The Risks of Search Engine Marketing

In July 2007, the Australian Competition and Consumer Commission (“ACCC”) instigated legal actions in the Federal Court against Trading Post Australia Pty Ltd (“Trading Post”) (a wholly owned subsidiary of Sensis Pty Ltd (“Sensis”)) and Google Inc (“Google”) alleging misleading and deceptive conduct in relation to sponsored links that Trading Post had purchased which had appeared on the www.google.com.au website.

The ACCC alleged that:

• Trading Post had contravened sections 52 and 53(d) of the Trade Practices Act 1974 (“the Act”) in 2005 when it paid Google for sponsored links to come up in the name of two of its competitors (Kloster Ford and Charlestown Toyota). This means that when those competitors were searched for on google.com.au, sponsored links appeared which had “Kloster Ford” or “Charlestown Toyota” in the title but which linked through to the Trading Post website when clicked (even though the Trading Post website contained no information regarding, or advertisements by, either Kloster Ford or Charlestown Toyota).
• Google engaged in misleading and deceptive conduct in breach of section 52 of the Act by causing the Kloster Ford and Charlestown Toyota links to be published on its website.
• Google engaged (and continues to engage) in misleading and deceptive conduct in breach of section 52 of the Act, by failing to adequately distinguish paid for sponsored links (which appear at the top and down the right hand side of Google’s search results page) from "organic" search results.

Section 52 of the Act provides that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Section 53(d) of the Act provides that a corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services represent that the corporation has a sponsorship, approval or affiliation it does not have.

At the time of instigating legal proceedings, the ACCC sought the following:

• declarations that Trading Post had contravened sections 52 and 53(d) of the Act;
• declarations that Google had contravened section 52 of the Act;
• injunctions restraining Trading Post from representing through sponsored links an association, sponsorship or affiliation with another business where one does not exist;
• injunctions restraining Google from publishing sponsored links of advertisers representing an association, sponsorship or affiliation where one does not exist;
• injunctions restraining Google from publishing search results that do not expressly distinguish advertisements from organic search results;
• orders that Trading Post and Google implement trade practices compliance programs;
• an order that Google publish a notice on its website outlining the above; and
• costs.

The ACCC’s case against Trading Post settled in April 2008 when Trading Post agreed to submit to the ACCC’s allegations that it had contravened sections 52 and 53(d) of the Act and engaged in misleading and deceptive conduct when it purchased Google adwords in the names of competitors in the car advertising space in August 2005.

Trading Post and Sensis also agreed to provide court enforceable undertakings to the ACCC which would continue for 3 years from their date of effect.

These undertakings were that:

• Trading Post consent to the Federal Court making certain declarations (to the effect that Trading post had contravened section 52 and 53(d) of the Act);
• Trading Post and Sensis undertake not to permit its employees or agents to publish Search Engine Advertisements (“SEA”) where the title or headline of that SEA contains a known competitor’s name and the user is directed to the Trading Post website, in circumstances where no information regarding, or advertisements by, that known competitor is contained on the Trading Post website; and
• Sensis undertake to engage an independent third party with experience in trade practices compliance programs to review Sensis’ trade practices compliance processes which relate to the Trading post SEA campaigns by 30 November 2008 and again by 30 November 2009 report back to the ACCC after each review.

In April, Sensis’ general counsel, Niki Hantzis, said, "We are now confident we have very strong compliance measures in place and the search engine marketing industry as a whole also has a much clearer view of what is considered acceptable practice.”

The case now continues against Google with a hearing date set for 23 June, but Trading Post’s decision to settle does not necessarily mean that the ACCC’s case against Google will succeed as Google may be able to argue it is only the vehicle for someone else’s misleading advertising (rather than the business who actually engaged in misleading advertising).

It is also questioned whether many consumers are really deceived by the placement of sponsored links at the top of each search result page, given that they are labelled “Sponsored links” and visually separated from organic search results.

There are therefore real legal issues that still need to be explored and no doubt this ongoing case will be watched closely by legal practitioners, search engine marketing practitioners and other businesses alike, especially as many search engines allow advertisers to purchase sponsored links in a similar way to Google and an adverse finding against Google in relation to its sponsored links could see search engines forced to police the use of millions of keywords.

If you need further information about this article, please do not hesitate to contact EKM legal on 9829 0999.