF THE ACCC’S CASE:  THE USE OF COMPETITORS’ NAMES IN THE HEADLINES

14. As I have mentioned, the second part of the ACCC’s case is based upon eleven distinct claims involving various advertisers and sponsored links.  Each of these sponsored links is said by the ACCC to be misleading or deceptive or likely to mislead or deceive because it included a headline which linked to the advertiser’s webpage rather than to a webpage of the advertiser’s competitor whose trading or product name featured in the headline.

15. The pleaded allegations relating to these eleven claims are cast in very similar form.  Three of these claims relate to advertisements published by Trading Post while the remaining eight relate to advertisements by other advertisers who are not parties to this proceeding.  It is appropriate that I make findings in relation to all eleven claims even if I conclude that it is the advertiser, and not Google, that makes the relevant representations.  At this stage, however, I shall concentrate on the way in which the ACCC has pleaded its case against Trading Post and Google. 

16. The first and second of the eleven claims relate to what I shall refer to as the “Kloster Ford” and the “Charlestown Toyota” advertisements respectively.  These are the only advertisements in relation to which the ACCC seeks relief against both Trading Post and Google.  The claim based upon the Kloster Ford advertisement is pleaded by the ACCC in paras 17-29 of the statement of claim in these terms:

    17.During 2005 and 2006, Trading Post, by its agent Downstream Australia, and Google Ireland agreed that Trading Post would advertise on Google Inc.’s websites using the Adwords Program.

    18.At material times, Downstream Australia and Google Ireland arranged for the placement of advertisements on selected Google Inc. websites in the following way:

    (a)Trading Post provided Downstream Australia with a list of key words which included “Kloster Ford” and “Charlestown Toyota”;

    (b)Downstream Australia selected, inter alia, “Kloster Ford” and “Charlestown Toyota” as key words; and

    (c)Downstream Australia provided to Google Australia the key words selected and the text of the advertisement into which a key word or key words would be inserted.

    19.At material times, the key words selected by Downstream Australia, including “Kloster Ford” and “Charlestown Toyota” were uploaded into Google Inc.’s system in order that they would generate advertisements for Trading Post on Google Inc.’s websites when the key words were selected by a person conducting a search.

    20.“Kloster Ford” was at all material times the registered business name of PPT Investments Ply Ltd, which operates Ford car dealerships in the Newcastle area in New South Wales.

    21.      At all material times, PPT Investments Pty Ltd, trading as Kloster Ford:

    (a)       neither sold products on or through the Trading Post Site;

    (b)      nor had any other connection with Trading Post or its business.

    22.On or about 28 August 2005, Trading Post advertised its business and the Trading Post Site on at least one Google Inc. website in the format set out at the top of the left side of the results page pictured at Schedule B (Kloster Ford Advertisement).

    Particulars

    The advertisement appeared on the website. Further particulars of other websites on which the advertisement appeared may be provided following discovery.

    23.If a person clicked on, or in proximity to, the headline of the Kloster Ford Advertisement he or she was taken to the Trading Post Site.

    24.By publishing the Kloster Ford Advertisement, Google Inc. and Trading Post made each of the following representations:

    (a)by clicking on the result at the top of the left side of the results page at Schedule B a person would be taken to a website associated with Kloster Ford;

    (b)there was an association between Trading Post and Kloster Ford;

    (c)there was an affiliation between Trading Post and Kloster Ford;

    (d)Kloster Ford approved of the link between its name and the Trading Post Site;

    (e)Kloster Ford had paid for the link between its name and the Trading Post Site;

    (f)Kloster Ford was a sponsor of the Trading Post Site;

    (g)information regarding Kloster Ford could be found at the Trading Post Site; and

    (h)information regarding Kloster Ford car sales could be found at the Trading Post Site

    (Kloster Ford Representations).

    25.In addition to making the Kloster Ford Representations, Google Inc., by publishing the Kloster Ford Advertisement also made each of the following representations:

    (a)the Kloster Ford Advertisement was a search result;

    (b)the position of the Kloster Ford Advertisement on the results page was the result of its relative relevance (as determined by the Google Search Tool) to the words “Kloster Ford”; and

    (c)the Kloster Ford Advertisement was not an advertisement.

    26.Each of the Kloster Ford Representations and the representations alleged in paragraph 25 was made in trade or commerce.

