Australia: High Court Googles Itself: Google Granted Special Leave to Appeal Finding That it is Liable for Misleading Search Results

Addisons Insolvency Update
Last Updated: 25 June 2012
Article by Justine Munsie

The High Court of Australia today has granted special leave to Google, Inc to appeal the decision of the Full Court of the Federal Court1 which found Google liable for publishing misleading search engine results.

The appeal is likely to be heard in the next few months before the retirement of Gummow J from the court in October.

At first instance, a single judge of the Federal Court found that whilst advertisers who use key words which include the trade marks of their competitors in order to generate advertisements appearing alongside Google's organic search results engage in misleading conduct, Google was not responsible itself for such conduct. The trial judge found that in the absence of any evidence that Google plays a role in the determination of key words, advertisers are solely responsible for the misleading effects of using another person's trade marks, business names or domain names as part of their search engine marketing strategy.

In a significant development in the evolving issue of search engine liability, three judges of the Full Federal Court unilaterally overturned this decision, finding that the role that Google plays in accepting key words, generating search results based on those key words and allowing them to be displayed in response to the entry of a key word, comprising the key word and the website of the advertiser, amounts to misleading and deceptive conduct in contravention of the Trade Practices Act 1974 (Cth)2.

Sponsored links

At issue are four examples of sponsored links for businesses trading as STA Travel, Carsales, AusDog and the Trading Post.

In response to a user's search inquiry using Google, two sets of results will usually appear. The first are the results generated by algorithms used by Google to determine and rank by relevancy the results which directly answer the user's inquiry. In addition to these "organic" search results are sponsored links or advertisements which appear to the top left and or to the right of the organic search results. An example considered in the case was a sponsored link for the STA Travel business which was displayed in response to a search for "Harvey World Travel", as follows:

Harvey World Travel Unbeatable deals on flights, Hotels & Pkg's Search, Book & Pack Now!

Such sponsored links are determined not by Google's algorithms, but by its AdWords program whereby advertisers select key words and enter into an auction for their advertisement to be displayed in certain circumstances.

Judgment at first instance

The trial judge, Nicholas J, found that each of the sponsored links he examined were misleading in that they suggested a commercial association or affiliation between the advertiser and one of its competitors. In the case of the example set out above, the trial judge found that the STA Travel sponsored link had misleadingly represented that:

  1. There was an association between STA Travel and Harvey World Travel businesses;
  2. There was an affiliation between STA Travel and Harvey World Travel businesses;
  3. Information regarding the Harvey World Travel businesses could be found at STA Travel's website;
  4. Information regarding the travel services provided by the businesses associated with the name "Harvey World Travel" could be found at STA Travel's website.

However, his Honour found that only the advertiser and not Google had engaged in the relevant conduct contrary to the Trade Practices Act. His Honour held that Google had not engaged in any misleading and deceptive conduct by publishing the advertisers' sponsored links since it was, and would be understood by users to be, a "mere conduit" for the advertisers' information, "merely passing it on for what it's worth", using the test for liability long established by the High Court of Australia in Yorke v Lucas3 regarding information of one party which is published by another. In coming to his conclusion, the trial judge relied on his own findings regarding the knowledge that ordinary and reasonable members of the class of online search users; namely that they would have understood that:

  • A sponsored link is an advertisement that includes a headline that incorporates a link to a website address displayed beneath the headline;
  • If a person clicks on the headline they will be taken to the website address displayed beneath the headline;
  • The website address displayed beneath the headline will usually be the website address of the advertiser;
  • The identity of the advertiser will usually be apparent from the website address displayed beneath the headline.

The appeal

The key issue in the appeal to the Full Federal Court was whether Google, Inc engages in misleading and deceptive conduct in contravention of section 52 of the Trade Practices Act4 by displaying an advertiser's web address in a sponsored link in response to an inquiry on Google's search engine using search terms which include the name of the advertiser's competitor.

The ACCC argued in particular that the trial judge had failed to have regard, according to the list of circumstances listed above, that Google's key word insertion facility caused a headline with a competitor's name to appear (ie the search term used by the user) displayed next to the advertiser's website and with a clickable link to the advertiser's website.

The Full Federal Court accepted the importance of the facts relied on by the ACCC and determined that Google was itself responsible for the misleading impressions created by the sponsored links. The Full Court held that:

  • No Google user would regard a sponsored link as a statement by an advertiser which Google is merely "passing on"; rather, what appears on Google's webpage is Google's response to the user's query. That it happens to include as a headline a key word chosen by the advertiser does not make it any the less Google's response;
  • Contrary to Google's assertion, its behaviour was not analogous to a billboard owner or owner of a telephone network, or similar service which merely provides advertising space and passes on the advertisers' content, without more.
  • What is misleading and deceptive is the display of the sponsored link in response to the entry of the user's search term in co-location with the advertiser's website address. This is Google's response, effected by Google's search engine. As a consequence, Google is more than a mere conduit: instead, the ordinary reasonable viewer of the search results would conclude that it was Google itself which displayed the sponsored link in co-location with the advertiser's website in response to the search.

In other words, it is Google itself which informs the user, by its response to their search query, that the content of the sponsored link is responsive to the user's query. Such information in the case of sponsored links is misleading and deceptive or likely to mislead or deceive contrary to the Trade Practices Act.

Both the trial judge and the Full Federal Court also found that Google is not entitled to rely on the "publishers" defence5 for the publication of advertisements in the ordinary course of business as Google had failed to prove that it did not know and had no reason to suspect that its advertisements were misleading.

How Google and other search engine providers have fared elsewhere

Consideration of Google's liability for the search results it generates has been given previously in Europe and the USA, most often in the context of trade mark infringement. In those jurisdictions, the courts to date appear to attribute their internet consumers with a greater sophistication of knowledge and awareness of sponsored links as advertising tools than has Australia's Full Federal Court.

In a case examining the use by automobile brokers of the registered trade mark "lexus" in their domain name6, the US Ninth Circuit stated that the relevant consumer in the online market place is reasonably prudent and accustomed to shopping online. The Court held that such internet consumers fully expect to find some sites that are not what they imagine based on a glace at the domain name or search engine summary. Expectations about the sponsorship of a website are not formed, the Court said, until the internet consumer goes through to the landing page of the advertiser and, as such, it is the advertiser's website itself that needs to be looked at as a whole, not just its advertisement.

Similarly, in Network Automation, Inc v Advanced Systems Concepts, Inc7 the purchase by Network Automation, Inc of key words such as "activeBatch", a trademark of Advanced Systems Concepts, Inc, for search engine marketing purposes, was found not to infringe any trademark rights of Advanced Systems Concepts, Inc. There the Court found that the search results and advertisements were not confusingly labelled because they were segregated from the organic search results and appeared in separately labelled sections under the heading "sponsored links".

In Europe, Google has also escaped liability in cases brought against it by Louis Vuitton, Viaticum and Thonet8 who each alleged that by selling their registered trade marks as keywords to other advertisers, Google's sponsored links and AdWords program constitute trade mark infringement. In those cases, the ECJ held in 2010 that an internet search provider which stores keywords that are identical to trade marks of third parties and arranges the display of advertisements on the basis of such keywords is not infringing those trade marks by doing so. The search provider cannot be held liable for the data that was stored at the request of an advertiser unless it has knowledge of the unlawful nature of the data and then fails to remove or disable access to it.

The way ahead in Australia

Google may now ask the High Court to ascribe to Australian internet users a similar degree of knowledge of online advertising as their US and European counterparts in support of its contention that the facilitation and arrangement of automated search results does not amount to misleading and deceptive conduct.


1 Australian Competition and Consumer Commission v Google, Inc [2012] FCA FC 49
2 The relevant provisions of the Act are now contained in the Competition and Consumer Act 2010 (Cth)
3 (1985) 158 CLR 661
4 Now section 18 of the Australian Consumer Law (ACL), being Sch 2 of the Competition and Consumer Act, which prohibits a corporation, in trade or commerce, from engaging in conduct which is misleading or deceptive or which is likely to mislead or deceive.
5 Formerly s85(3) of the Trade Practices Act and now found in s209 of the ACL
6 Toyota Motor Sales, USA Inc v Tabari 610 F.3d 1171 (9th Cir. July 8, 2010). The respondents provided their business, Fast Imports, through their websites "" and "".
7 Network Automation, Inc v Advanced Systems Concepts, Inc 638 F.3D 1137 (9th CIR.2011)
8 C-236/08, being the referral of three conjoined French cases: C-236-08, C-237-08, C-238-08

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Justine Munsie
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