ACCC appeals Google Misleading Ads Case in Australian Federal Court

The Australian Competition and Consumer Commission (ACCC), a consumer watchdog similar to the US Federal Trade Commission (FTC), has decided to file an appeal against the recent decision by the Federal Court of Australia that Google engaged in misleading advertising practices. On appeal, ACCC claims that Justice John Nicholas’ conclusion in ACCC v. Trading Post Australia Pty Ltd and Google Inc is based on precedents concerning publishers of advertisements in traditional media, such as print and television, which should not apply to search engine providers.

In the Federal Court’s original judgment handed down in September 2011, Google defeated a claim by the ACCC that the search engine giant and the Trading Post, a popular classified advertising periodical in Australia, had breached fair trade practice laws by allowing advertisements placed by the Trading Post about car retailers to appear alongside results displayed by its search engine. The ACCC argued that Google failed to distinguish adequately between “organic” search results and paid advertisements. They asserted that the similar appearances and grouped ad placements on the left side of the results page, only slightly distinguished by Google's shading and labeling of the sponsored links, were “insufficient to counteract the overall impressions.” Justice Nicholas dismissed the ACCC’s claims that Google did not provide enough distinction between normal results and the paid advertisements and held that Google was not liable for the presentation of search results, as most users would have appreciated that the "sponsored links" were in fact advertisements.

On appeal, the ACCC contends that “Google’s key word insertion system, plus the role of Google staff, were fundamental to the representations being made.” The ACCC hopes that the court will find that the opinion was based on precedents concerning publishers of advertisements in traditional media, and should not apply to search engine providers. The appeal is expected to be heard by the Full Court of the Federal Court of Australia in the first half of 2012.

“It is important that [search engine providers] are held directly accountable for misleading or deceptive paid search results when they have been closely engaged in presenting and publishing those results.”

The ACCC’s decision to appeal is based on the idea that “[t]he role of search engine providers as publishers of paid content needs to be closely examined in the online age. Specifically, it is important that they are held directly accountable for misleading or deceptive paid search results when they have been closely engaged in presenting and publishing those results,” said ACCC chairman Rod Sims.

At initial glance, this appeal may seem like an unremarkable event for the search engine behemoth. However, a closer look at Google’s actions after the initial filing of the case sheds a different light on the ACCC’s decision. The company took a series of measures to amend any misconception about its ads, such as changing the labeling of sponsored links to ‘Ads’ and “releasing a new policy on the use of unrelated business names in the first line of text for advertisements.”

Additionally, the Australian Federal Court decision and the ACCC’s recent appeal come at an interesting time, as many in Washington, DC continue to express concerns that Google gives its own services priority in search results over its competitors. Google executive chairman Eric Schmidt was recently still defending his company against these claims.

It is unclear how the Federal Court will decide on the ACCC’s appeal early next year or the long-term repercussions for the company’s advertisement component, which represents a significant source of revenue for Google and other search engines. The ACCC chairman made clear that “[i]t is very important that the law in this area is clarified and fully understood.” If successful on appeal, the court’s decision may lead to significantly more litigation against Google regarding liabilities for infringement of trade practice laws and deceptive advertisements.

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