    27.By making each or any of the Kloster Ford Representations, Google Inc. and Trading Post have engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in that:

    (a)a person who clicked on the result at the top of the left side of the results page at Schedule B would be taken to the Trading Post Site which was not a website associated with Kloster Ford;

    (b)there was no association between Trading Post and Kloster Ford;

    (c)there was no affiliation between Trading Post and Kloster Ford;

    (d)Kloster Ford had not approved the link between its name and the Trading Post Site;

    (e)Kloster Ford had not paid for the link between its name and the Trading Post Site;

    (f)Kloster Ford was not a sponsor of the Trading Post Site;

    (g)there was no information regarding Kloster Ford at the Trading Post Site; and

    (h)there was no information regarding Kloster Ford car sales at the Trading Post Site.

    28.By making each, or any, of the Kloster Ford Representations set out in subparagraphs 24(b) to (f) Trading Post has represented that it has a sponsorship, approval or affiliation that it does not have.

    29.By making each or any of the representations alleged in paragraph 25, Google Inc. has engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in that:

    (a)the Kloster Ford Advertisement was not a search result;

    (b)the Kloster Ford Advertisement was an advertisement;

    (c)the position of the Kloster Ford Advertisement was determined in part by the price per click that Trading Post had agreed to pay; and

    (d)the position of the Kloster Ford Advertisement was not the result of any relative relevance (as determined by the Google Search Tool) of the words “Kloster Ford” to the Trading Post Site.

    There are a number of things I will say about these paragraphs of the statement of claim. 

1. Mr Fontana was also an AdWords customer advertising with Google.  The first of a number of right side sponsored links appearing on the same results page was an advertisement for one of Mr Fontana’s other businesses, Canine Communications, which had the name Alpha Dog Training as its headline: 

   Alpha Dog Training
   Dog & puppy training.  Behavioural problem solving.  Free info booklet.  >

   On 13 March 2008 Mr Fontana sent an e-mail to Google which was responded to the next day by Ms Casey-Lee Atherton of the Google Australia & New Zealand AdWords Team.  Mr Fontana’s e-mail was entitled “Fraudulent use of our business name”.  In it Mr Fontana complained about the sponsored link to the website at DogTrainingAustralia.com.au which he stated was the website of a competitor also operating in Melbourne.  He also pointed out, correctly, that Alpha Dog Training was the registered name of his business and that he considered that the use being made of his business name was “blatantly misleading”.  Ms Atherton’s response to Mr Fontana’s e-mail was, relevantly, as follows:

   Google appreciates your bringing this sort of matter to our attention. However, as a provider of space for advertisements, we are not in a position to intervene in disputes over the use of registered business names. As stated in our Terms and Conditions, advertisers are responsible for the keywords and ad text that they choose to use.

   If you have concerns regarding the business practices of ‘DogTrainersAustralia.com.au’ [sic] I would suggest that you take them up directly with that company in the first instance, or with the Consumer Affairs Department of Victoria or, with the State’s department in which you have registered your business name (for example, in NSW you would approach the Office of Fair Trading) if that fails.

   In addition, you may like to trademark your business name with IP Australia. Google takes allegations of trademark infringement very seriously and, as a courtesy, we’re happy to investigate matters raised by trademark owners. The trademark owner is not required to be a Google AdWords advertiser in order to send a complaint or file notice of their trademark with Google. Once you have registered your business name as a trademark then you may file notice of it with Google by completing the Trademark Complaint Form accessible to you at this link: >

   On 27 March 2008 Mr Fontana carried out another search of the name Alpha Dog Training and the same sponsored link which was the subject of his earlier complaint to Google reappeared on the results page.  On 1 April 2008 Mr Fontana telephoned Mr Harkin of Ausdog – The Dog Trainer Pty Ltd (Ausdog) and complained to him.  The next day Mr Fontana carried out the same search and saw there was no further reappearance of Ausdog’s sponsored link.  I infer that Mr Harkin moved quickly to ensure that it would no longer appear soon after he received Mr Fontana’s complaint. 

2. Ms Conroy also gave evidence in relation to the Alpha Dog Training advertisement.  Her evidence established that the AdWords account for Ausdog was also managed by Ms Taylor of Agency XYZ.  Ms Conroy’s evidence established that at the time the Ausdog’s AdWords account was established an AdWords campaign called “Generic Dog Training” was created by Agency XYZ.  Her evidence also showed that on 16 December 2007 Agency XYZ uploaded 3 text ads and 239 keywords including the following 15 “alpha dog” keywords:

   alpha dog training
   alphadog
   alphadogtraining
   alpha dog trainer
   alpha dogtraining.com.au
   alpha dogtraining com au
   alpha dog training.com au
   alpha dog training.com.au
   alpha dog training com au
   alphadogtraining.com.au
   alphadog com.au
   alphadog.com au
   alphadog com au
   alphadog.com.au

   alphadogtrainer

3. On the same date that the 239 keywords were uploaded, Google’s automated systems reviewed and approved the keywords.  It is apparent from a change history report which is in evidence that the vast majority of all 239 keywords consisted of the names of dog breeds or generic words and phrases that describe dog training services which may have been offered by Ausdog.  In particular, apart from the 15 alpha dog keywords and, perhaps, the “bark busters” keyword, there is no reason to think that any other keywords consisted of a name or mark under which any of Ausdog’s competitors carried on business. 

