Australia: Google succeeds in High Court appeal: misleading and deceptive conduct


On 6 February 2013, the High Court of Australia handed down its unanimous decision in respect of Google Inc's appeal against the decision of the Full Court of the Federal Court of Australia holding Google liable for misleading or deceptive conduct under section 52 of the Trade Practices Act 1974 (Cth) (now superseded by section 18 of Schedule 2 to the Competition and Consumer Act 2010 (Cth)).

The case, brought by the Australian Competition and Consumer Commission in 2011, centred around a number of paid advertisements which contained misleading information and which appeared on Google's website. In essence, the ACCC argued that Google ought to be liable for misleading or deceptive conduct because it enabled and allowed the publication of the advertisements on its website thereby making the misrepresentations within those advertisements.

At first instance, on 22 September 2011, Justice Nicholas held Google not liable for misleading or deceptive conduct on the basis that Google was merely a publisher of the misleading advertisements and not their author. Further, Google did not in any way adopt or endorse the content of the advertisements. Our earlier detailed report of Justice Nicholas' reasons can be found here.

On appeal, the Full Court of the Federal Court of Australia overturned the earlier decision of Justice Nicholas. The Full Court held that Google was not merely a publisher but that it had indeed made many of the relevant misleading representations contained in the advertisements. Our report of the Full Court's findings can be found here.

The High Court allowed Google's appeal, reversing the Full Court's findings. While the decision of the Court was unanimous, three judgments were handed down - a joint judgment authored by Chief Justice French, Justices Crennan and Kiefel, a judgment by Justice Hayne and another by Justice Heydon.

The decision is important in that it clarifies the scope of a search engine operator's liability for content authored by third parties and published on the operator's website. While the decision appears to reinforce that an intermediary that simply publishes third party information that may be misleading, without endorsing or adopting that information, is unlikely to itself engage in conduct that is misleading or deceptive, it is important to remember that this decision was reached based on a particular set of facts. The decision therefore may not apply in all circumstances.

A brief overview of the facts

Google is an operator of a well known search engine. By using Google's search engine, two types of results can be obtained: "organic" search results ranked by Google according to a set of complex algorithms, and "sponsored links", which are paid advertisements. Sponsored links appear at the top and on the right hand side of the organic search results and are distinguished from the organic search results by their enhanced appearance.

To cause a sponsored link to appear in response to a particular search query by a user of Google's search engine, advertisers select and pay for keywords. When a keyword is used in a search query, the sponsored link appears on the results page. At times, a keyword appears in the sponsored link itself as a headline, a link that will ordinarily take a user to a website of the advertiser.

The litigation arose because a number of sponsored links were found to feature, as headlines, keywords selected by an advertiser consisting of the name or trade mark of the advertiser's competitor. The ACCC alleged that the use of a competitor's trade mark, business or product name as a keyword in a headline of a sponsored link implies, contrary to the fact, that there is an association between the competitor, its business or products and the advertiser. Such conduct, the ACCC argued, was misleading or deceptive or likely to mislead or deceive. By enabling advertisers to create such sponsored links and by publishing them on its website, Google was engaging in conduct that is misleading or deceptive or likely to have that effect. In the ACCC's view, Google was not a mere conduit for the advertisements but rather contributed to their creation because it used its technology to display particular sponsored links in response to search requests made by users of the search engine. In this respect, Google's conduct was said to go further than the conduct of a mere publisher of advertisements.

It is noteworthy that Google had in place terms and conditions and applicable policies which dictated the terms on which Google provided the sponsored link advertising service to its customers. The relevant terms and conditions made it clear that it was the advertiser that was responsible for the content of its advertisements and not Google. The terms and conditions also prohibited advertisers from using as keywords trade marks, business names and other brand indicia of third parties. Google also offered a service whereby owners of business names or trade marks could notify Google of any misuse of their branding indicia by Google's customers. Google would review such use and act accordingly.

In its defence, Google argued that it was a mere conduit in enabling advertisers to place advertisements on its website. It was the advertiser that selected the keywords it wished to use and the use of the keywords in headlines of sponsored links. Google in no way adopted or endorsed the content of the advertisements. If the advertisements contained any misrepresentations, those misrepresentations were those of the advertisers and not Google. An ordinary, reasonable search engine user would be aware of this. On this basis Google argued that it ought not be liable for misleading or deceptive conduct.

Further, if it was shown that by publishing a particular advertisement Google made any representation that was misleading or deceptive, Google sought to rely on section 85(3) of the Trade Practices Act 1974 (Cth) (TPA) (now superseded by section 251 of Schedule 2 to the Competition and Consumer Act 2010 (Cth)) to defeat liability. Pursuant to section 85(3), a publisher of a misleading or deceptive advertisement is not liable for misleading or deceptive conduct if the publisher did not know, and had no reason to suspect, that publication of the advertisement was misleading or deceptive or likely to mislead or deceive.

The Decision

The key issue on appeal to the High Court was whether Google, by publishing or displaying the misleading advertisements and therefore arguably making the representations within the advertisements, itself engaged in conduct that is misleading or deceptive or likely to mislead or deceive.

The High Court unanimously rejected the ACCC's position and held that Google was not liable under section 52 of the TPA. While the end result was unanimous, their Honours reached the conclusion on somewhat different bases.

