Google Ads in Australia Searches Misleading, Court Says

Google Inc. (GOOG), owner of the world’s most-popular search engine, misled Australian consumers in 2007 by including paid advertisements from competitors in search results for businesses, an appeal court ruled.

The Federal Court of Appeal in Sydney today overturned a lower court decision and ordered the Mountain View, California- based company to set up a protocol to avoid repeating the practice.

The decision makes Google responsible for ads that are displayed and says the company isn’t merely a conduit for the advertiser. Google was ordered to pay a share of costs for the trial and appeal although it won’t have to pay a penalty because the Trade Practices Act, under which it was originally sued, didn’t provide for fines for misleading conduct.

The case “raises very important issues as to the role of search engine providers as publishers of paid content in the online age,” Rod Sims, chairman of the Australian Competition & Consumer Commission, said in a statement today.

Google was disappointed with the appeal court ruling and is reviewing its options, it said in an e-mailed statement. The company is committed to providing an advertising platform that benefits both advertisers and users, it said. Google has changed the way results are displayed since 2007.

Photographer: Andrew Harrer/Bloomberg

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The Google Inc. logo is displayed on computer LCD screens.

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Photographer: Andrew Harrer/Bloomberg

The Google Inc. logo is displayed on computer LCD screens.

‘Misleading Conduct’

“The user asks a question of Google and obtains Google’s response,” the three-judge appeal panel wrote in a 49-page ruling today. “Several features of the overall process indicate that Google engages in misleading conduct.”

The ACCC sued Google, in the first claim of its kind in the world that makes the search-engine company responsible for the content of ads, according to the regulator.

Justice Antony Nicholas dismissed the ACCC complaint in September, ruling that Google didn’t know publication of the ads amounted to a contravention of the Trade Practices Act.

The ACCC appealed, citing four advertisements, including those that showed up in a search for the Australian company Harvey World Travel, that it said Google should have known would contravene the law.

A search for a business name would include results from competitors who paid to have their ads placed in a column beside the search results.

“The most obvious example of the falsity of the response, and of the fact that it is Google’s conduct, is the Harvey World Travel sponsored link,” the appeal panel wrote.

A user who sought information about Harvey World Travel was instead given the web address of one of its competitors, the panel said.

“Google tells the user that the URL provided below is the contact information about Harvey World Travel,” the panel wrote. “The enquiry is made of Google and it is Google’s response which is misleading.”

The case is Australian Competition and Consumer Commission v. Google Inc. NSD1759/2011. Federal Court of Australia (Sydney).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net.

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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