4. The evidence also establishes that on 2 April 2008 (the day after Mr Fontana spoke to Mr Harkin) Agency XYZ took some steps to ensure that “alpha dog training” did not reappear as the headline of any Ausdog sponsored link and that on 12 April 2008 Agency XYZ deleted all “alpha dog” keywords from the Ausdog account. 

5. The ACCC alleged that by publishing the Alpha Dog Training advertisement Google made various representations including the following:

   ·by clicking on the Alpha Dog Training Advertisement a person would be taken to a website associated with the Alpha Dog Training Business;

   ·there was an association between the Alpha Dog Training Business and the Ausdog Site;

   ·information regarding the Alpha Dog Training Business could be found at the Ausdog Site; 

6. Although the evidence lead by the ACCC concerning the extent of Mr Fontana’s trading activities using the name “Alpha Dog Training” was scant, it is apparent from Mr Fontana’s evidence that he has carried on business under the name Alpha Dog Training in Victoria since 1996.  Thus, by the time the Ausdog’s AdWords account was established, Mr Fontana had been carrying on business as Alpha Dog Training for about 12 years. 

7. Further, while the keywords included in the relevant AdGroup consist almost entirely of generic words and phrases, the 15 alpha dog keywords that were deleted on 7 April 2008 were of a different character.  I infer that they were included by Agency XYZ because of their special signification in Victoria where there were likely to be a significant number of people who knew of Mr Fontana’s business.  For reasons I have stated in relation to the Just Listed advertisement, it does not follow merely because Agency XYZ or its client knew that the 15 alpha dog keywords would be understood to refer to the business or the website of the business trading as Alpha Dog Training that there was necessarily any intention to mislead or deceive.  At the very least, however, the use of these keywords in the Ausdog account is further evidence of Mr Fontana’s reputation in the name and points to the existence of a class of people who were likely to associate it with Mr Fontana’s business. 

8. Mr Fontana was cross-examined with a view to demonstrating that “alpha dog” (in the sense of “top dog” or “leader of the pack”) and “alpha dog training” are descriptive phrases.  To some extent they are.  But I do not think they are so descriptive that they might not become distinctive of a dog training business, even one that specialised in the training of what some professional dog trainers might sometimes refer to as “alpha” dogs. 

9. Some of Mr Fontana’s oral evidence was a little confusing.  However, having considered it closely, and other evidence relied upon by Google on this issue, I do not accept, as was submitted by Google, that the expression “alpha dog” is commonly used to describe a dog with a certain personality trait.  Nor do I accept Google’s submission, at least not in its unqualified terms, that Alpha Dog Training is an expression that all dog trainers are free to use.  Whether or not a dog trainer is free to use that expression depends upon the circumstances including where, how and in what context it is used.  

10. In my opinion the publication of the Alpha Dog Training advertisement was likely to mislead or deceive ordinary and reasonable members of the relevant class.  First, it was likely to mislead or deceive people living in Victoria who knew of Mr Fontana’s business or were looking for information concerning it to believe that it was associated in some way with Ausdog.  Similarly, it was likely to lead the same people to believe that by clicking on the Alpha Dog Training advertisement they 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. 

11. Accordingly, I am satisfied that the Alpha Dog Training advertisement was in these respects misleading or deceptive or likely to mislead or deceive ordinary and reasonable members of the relevant class.  I am not satisfied that any of the other representations relied upon by the ACCC were conveyed by the Alpha Dog Training advertisement.  Nor am I satisfied, for reasons which I have already explained, that any of the representations that were conveyed were made by Google.

    Section 85(3)

12. By the time the Alpha Dog advertisement appeared on 27 March 2008, Ms Atherton had received and responded to Mr Fontana’s e-mail of 13 March 2008. In those circumstances I am satisfied that Google had reason to suspect that the publication of the Alpha Dog advertisement from on or about 13 March 2008 would amount to a contravention of s 52(1) of the Act. It follows that if I had found that the misleading and deceptive representation conveyed by the Alpha Dog advertisement had been made by Google, I would have rejected Google’s defence based upon s 85(3) of the Act.

