Google wins AdWords appeal in the High Court

This morning the High Court unanimously upheld the appeal in Google Inc v Australian Competition and Consumer Commission, and in doing so held that in providing its AdWords system for advertisers, Google did not engage in misleading and deceptive where that system produced misleading sponsored links.

The Google search engine produces two types of results: “organic” search results and “sponsored links”. Organic search results are information displayed free of charge.  These are matching web pages ranked in order of relevance determined by a complex algorithm developed by Google. Sponsored links are advertisements that include a headline incorporating a link to a website address displayed beneath the headline. When a user enters a search term, Google’s Adwords program conducts an internal “auction” that determines which sponsored links to show, in which order to show them, and how much Google charges its advertisers. The advertiser pays a fee to Google if its link is clicked by a user. Most of Google’s revenue is derived through its advertising business.

The Adwords program is a self-serve system for advertisers, accessible online, that enables advertisers to create their own advertisements and to bid to display them on the results page of a Google search.  The results generated included a headline, additional text chosen by the advertiser, and the web address or URL chosen by the advertiser.  The headline could be a “fixed headline” nominated by the advertiser, or the advertiser could choose to use a “dynamic headline” which allowed the headline to replicate the search terms. The headline was hyperlinked to the URL chosen by the advertiser.  An AdWords customer may elect to trigger advertisements (or participate in an auction that will determine which advertising text will be displayed as a sponsored link) by choosing three different types of keywords. These are ‘exact match’, ‘phrase match’ or ‘broad match’. Hence a search of a keyword or phrase may trigger a number of similar, but commercially unrelated results.  

An example of this process that was in evidence in the proceedings included the advertisements generated by a search for “Harvey World Travel”.  This produced a sponsored link for STA Travel.  The advertiser (in this case STA Travel) had chosen a dynamic headline, so that the search result was prominently headlined as “Harvey World Travel” even though the link was not for Harvey World Travel but for STA Travel, and was hyperlinked to the STA Travel website.

In general terms, at issue was whether the generation of sponsored links to companies commercially-unrelated to the company whose name was entered as the search term amounted to “misleading and deceptive conduct”, and if so whether it was conduct engaged in by Google Inc.

The High Court unanimously allowed Google’s appeal, although their Honours expressed different reasons for doing so.  The plurality of French CJ, Crennan and Kiefel JJ held that Google had no control over a user’s choice of search terms or an advertiser's choice of keywords, and that as a consequence Google did not create, in any authorial sense, the sponsored links that it published or display.  Google was no different to any other intermediary who published, displayed or broadcast the advertisements of others. Independently of that, the trial judge had found that ordinary and reasonable users of the Google search engine would have understood that the sponsored links were created by advertisers, and such users would also have understood that representations made by the sponsored links were those of the advertisers, and were not adopted or endorsed by Google.  These findings themselves were sufficient basis for upholding the appeal.  Hayne J determined the appeal on the narrow ground that those findings by the trial judge necessarily dispensed with the case as pleaded by the ACCC.  Heydon J in separate reasons arrived at similar conclusions to the plurality. His Honour noted that if Google's provision of its technological facilities to display the advertisements caused it to be the maker of the advertisements, then there would be an exceptionally wide form of absolute liability for those who publish information in the media, or there would be a distinction between advertising in online media and advertising in traditional media. There was no basis in the legislation or in the authorities for accepting either conclusion.