Google takes consumer watchdog to High Court over misleading AdWords

The High Court has granted Google special leave to appeal a unanimous Full Federal Court decision which found that Google had engaged in misleading and deceptive conduct concerning “sponsored links” or “AdWords” that appeared on the search engine.

The Full Federal Court’s decision came as a sting to the search engine industry as the Court held that not only the individual advertiser, but Google itself, had engaged in misleading and deceptive conduct. See our previous post on the Full Federal Court’s decision here.

The point of law which appears to have sparked the High Court’s interest is whether what

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some may call the “antiquated” decision of Universal Telecasters (Qld) v Guthrie (1978) 18 ALR 531 (where it was held that a television broadcaster was liable under s 53(e) of the Trade Practices Act 1974 (Cth) for making misleading statements concerning the existence or amount of an advertiser’s price reduction) is relevant in an assessment of whether an search engine had engaged in misleading and deceptive conduct.

In the first instance decision in the Google proceedings, Nicholas J was of the view that in the age of online advertising the law had “moved on” significantly from Guthrie, but the Full Federal Court did not agree, finding that the decision was relevant to a consideration of whether Google was itself liable for making misleading representations, or whether it was a mere conduit.

At the special leave application before Gummow, Crennan and Kiefel JJ, counsel for Google criticised this reliance on Guthrie and pointed that this reliance was in lieu of an attempt by the Full Court to “squarely address three incontrovertible propositions”:

  1. First, that the sponsored link consists of three elements each of which is dictated by the advertiser, namely, the headline, advertising texts underneath that and the URL; those elements would not exist but for the creation and direction by the advertiser.
  2. Second, that users of Google understood that the sponsored links were advertisements paid for by the advertiser.
  3. Third, that the misleading conduct alleged was the making of particular representations, namely, a commercial association or other relationship between two entities identified in the individual advertisements.

The Full Federal Court came down with full force on Google holding it was far from a mere conduit – finding that when a user of Google enters a search enquiry, “the enquiry is made of Google and it is Google’s response which is misleading”. This appears to place a significant burden on search engine providers, particularly industry leading players such as Google, to manage the content of the hundreds of thousands of advertisements that appear on its search engine, a gargantuan task. As Google commented following its successful special leave application, “We are pleased with the High Court’s decision to grant our special leave for appeal. Google AdWords is an ad hosting platform, and we believe that advertisers should be responsible for the ads they create on the AdWords platform”.

The ACCC, as do we, “looks forward to the High Court considering the issue of the role and responsibility of search engine providers in online search advertising”.