    The Nilsen Advertisement

13. The ACCC called evidence from a number of witnesses in relation to the Nilsen advertisement.  It was a top left sponsored link that appeared on 17 December 2007 in response to a search of the word “Nilsen” and was in the following terms:

    Nilsen

    Electrical Installation, Testing Maintenance, Commissioning.

    The Nilsen advertisement was the only sponsored link to appear on the results page.  It included a link to the website at highenergysolutions.com.au.  That is the website of High Energy Solutions Pty Ltd (High Energy Solutions).  Immediately below the Nilsen advertisement was an organic search result with the same headline including a link to the website at nilsen.com.au.  That is the website of Oliver J. Nilsen (Australia) Limited (Nilsen Australia).

14. Evidence was given by Mr Oliver Mark Nilsen, the managing director of Nilsen Australia.  Nilsen Australia is a long established business that supplies electrical services and equipment particularly in the “high energy” area.  It is the registered owner of Australian trade mark number 423995 for the word “Nilsen” which was registered with effect from 19 March 1985 for goods in class 9 consisting of “Electric circuitry apparatus in Class 9, including fuses, fuseboards, service fuses, enclosed switchgear, electric bells and buzzers, transformers, switches and electric links.”

15. On 16 December 2007 Mr Gary Rothville, a director of Nilsen Australia and its solicitor, wrote to Google Australia complaining about the Nilsen advertisement.  He alleged that High Energy Solutions was engaging in passing off and demanded that Google withdraw the Nilsen advertisement.  It is clear from other evidence that Mr Rothville’s letter was not received by Google until about 2 January 2008.  Ms Fowler of the Google AdWords Trademark Team replied to Mr Rothville’s letter by e-mail dated 7 January 2008.  Mr Rothville does not appear to have responded to her e-mail. 

16. On 18 December 2007, at Mr Nilsen’s request, Mr Rothville also wrote to High Energy Solutions.  Although High Energy Solutions appears not to have responded to that letter, Mr Nilsen’s evidence was that he carried out further searches after 17 December 2007 but that it was not until around 15 January 2008 that he noticed that the Nilsen advertisement no longer appeared in response to his searches for “Nilsen”.  Evidence from Ms Fowler established that the Nilsen advertisement ceased because High Energy Solutions did not pay the amount outstanding under its AdWords account. 

17. High Energy Solutions was incorporated in March 2007 by two former employees of Nilsen Australia, Mr Dylan Danyluk and Mr Jacques Pang, even though, as Mr Nilsen was quick to point out, they were employed by Nilsen Australia until June 2007.  There is no evidence to suggest that Mr Danyluk and Mr Pang were not qualified to maintain or service electrical equipment originally installed by Nilsen Australia or its related companies.  On the contrary, I infer that they were.  The evidence showed that Mr Danyluk was employed by Nilsen NSW Pty Ltd (Nilsen NSW), a subsidiary for Nilsen Australia, for more than seven years. 

18. Mr Nilsen gave evidence that High Energy Solutions did not have any commercial or other relationship with Nilsen Australia and that High Energy Solutions is a direct competitor of Nilsen Australia.  However, his evidence also established that High Energy Solutions provided services to Nilsen NSW under sub-contracting arrangements apparently overseen by the service manager employed by Nilsen NSW.  Such arrangements appear to have been entered into before and after the Nilsen advertisement appeared.

19. The website of High Energy Solutions included a webpage entitled “Company Profile”.  The following statements appeared on that webpage:

    ·High Energy Solutions is a Sydney based company which specialises in all high energy electrical services;

    ·High Energy Solutions has well trained and highly qualified technicians to meet your electrical needs with 24 hour emergency breakdown assistance;

    ·High Energy Solutions is able to provide its specialised electrical services Australia wide, with very competitive rates.

    Appearing on the same webpage were the words “services on all makes and models”.  Beneath those words appeared about twenty brand names and logos including the Nilsen name and some very well known names and marks such as those of G.E., Westinghouse, Siemens and Mitsubishi Electric.  While the evidence of what appears on the website is incomplete, it is consistent with what is likely to be the fact, that is, at relevant times High Energy Solutions was carrying on business maintaining and repairing high energy electrical installations including those manufactured and installed by Nilsen Australia or its related companies. 

