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  • Analysis, Internet - Written by on Monday, February 11, 2013 16:26 - 13 Comments

    Google – and everyone else – wins by High Court decision

    This article is by Stephen King, Professor in the Department of Economics at Monash University. It was first published on The Conversation and is re-published here with permission.

    analysis The High Court has ruled that Google did not engage in misleading and deceptive conduct when it published a number of advertisements created by its AdWords program. Does this mean that the advertisements themselves were not misleading and deceptive? No! Everyone agrees that they were. Rather, the decision clarifies the law for publishers, including those using the internet.

    When an advertisement is published, either in a physical form or online, it involves three parties: the advertiser, the publisher and the consumer. Section 52 of the Competition and Consumer Act (CCA) makes it illegal for a corporation to engage in misleading or deceptive conduct, including through advertising. However, section 85(3) of the CCA provides a “publishers’ defence”.

    A publisher does not engage in illegal conduct if, in the normal course of business, it publishes a misleading or deceptive advertisement but had no reason to suspect that the advertisement was illegal. Further, legal precedent accepts that “[t]he innocent carriage of a false representation … where the carrier is and is to be seen a mere conduit” does not make the ‘carrier’ liable for the false or misleading representation (High Court decision at paragraph 12).

    The publishers’ exemption makes sense. If publishers had to verify the content of every advertisement, it would bring the advertising industry to a shuddering halt. Publishers would not have the information or the ability to verify all advertisements and they would either be forced to significantly limit advertising or hope and pray that advertisers were doing the right thing. Of course, the exemption does not apply to the advertisers themselves. If they advertise in a false or misleading way, then they have breached the law. It only applies to the ‘conduit’ or publisher for the advertisement.

    So, back to the High Court’s decision.

    Between 2005 and 2007, Google’s Adwords was used by a number of companies to create “sponsored links” that were displayed on Google’s search pages. These advertisements were misleading and deceptive. The relevant advertisers have already been dealt with for breaching the CCA. The matter before the High Court, however, concerned whether:

    “Google (as distinct from the advertisers to whom the sponsored links belonged) engaged in misleading and deceptive conduct by publishing or displaying the sponsored links” (judgement, paragraph 3).

    The publishers’ and “innocent conduit” defences seem to imply that Google had not broken the law. However, the Australian Competition and Consumer Commission (ACCC) were not so sure. According to the ACCC, the AdWords technology meant that Google had a role in making or creating the sponsored links. Google did not simply “receive” and “publish” the advertisements. It was intimately involved in providing the program that made the misleading advertisements possible. So, by this argument, Google was neither just a publisher nor “innocent conduit” but an active party to the misleading and deceptive behaviour.

    And this is not a bad argument. Indeed, the Full Federal Court agreed. The Full Federal Court stated that Google was more than a publisher because the advertisements were displayed in response to a consumer’s search request. The Court concluded, “Google’s conduct in response to the user’s interaction with Google’s search engine was misleading”.

    I discuss this earlier decision more fully here.

    The High Court has disagreed. The AdWords technology “merely assembles information provided by others”. It “does not render Google the maker, author, creator or originator of the information in a sponsored link”. As such, “Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online) …”. Google simply provides “a means of communication between advertisers and consumers” (judgement paragraph 69).

    So the High Court has clarified the situation for Google and other internet intermediaries. They are publishers with the rights and obligations of publishers, but no more. This is a good thing. If the earlier decision of the Full Federal Court was upheld it would have created a legal quagmire for online publishers. So not just Google, but all online publishers, were winners from the High Court decision.

    Some media commentators have suggested that the law should now be changed. This is wrong. The High Court’s decision makes it clear that online publishers have the same rights and obligations as bricks-and-mortar publishers. The fact that they use a different technology does not change that.

    Some commentators have suggested that it will be harder to prosecute misleading and deceptive online advertising. This is wrong. The High Court’s decision was about the online publishers’ obligations. The advertisers still face the same rules for misleading and deceptive behaviour.

    It has been claimed that the decision is a “loss for consumers”? Again, this is wrong. It is a win for publishers and means that the consumer protections for physical advertisements also hold for online advertising. But there is no greater obligation created just because advertising on the internet uses a different technology.

    Was the ACCC wrong for taking the case? In my opinion, it was not. The ACCC had a good argument and the law needed to be tested. This is one of the roles of the ACCC.

    So who lost from the High Court’s decision? Well, actually, no-one. The decision has created clarity of the law and that benefits everyone, including the competition regulator.

    Stephen King is a former Member of the Australian Competition and Consumer Commission. He has also received research funding from Google.

    This article was originally published at The Conversation. Read the original article. Image credit: Robert Scoble, Creative Commons

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    1. Posted 11/02/2013 at 4:54 pm | Permalink | