In its first judgment of the year, the High Court of Australia this morning unanimously allowed an appeal brought by Google against a decision of the Full Court of the Federal Court1.
At issue were a number of sponsored links which had been found to have conveyed misleading and deceptive representations.
The Court accepted that all relevant aspects of the sponsored links were authored by the advertisers and not Google. It also accepted that Google's role, through its search engine and AdWords program, was akin to that of an intermediary: "to the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers". The Court also acknowledged the difficulties associated with developing systems for policing potential misrepresentations by advertisers through their choice of certain keywords.
The outcome should be music to the ears of search engine providers, who otherwise face potential liability for any misleading advertisement which featured in their search results had the Full Court's decision stood.
The decision is the culmination of a dispute which has played out before the courts since 2007. It has seen each appellate court unanimously reverse the decision of its respective lower court. We consider the background to the appeal in more detail and discuss the effect of the decision.
"Sponsored links" are advertisements featured on Google's search results page.
In response to a user's search inquiry, 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, sponsored links appear above or to the right of the organic search results.
An example which featured in the case was a sponsored link for the business STA Travel, displayed in response to a search for "harvey world travel"2:
Unbeatable deals on flights, Hotel & Pkg's Search, Book
& Pack Now!
Such sponsored links are determined not by Google's algorithms, but rather by its AdWords program, whereby advertisers select key words and enter into an auction for their advertisement to be displayed in certain circumstances.
The First Instance Decision
Whilst the trial judge found that each of the sponsored links in question contained misleading representations in that they suggested a commercial association or affiliation between the advertiser (e.g. STA Travel) and one of its competitors (e.g. Harvey World Travel), his Honour held that only the advertisers and not Google had engaged in the relevant conduct.
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. In other words, Google's conduct went no further than "merely passing it on for what it's worth" the representations conveyed in the links, without endorsing or approving them (his Honour appropriating the language used by the High Court in Yorke v Lucas3).
In reaching this 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 Full Court Decision
The appeal to the Full Court revisited the characterisation of Google's conduct, the Full Court finding that the facts illustrated that Google's role went beyond that of mere conduit.
Their Honours had regard to the role of the user in a Google search and its interaction with the search engine. Notably, their Honours 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.
Consistent with the trial judge's decision, the Full Federal Court also found that Google was not entitled to rely on the "publishers" defence4 for the publication of advertisements in the ordinary course of business on the basis that Google had failed to prove that it did not know, and had no reason to suspect, that its advertisements were misleading.
The High Court Decision
The High Court was asked to characterise Google's conduct for a third time.
The ACCC argued that Google was the creator of the sponsored links and should not be treated as an intermediary which simply passed on the representations of advertisers. In support of this, the ACCC referred to the fact that the sponsored links, produced using the AdWords program developed by Google, were responsive to the user's searches. It also relied upon Google's involvement in the formulation of the headlines in sponsored links (i.e. advertisers could have search terms elected by users used in headlines of sponsored links).
Google argued that it was essentially an intermediary and that it had not endorsed or adopted the representations in the sponsored links. It contended that every relevant aspect of a sponsored link was chosen by the advertiser, including the keywords. It also relied upon the trial judge's finding, which had not be reversed, that ordinary and reasonable users of Google's search engine would have understood that the sponsored links were advertisements and that Google was merely passing them on for what they were worth.
The Court agreed that all relevant aspects of the sponsored link were authored by the advertiser and not Google: Google is not "the maker, author, creator or originator of the information in a sponsored link". In other words, Google had not itself made the misleading representations found to have been conveyed by the sponsored links.
There was no evidence in the case to suggest that Google personnel played any role in choosing the relevant keywords or creating or endorsing the sponsored links. Moreover, the way in which the sponsored links appear indicates that the source of the link is not Google, but the advertiser.
The Effect of the Decision
The High Court's decision appears to fall into line with the attitudes of courts in other jurisdictions regarding the sophistication of internet consumers in their dealings with online advertising and their awareness of the distinction between the advertiser and the search engine provider.5 The decision has potential to provide greater protection to those who operate websites which host other forms of advertising, not merely search engine providers.
The assistance of Nicholas Rozenberg, Solicitor, of Addisons in the preparation of this article is noted and greatly appreciated.
Footnotes1Australian Competition and Consumer Commission v Google, Inc  FCAFC 49
2 At the appeal, it was not in contention that the sponsored links at issue, namely those of STA Travel, Carsales, AusDog and the Trading Post, did in fact convey misleading and deceptive representations: see Google Inc v Australian Competition and Consumer Commission  HCA 1, per French CJ, Crennan and Kiefel JJ at .
3 (1985) 158 CLR 661
4 Formerly s85(3) of the Trade Practices Act and now found in s209 of the ACL
5These decisions are considered in our discussion of the Full Federal Court's decision, see: http://www.addisonslawyers.com.au/profile/Justine_Munsie.aspx?position=3de9d6146c5f833b
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