20. According to Mr Nilsen’s evidence, Nilsen Australia manufactures, or licences others to manufacture, electrical equipment which is supplied for use in new and existing electrical installations.  He accepted in cross-examination that it also supplies electrical equipment in the ordinary course of business to competitors such as High Energy Solutions.  Presumably the competitors use this equipment when servicing electrical installations previously supplied and installed by Nilsen Australia or its related companies.  Mr Nilsen did not know whether these products were sold by Nilsen Australia under the Nilsen mark but he did say that some of these products were sold under the name Nilstat.  Of course, that does not exclude the possibility that they were also sold under the Nilsen mark.  The evidence showed that two Nilstat DPB protection relays were supplied by Nilsen NSW to High Energy Solutions for slightly more than $5,000 in January 2008.  The Nilsen mark appeared on the invoices relating to those sales.

21. In the statement of claim, the ACCC alleged that by publishing the Nilsen advertisement Google made various representations including the following:

    ·by clicking on the Nilsen Advertisement a person would be taken to a website associated with the Nilsen Business;

    ·there was an association between the Nilsen Business and the High Energy Solutions Business;

    ·the Nilsen Business approved of the link between the word “Nilsen” and the High Energy Solutions Site;

    ·the Nilsen Business had paid for the link between the word “Nilsen” and the High Energy Solutions Site;

    ·the Nilsen Business was a sponsor of the High Energy Solutions Site;

    ·information regarding the Nilsen Business could be found at the High Energy Solutions Site;

    ·information regarding the electrical services offered by the Nilsen Business could be found at the High Energy Solutions site.

    The expression “Nilsen Business” was defined to refer to the business known as “Nilsen” providing specialised electrical services throughout Australia, including the provision of high energy electrical system maintenance and construction services to major building and industrial sites.  The expression “High Energy Solutions Business” was defined to refer to the business which High Energy Solutions carried on providing high energy electrical system maintenance and construction services.  The ACCC alleged that each of the representations upon which it relied was misleading or deceptive or likely to mislead or deceive in that none was correct and that:

    … although a subsidiary of Nilsen occasionally engaged in a labour hire arrangement with High Energy Solutions and sold products to High Energy Solutions there was no other commercial relationship between Nilsen and High Energy Solutions.

22. I do not think the Nilsen advertisement would be likely to mislead or deceive if, at relevant times, the true position was that High Energy Solutions was engaged in the business of maintaining or servicing electrical installations supplied by Nilsen Australia or its related companies or supplying genuine Nilsen branded products.  Of course, in saying this I have in mind a situation in which such activities were engaged in by High Energy Solutions in good faith and not as a mere subterfuge undertaken in order to justify what was in reality a “half truth”.  But the evidence called by the ACCC in relation to the Nilsen advertisement did not establish that it conveyed a “half truth” nor, in particular, did it establish that High Energy Solutions was not genuinely engaged in the business of maintaining or servicing electrical equipment originally supplied and installed by Nilsen Australia or its related companies using genuine Nilsen parts. 

23. In my view, it has not been established that, at any relevant time, electrical equipment supplied by Nilsen Australia was not also available from High Energy Solutions or that High Energy Solutions was not offering to supply, or not able to supply, goods and services related to the maintenance or repair of electrical installations originally supplied and installed by Nilsen Australia or its related companies. 

24. Accordingly, while I am satisfied that the Nilsen advertisement represented that there was an association between Nilsen and High Energy Solutions, I am not satisfied that such a representation was misleading or deceptive or likely to mislead or deceive.  In particular, the ACCC has not satisfied me that there was no relevant association between High Energy Solutions and Nilsen Australia.  As to the other representations relied upon by the ACCC, I am not satisfied that any of them was made.  Nor am I satisfied that any of the representations relied upon by the ACCC was made by Google. 

    The Just 4 x 4s Magazine Advertisement

25. The Just 4 x 4s Magazine advertisement as it appeared on 29 May 2007 (Schedule 4) was a top left sponsored link.  There were two top left sponsored links and a larger number of right side sponsored links on the results page.  The Just 4 x 4s Magazine advertisement, and the other top left sponsored link immediately above it, were in the following terms:

    Just Car Insurance
    Competitive car insurance for young drivers.  Check out our new web site

    Just 4x4s Magazine

    New & Used 4WD Cars – See 90,000+ Auto Ads Online.  Great Finds Daily!

    The evidence established that the Just 4 x 4s Magazine advertisement appeared in answer to a search query for “just 4x4s magazine” and that this name appeared in the headline of the Just 4 x 4s Magazine advertisement by reason of keyword insertion.  Curiously, while it is alleged that the Just 4 x 4s Magazine advertisement was published by Google, no such allegation is made against Trading Post even though it is clear that Trading Post was the advertiser. 

