Canadian Appeals Monitor Information and Commentary on Upcoming and Recent Appeal Court Decisions

Click Here to Win a Million Dollars!: The Australian High Court Considers Whether Online Intermediaries are Liable for Displaying Misleading or Deceiving Advertisements

Posted in Administrative, Case Comments, Communications, Competition
Sam Rogers

Online advertising is big business. It is estimated that $92 billion was spent worldwide last year, and forecasters expect that number to reach $143 billion by 2017. But to what extent are the distributers of online advertisements responsible for their content? That was the question considered by the Australian High Court in Google Inc v Australian Competition and Consumer Commission. In a decision that is sure to have implications in Canada, the High Court decided that Google is not relevantly different from traditional advertisement intermediaries such as newspaper publishers or broadcasters and is therefore not responsible for misleading or deceptive content in the advertisements it displays.

Background

Google displays advertisements (“Sponsored Links”) on its search result pages based on the searches conducted by the users. These Sponsored Links appear above normal or “organic” links on Google’s search result pages. The content of the Sponsored Links including title, content, and link destination are determined by the advertiser who purchases the Sponsored Link.

Sponsored Links appear when certain key words are matched in the user’s search. Key word matching can be one of three types. Exact match, where a Sponsored Link will appear only if the exact keyword chosen by the advertiser is entered. Phrase match, where a Sponsored Link will appear if any word in a phrase is entered. Broad match, where a Sponsored Link will appear if a known association, as determined by Google’s algorithm, is found. The links in question in this case were all of the exact match type.

The links in question were purchased by 4 advertisers, STA Travel, Carsales, Ausdog, and Trading Post (the “Advertisers”). In each case, an Advertiser chose to display a Sponsored Link when a user entered the name of a competitor. The Sponsored Link displayed the name of the competitor but linked to the Advertiser’s website.

The Australian Competition and Consumer Commission (the “ACCC”) initiated proceedings against Google seeking declarations and injunction relief on the basis that Google’s conduct was “misleading or deceptive” or was “likely to mislead or deceive” contrary to section 52 of the Australian Trade Practices Act (now section 18 of Schedule 2 to the Competition and Consumer Act).

The ACCC lost at the court of first instance but won on appeal to the Full Court. Google appealed.

The Decision

It was inarguable that the Sponsored Links in question were likely to mislead or deceive. The question for the High Court was whether Google had engaged in conduct that was likely to mislead or deceive as a “principle”. In other words, was Google the maker or creator of the Sponsored Links?

The ACCC advanced 3 arguments:

  • that Google’s method of displaying advertisements was fundamentally different than that of traditional media such as television, print, or radio, on the basis that, by displaying particular ads based on user input, Google was in effect an author of the information displayed;
  • that ordinary and reasonable users of the Google search engine would not understand that the Sponsored Links were advertisements; and
  • that by having personnel advising or assisting advertisers to choose key words, Google was in fact creating, endorsing or adopting the sponsored links.

The High Court rejected all 3 arguments.

Regarding Google’s method of displaying advertisements, the Court held:

Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online), who publish, display or broadcast the advertisements of others. (para 69)

This holding was based on a finding that the content of the Sponsored Links was determined solely by the Advertisers:

[E]ach relevant aspect of a sponsored link is determined by the advertiser. The automated response which the Google search engine makes to a user’s search request by displaying a sponsored link is wholly determined by the keywords and other content of the sponsored link which the advertiser has chosen. Google does not create, in any authorial sense, the sponsored links that it publishes or displays. (para 68)

The Court did acknowledge that there are differences between how advertisements are delivered by Google and how they are delivered by more traditional intermediaries. Those differences, however, were found to be due to the nature of the medium (i.e. the internet) and did not upset the analogy between Google and traditional intermediaries:

That the display of sponsored links (together with organic search results) can be described as Google’s response to a user’s request for information does not render Google the maker, author, creator or originator of the information in a sponsored link…The fact that the provision of information via the internet will – because of the nature of the internet – necessarily involve a response to a request made by an internet user does not, without more, disturb the analogy between Google and other intermediaries. (para 69)

Regarding ordinary and reasonable users, the Court held that the primary judge’s findings regarding this issue, which were not disturbed on appeal, were “plainly correct”:

ordinary and reasonable users would have understood the sponsored links to be statements made by advertisers which Google had not endorsed, and was merely passing on for what they were worth (para 70)

Interestingly, Justice Hayne, writing in concurrence, would have allowed Google’s appeal on this basis alone. (para 82)

Regarding the assistance provided by Google personnel, the Court held that the correspondence between Google personnel and the Advertisers was relevant. However, the Court found that, as a matter of fact, the correspondence between Google personnel and the Advertisers “never rose so high as to prove that Google personnel, as distinct from the advertisers, had chosen the relevant keywords, or otherwise created, endorsed or adopted the sponsored links.” (para 71)

In the result, the Australian High Court allowed Google’s appeal on the basis that the facts and circumstances showed that “Google did not itself engage in misleading or deceptive conduct or endorse or adopt the representations which it displayed on behalf of advertisers.” (para 73)

Potential Significance

Many Canadian jurisdictions have enacted similar prohibitions against misleading advertisements. For example:

Subsection 52(1) of the Federal Competition Act:

52. (1) No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.

Section 14 of the Ontario Consumer Protection Act, 2002.

Section 5 of the British Columbia Business Practice and Consumer Protection Act. Note that section 6 provides an explicit statutory defense to advertisers. Given the broad definition of “advertiser” it would apply to online intermediaries.

Section 4 of the Alberta Fair Trading Act. Interestingly, section 42 of the Fair Trading Act allows the government of Alberta to establish regulations regarding “Marketing Through Electronic Media” although at the time of the posting no regulations have been made pursuant to this section.

The decision should give comfort to online distributors of advertisements that they will be treated in the same manner as other, traditional, advertisement intermediaries under the above referenced statutory provisions. They are therefore unlikely to be liable for misleading statements appearing in advertisements they publish online.

Further comfort should be taken from the Court’s comment that ordinary and reasonable users will know that the Sponsored Links are advertisements. This implies that ordinary and reasonable users will not be found to have been misled by commonplace online advertiser conduct.

Finally, it is important to note the finding regarding the communications between Google personnel and the Advertisers was one confined to the facts of this case. Greater involvement by Google personnel in the choice of keywords by the Advertisers, such as an explicit recommendation that the Advertiser choose a competitors’ name as a key word, may have given rise to liability on the part of Google.

Case information

Google Inc v Australian Competition and Consumer Commission [2013] HCA 1

Docket: S175/2012

Date of Decision: February 6, 2013