Good afternoon and welcome to the BRR Legal Brief, looking at the major legal issues affecting corporate Australia.  I’m David Bushby and today we’re talking Google ad words, and the way in which advertisers use the system to direct search traffic away from their competitors’ websites.  It’s a practice which Google has been found liable for misleading and deceptive conduct in a Federal Court case handed down last week, and here to discuss what this means for online search, online advertisers, and online publishers, is Kathryn Edgehill from Truman Hoyle, who’s unfortunately injured her back just this morning, but bravely dialling in over Skype.  Welcome to BRR Media Kathryn.

Hello David, it’s good to be talking to you again, and I’m very happy to be talking about the Google case.

Absolutely.  Well Kathryn it’s pretty common these days to Google a service or a product and have a sponsored ad for a business appear, but when you click on that sponsored ad that URL directs you to a competitor’s website, this case I guess puts that practice to bed or ceases that practice.

Well David that’s probably right.  Unless this case makes it to the High Court and is eventually overturned on appeal, I think that’s a fair assessment.  But I think it probably even goes further than that in that the whole process used by search engine providers and advertisers in relation to sponsored links is going to need to undergo some radical change.  It might be worthwhile me giving you a little bit of a run down on why I have that view.  Basically the unanimous findings of the 3 Federal Court judges was that it was Google as the search engine provider who engaged in misleading and deceptive conduct by directing users of its website through sponsored links to websites of competitors of the parties named in that link.  Interestingly what the court did was it said well Google it’s your responsibility because it’s your conduct which meant that a user could be misled into believing that by clicking on the link they’re going to be taken to a site that’s the site of either the party named in the headline of the link, or at least in some way associated to the party named in the link, and we know that what in fact was occurring was that they were taken to a site of a competitor.  What’s really interesting about the decision is that the Full Court’s overturned the decision of the judge at first instance, but it found that Google is the party primarily liable for the misleading conduct and not the advertiser who bought the rights to the use of the sponsored link in the first place.

Absolutely, well I understand Google did try to rely on the so called Publisher’s Defence, but it didn’t fly in this instance.

That’s true again David and again it’s what makes this decision such an important one, for search engine providers and advertisers.  To give you a bit of background the Publisher’s Defence, basically allows a person who carries on a business of publishing or arranging for the publication of ads to avoid liability for breach of certain of the consumer protection provisions of the Competition and Consumer Act, but that only occurs where the publisher did not know and had no reason to suspect the publication of the ad would breach the Act.  Google didn’t succeed in relying on that defence because the Court found that Google’s involvement in the whole process from conducting the auction for the words, by allowing users to conduct a search, by responding to the search query by bringing up the sponsored link and then by directing the user to the competitor’s website, you know, wasn’t that of an innocent publisher who didn’t know that the offending material would breach the Act.  It even went beyond that of a knowing participant and facilitator and the Court found that they were in fact the party primarily responsible for the conduct, in other words it was its conduct in the first place which was misleading.

Well Kathryn I do want to also look at I guess your traditional advertisers, billboards, newspapers, and television, will those channels be affected by this case?

Well that’s also an interesting question David.  Not really in one sense because if they’re still innocent publishers who don’t know and have no reason to suspect that an ad which is placed with them and they subsequently publish is misleading, then they can still fall back on the Publisher’s Defence.  Indeed the Full Court was at pains to say that it was a fact that Google was directly responsible for creating the misleading impression, which in fact prevented any analogy at all with the more traditional advertising media.

Well Kathryn could the ACCC have pursued, for example, STA Travel, ie, you know one of the advertisers that purposefully uses this tactic?

Well that’s another interesting question David, because it raises this whole issue of whose conduct is it that was misleading.  You know was purchasing the words and obtaining the sponsored link enough.  The case leaves that very open, but at the very least I think that those advertisers could have been pursued for being knowingly concerned at least, in Google’s misleading conduct because without their purchase of the rights to use the sponsored link to direct the traffic to their respective websites, Google couldn’t of engaged in the conduct in the first place.

And Kathryn I want to look at the trade mark issue, if you take for example STA Travel, it bid on the words Harvey World Travel, which I understand is a trade mark term, did trade mark infringement was that argued in this case?

No, the issue of trade mark infringement wasn’t considered as part of the case, because the ACCC’s appeal related only to whether Google had engaged in misleading deceptive conduct.  But the example you gave is a good one because in that case, the words Harvey World Travel were in fact trade marked and STA used them in a sponsored link to direct the traffic to their website.  What that initially resulted in was a complaint from Harvey World Travel to Google of trade mark infringement.  Google responded by withdrawing the trade marked words from the headline in the sponsored link.  So in that sense at least, trade marking certain words or phrases or names if that’s available, and it’s not always available, is one way for a party whose name is being used in the sponsored link to prevent or at least stop conduct of the kind which resulted in this case.

And Kathryn just to wrap things up and talking I guess for the future; what are the next steps here?  Lots of talk of an appeal, some experts saying that Google has no choice but to appeal given that it’s such a money spinner for them.  Do you agree, and I guess in the meantime what are your main tips for (a) online advertisers, and (b) businesses?

Okay David, well in order to appeal the decision Google’s going to need to get special leave from the High Court.  So it’s not going to be automatic, there’s a hurdle to get over there.  I probably agree with other commentators that Google’s likely to seek that leave, for the very reason that you know if they leave the decision unchallenged they’re going to have to make some radical changes to the way they conduct the ad words business and sponsored links.  Whether or not they get that leave is another question, because on one hand the decision certainly raises some fairly interesting issues regarding liability of search engine providers and even further than that other facilitators of online publications.  On one view it might be seen as a novel application or a novel failure to apply the publisher’s defence, but then on the other hand if you look carefully at the reasoning of the court there’s an argument that all they’ve done is apply the law as it relates to the publisher’s defence and simply found on the facts of Google’s involvement and responsibility in the process meant that it didn’t meet the criteria for that defence.  So what does it mean in the meantime?  Well for advertisers I think they can expect search engine providers to start seeking appropriate comfort from them that the words which they’re seeking to use in sponsored links aren’t going to mislead consumers, before the search engine providers will accept and publish the links.  And for search engine providers unless the decision’s overturned they are going to have to add some checks into the process to ensure that they’re not going to be directing users of sponsored links to sites which have no connection with the name in the headline of the link.  They need now to be a little bit more proactive, they can’t just stand back and say we’re innocent; they are involved and with that involvement comes responsibility to conduct some checks.

Well Kathryn certainly is a significant case and we’ll keep a very close eye on it as it pans out and goes through the system, but for now thank you so much for your insights.

Pleasure David.

And viewers thank you so much for tuning in.  We look forward to having your company for next week’s BRR Media Legal Brief.