1. The Trading Post account relevant to the Just 4 x 4s Magazine advertisement was the Trading Post (TP Autos 2) account.  Mr Wood also gave evidence in relation to this account.  It was opened by Sensis on 21 November 2006.  Mr Eric Wan of Sensis was nominated as its contact person.

2. According to Mr Wood’s evidence, on 26 December 2006 Mr Wan uploaded the keyword “just 4x4s magazine” to the Trading Post (TP Autos 2) account in a batch of 246 keywords.  These were uploaded by Mr Wan without any assistance from Mr Wood or any other representative of Google.  I am satisfied on the basis of his evidence that the keyword “just 4x4s magazine” was not selected or recommended by Google. 

3. The ACCC called evidence from Mr Hunter who is the Chief Executive Officer and Managing Director of Just Magazines Pty Ltd (Just Magazines).  In his affidavit affirmed in May 2008, he stated that Just Magazines was the publisher of various magazines published throughout Australia including a magazine titled “Just 4 x 4s”.  Mr Hunter gave evidence that the magazine published by Just Magazines under the name “Just 4 x 4s” contains classified advertisements for four wheel drive vehicles.  He also gave evidence that Trading Post was a competitor of Just Magazines and that Just Magazines had never had any commercial or other relationship with Trading Post.

4. In its final submission Google drew attention to the lack of any specific information in Mr Hunter’s evidence as to the numbers of copies of “Just 4 x 4s” that had been distributed by Just Magazines by May 2007 or the manner in which the name had been used by Just Magazines up to that time.  The absence of such evidence was, according to Google, all the more problematical given the highly descriptive nature of the magazine’s title. 

5. Leaving aside those representations relevant to Google’s alleged failure to distinguish between sponsored links and organic search results, there are six relevant representations that are alleged to have been made by Google as a result of it having published the Just 4 x 4s Magazine advertisement.  These are to the same effect as those alleged to have been conveyed by the Kloster Ford advertisement though, of course, they relate expressly to Just 4 x 4s Magazine rather than Kloster Ford.  Whether such representations were conveyed by the publication of the Just 4 x 4s  Magazine advertisement depends upon, among other things, whether there was a relevant class of consumer who knew of Just 4 x 4s Magazine at the time of publication of the Just 4 x 4s Magazine advertisement.  More particularly, the ACCC must establish that there was a relevant class of consumer to whom “Just 4 x 4s Magazine” signified a particular publication known by that name.  The evidence relied upon by the ACCC for this purpose was thin.

6. So far as the descriptive nature of the expression “Just 4 x 4s” is concerned, there are two points to make.  First, it is clear that a name consisting of descriptive words may become distinctive of a particular business: see, for example, BM Auto Sales Pty Ltd & Anor v Budget Rent A Car System Pty Ltd (1976) 12 ALR 363 in which case the High Court held that the name “Budget Rent A Car” had become distinctive of the plaintiff’s business in various parts of Australia. Secondly, the name “Just 4 x 4s Magazine” as used in the headline of the Just 4 x 4s Magazine advertisement was used by the advertiser not to describe its own publication but to refer to a magazine published under that name by the advertiser’s competitor. That use seems to be of a completely different character to the descriptive use of the expression “just 4 x 4s magazine” appearing in the first of the organic search results on the results page published on 29 May 2007.

7. The evidence going to Just Magazines’ reputation in the name “Just 4 x 4s Magazine” as at the relevant date included the evidence of various Australian trade marks owned by Just Magazine.  The most relevant for present purposes is registered trade mark number 1081634 for “Just 4 x 4” in respect of various goods and services in classes 9, 16 and 41 including “printed matter and printed publications … magazines” and “publishing services including the provision of electronic publications and on-line magazines”.  This trade mark was applied for by Just Magazines on 19 October 2005 and accepted for registration on 3 December 2007.  The evidence indicates that in accepting the mark for registration the Registrar of Trade Marks (the Registrar) applied the provisions of s 41(5) and s 44(3) of the Trade Marks Act1995 (Cth). Section 41(5) allows for the registration of a trade mark that the Registrar finds is to some extent inherently adapted to distinguish provided he or she is satisfied that the trade mark does or will distinguish while s 44(3) allows for registration in circumstances where there has been honest concurrent use of two marks. The short point is that the Registrar’s decision to register the trade mark in reliance upon these provisions suggests that the trade mark had been in use by Just Magazines since at least 19 October 2005. The cross-examination of Mr Hunter did not suggest otherwise.