In examining the issue, Chief Justice French and Justices Crennan and Kiefel restated some well known principles concerning section 52. These were:

  • It is not necessary to demonstrate actual deception in order to succeed in a claim under section 52.
  • It is necessary to consider whether the reasonable or ordinary members of the relevant consumer group would be misled or confused.
  • Conduct causing confusion and wonderment is not necessarily co-extensive with misleading or deceptive conduct.
  • A person may contravene section 52 even if the person is acting reasonably and honestly. Intention to mislead or deceive is not a necessary element to establish the cause of action.
  • Whether or not intermediaries or agents which publish, communicate or pass on misleading representations of another have themselves engaged in misleading or deceptive conduct will depend on whether it would appear to ordinary and reasonable members of the relevant class that the intermediary or agent adopted or endorsed that representation. This is a question of fact to be considered in all circumstances of each particular case.

Looking at all of the circumstances of this particular case, Chief Justice French and Justices Crennan and Kiefel took the view that Google had no control over a search engine user's choice of search terms or an advertiser's choice of keywords. While Google displayed particular sponsored links in response to search engine user's queries, it did not author the sponsored links it displayed. Their Honours further stated that the display of the sponsored link in response to a user query did not make Google the maker, author, creator or originator of the information in a sponsored link.

Reasonable ordinary users of the Google search engine would understand that sponsored links were advertisements which Google neither endorsed nor adopted. It merely passed them on as a newspaper publisher or a broadcaster would do.

Chief Justice French and Justices Crennan and Kiefel also rejected the argument put forward by the ACCC that because of the role Google's sales personnel played in assisting advertiser in choosing keywords for use in sponsored links, Google ought to be liable. The Court noted that while evidence of the actions of Google's personnel was relevant, the personnel's conduct could not be interpreted as demonstrating that it was the personnel rather than the advertisers that chose relevant keywords for use in the advertisements in question. In his judgment, Justice Heydon agreed with this view, further stating that the ACCC also failed to explain how the fact that Google's employees assisted advertisers in composing advertisements undermined the conclusion that an ordinary and reasonable member of the relevant class would not understand Google to be making the misleading statements contained in the advertisements.

While Justice Hayne reached the same conclusion as his fellow judges, it was on a different footing. Justice Hayne's judgment focussed on the breadth of section 52 of the TPA. His Honour rejected the view that, contrary to the opinion expressed by the majority judgment, there exists some general principle that a corporation may contravene section 52 of the TPA by publishing a third party advertisement only if it endorses or adopts the content of the advertisement in some way. His Honour stated that such a proposition had no foundation in the text of section 52 or in the case law referred to in the appeal. The notions of adoption or endorsement, according to his Honour, could only be relevant to the application of section 52 in circumstances where the contravening conduct was identified as making a representation.

Justice Hayne emphasised that the case turned on its own facts and on the manner in which the ACCC argued its case. His Honour appeared to suggest that had the ACCC argued its case differently, a different result may have been reached. That is, had the ACCC argued that Google engaged in misleading or deceptive conduct merely by publishing the advertisements in question, it may have been found liable for misleading or deceptive conduct. Because the ACCC's case was based on the premise that Google, by publishing the relevant advertisements, conveyed the misrepresentations within them, thereby engaging in misleading or deceptive conduct, the ACCC failed. In this regard, his Honour stated:

"When a print or electronic media corporation publishes a paid advertisement, the reader or viewer of the advertisement will very often recognise readily that what is seen or heard was devised and paid for by the advertiser. The reader or viewer will usually be given no reason not to take the advertisement at its face value. If the advertisement is misleading or deceptive, the reader or viewer will likely be misled or deceived. The conduct of publishing the advertisement has made it available to the reader or viewer. If no more is shown, there seems much to be said for the view that publishing the advertisement is conduct of the kind prohibited by section 52. When sections 52 and 85(3) are read together, it is evident that the Act assumed that the conduct of publishing an advertisement made and paid for by a third party may contravene section 52".

His Honour did not comment on whether, if Google was found liable on this alternative basis, the section 85(3) defence would have been open to it.

His Honour appears to suggest that the presence of section 85(3) in the TPA confirms the view that conduct involving the publication of misleading third party advertisements could be conduct that itself is misleading or deceptive or that is likely to have that effect even in circumstances where the publisher neither endorsed nor adopted the content of the advertisement. This view is different to that expressed in the majority judgment where their Honours suggested that the section 85(3) defence need not be called on in circumstances where, as in the present case, the publisher of the advertisement did not endorse or adopt the misrepresentations within it as no contravention of section 52 occurred. Rather, the defence would be open to a publisher that endorsed or adopted the misrepresentation without appreciating the capacity of that representation to mislead or deceive.

Justice Heydon appears to have concurred with the view of the majority. His Honour stated "If a person repeats what someone else has said accurately, and does not adopt it, there is nothing misleading in that person's conduct". A contrary interpretation of the application of section 52, in his Honour's view, would lead to a situation where, apart from the field of advertising where section 85(3) defence is available, the possibility of "universal absolute liability in (...) other fields" would be left open. In his Honour's view, such interpretation of section 52 is incorrect. In relation to the role of section 85(3) of the TPA, Justice Heydon concluded that "it operates as a backstop in cases where the defendant did make the misleading statement, but the fairly rigorous criteria for immunity stated in section 85(3) are made out".

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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