8. I infer that Just Magazines was using the mark “Just 4 x 4” or “Just 4 x 4s” as the title of the magazine it published for some years prior to the time the “Just 4 x 4s Magazine” advertisement was published by Trading Post and that this magazine was likely to have been well known to four wheel drive enthusiasts prior to that time.  I also infer that the keyword “just 4x4s magazine” was uploaded by Mr Wan of Sensis to the Trading Post (TP Autos 2) Account because it was well known to Trading Post (even if not to Mr Wan) that people interested in four wheel drive vehicles would use the Google search engine not only to search for information relating to four wheel drive vehicles generally but also information concerning four wheel drive vehicles published in Just 4 x 4s Magazine or on a website associated with that publication.  In the circumstances, I am satisfied that in May 2007 a significant number of people in Australia interested in four wheel drive vehicles would have understood “Just 4 x 4s Magazine” to signify the magazine published by Just Magazines under that name. 

9. I am also satisfied that by the publication of the Just 4 x 4s Magazine advertisement Trading Post made a representation that there was a commercial association between the Just 4 x 4s Magazine and Trading Post and a representation that information regarding Just 4 x 4s Magazine could be found at the Trading Post website.  The precise nature of the commercial association represented to exist hardly matters because, as Mr Hunter’s evidence made clear, Just Magazines and Trading Post are competitors which have never shared any commercial relationship.  From this evidence I also infer that a person visiting the Trading Post website would be unlikely to find any information at that site regarding the Just 4 x 4s Magazine. 

10. In the circumstances, I am satisfied that representations conveyed by the Just 4 x 4s Magazine, being those I have identified, were misleading or deceptive or likely to mislead or deceive.  However, I am not satisfied that any of the other representations relied upon by the ACCC were conveyed by the Just 4 x 4s Magazine advertisement.  Nor am I satisfied that any of the representations said by the ACCC to have been conveyed by the Just 4 x 4s Magazine advertisement were made by Google. 

    Section 85(3)

11. As I have already found, the keyword “just 4x4s magazine” was not selected or recommended by Google and was uploaded to the Trading Post (TP Autos 2) account by Mr Wan of Sensis without any assistance from any representative of Google.  However, in opening the ACCC asserted that the original statement of claim in this proceeding was served on Google Australia on 11 July 2007 and that it would have come to Google’s attention on or shortly after that date.  The original statement of claim made express reference to the Just 4 x 4s Magazine advertisement as an example of “continuing conduct”.

12. The evidence showed that the Just 4 x 4s Magazine advertisement was published on 18 July 2007. It is possible that the original statement of claim did not come to Google’s attention until shortly prior to 18 July 2007 or perhaps some time thereafter. But there was no evidence called by Google directed to that question. In the circumstances, I am not satisfied that Google had no reason to suspect that the publication of the Just 4 x 4s Magazine advertisement on 18 July 2007 would amount to a contravention of s 52(1) of the Act.

13. Hence, if I had found that Google had made the misleading and deceptive representations conveyed by the Just 4 x 4s Magazine advertisement, I would have rejected Google’s defence based upon s 85(3) of the Act at least in so far as it was relied upon in relation to the publication that occurred on 18 July 2007.

    EVIDENTIARY RULINGS

14. Various documents consisting of reproductions of results pages that were admitted into evidence were the subject of a general objection by Google on the basis that they did not accurately depict the appearance of such results pages on the computer screens on which they originally appeared.  These documents were admitted into evidence subject to Google’s general objection.  I have been mindful when considering the evidence that the quality of the various reproductions varied considerably.  There is no doubt that the reproductions are not perfect and in some cases they are quite poor.  Nevertheless, this is not a sufficient basis for rejecting the evidence and the general objection taken by Google is disallowed. 

15. Google also objected to evidence tendered by the ACCC which was relied upon by the ACCC in support of the allegation made in para 14(a) of the statement of claim which asserted that Google “… purported to rank search results on its results pages according to relative relevance …”.  This evidence (the 14(a) evidence) is identified in Appendix I to the ACCC’s outline of closing submissions. The 14(a) evidence was received into evidence subject to Google’s objection that it was inadmissible hearsay and that, if not rejected on that basis , it should be rejected under s 135 of the Evidence Act 1995 (Cth).

16. The 14(a) evidence included transcripts of recordings of statements made in 2000 by Sergey Brin, one of the two founders of Google, on the US game show “To Tell the Truth” and statements made by other senior officers and employees of Google during the course of various seminars and presentations.  During the course of his appearance on “To Tell the Truth” Mr Brin apparently said that the reason why the Google search engine is so much better than its competitors is that “you find the best things first – the best answer is on top” and “we really return the most relevant results very quickly.”  Statements by other officers and employees of Google that were relied upon by the ACCC included “users expect from Google that we give them the exact right thing every time” and “to be Google is to deliver the fastest answer to every question and be right.”

17. The ACCC argued that the 14(a) evidence was not hearsay but that if it was then it was admissible under s 81 of the Evidence Act as evidence of statements that were admissions. The former argument was not developed in submissions but in relation to s 81 the 14(a) evidence was said to be “evidence of an admission in any circumstances where Google wishes to take the position that the statement is not correct or true”.

18. In my opinion the 14(a) evidence is inadmissible as hearsay unless it is within the exception provided for in s 81. Whether or not it is within that exception depends, among other things, upon whether the relevant statements are adverse to Google’s interest in the outcome of this proceeding. Section 88 of the Evidence Act provides:

    For the purpose of determining whether evidence of an admission is admissible, the court is to find that a particular person made the admission if it is reasonably open to find that he or she made the admission.

19. Since the 14(a) evidence has been received subject to Google’s objection there is no longer any advantage to be gained by asking whether it is reasonably open to me to find that Mr Brin or any of the other officers or employees made admissions. What I will do is admit the 14(a) evidence unconditionally but explain why I do not consider that it is of any assistance in determining whether or not Google contravened s 52 of the Act by failing to adequately distinguish sponsored links from organic search results.

20. In closing submissions the ACCC made it clear that the search results referred to in para 14(a) are organic search results.  It argued that the 14(a) evidence when read in conjunction with the evidence of Mr Dulitz would:

    … allow the Court to find that Google does purport to rank organic search results in order of relative relevance as pleaded by the ACCC and further achieves a remarkable degree of success in achieving same.

    Accepting that Google purports to rank organic search results in order of relative relevance, I cannot see what difference this could make to the outcome of the first part of the ACCC’s case.  If Google purports to rank organic search results according to “relative relevance” it does not follow that sponsored links will be ranked according to “relative relevance” or that ordinary and reasonable members of the relevant class would understand that they were ranked according to “relative relevance”.  Once it is accepted that ordinary and reasonable members of the relevant class are likely to understand that sponsored links are advertisements then it may be inferred that they will also understand that the positions occupied by sponsored links on results pages will be determined in whole or part by commercial arrangements between Google and the advertiser. 

    CONFIDENTIALITY

21. There was evidence in this case that was, and remains, the subject of non-publication orders made under s 50 of the Federal Court of Australia Act1976 (Cth). Having come to the view that it would be necessary for me to refer to parts of that evidence in my reasons (though not necessarily in detail), I gave the parties an opportunity to make submissions in relation to a form of order I proposed that would ensure that these reasons for judgment could be published by others without risk of contravening any of the s 50 orders previously made. The parties had no difficulty with me making the proposed order except in so far as it related to one matter which Google argued should be included in a confidential annexure to my reasons. Having considered Google’s arguments and further evidence from Mr Dulitz in relation to that matter, I am not persuaded that there will be any prejudice to the administration of justice in allowing the relevant evidence to be published in the manner provided for by the terms of the proposed order.

    CONCLUSION

22. I am satisfied that there should be a declaration that Trading Post contravened s 52(1) of the Act by, in trade or commence, engaging in conduct that was misleading or deceptive or likely to mislead or deceive by publishing the Kloster Ford advertisement. This is on the basis that by publishing the Kloster Ford advertisement Trading Post made various representations which were misleading or deceptive, or likely to mislead or deceive, in the respects that I have identified. I am also satisfied that Trading Post contravened s 53(d) of the Act by representing, contrary to the fact, that it had an affiliation with Kloster Ford. I will make declarations to that effect in appropriate terms. The case brought against Trading Post based upon its publication of the Charlestown Toyota advertisement has failed due to the evidentiary deficiencies that I have previously identified.

23. I am not satisfied that Google contravened s 52 of the Act by failing to sufficiently distinguish advertisements (sponsored links) from organic search results on its search results pages. Nor am I satisfied that Google contravened s 52 of the Act by making any of the representations that the ACCC alleged Google made by the publication of the Kloster Ford advertisement, the Charlestown Toyota advertisement or any of the other advertisements about which the ACCC complained in this proceeding.

24. There will be an order for costs as between the ACCC and Trading Post in the amount agreed between them before the trial.  The ACCC should pay Google’s costs of the proceeding. 

25. I will make orders accordingly. 

I certify that the preceding three hundred and fifty-seven (357) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.

Associate:
Dated:       21 September 2011

Schedule 1

Schedule 2

Schedule 3

Schedule 4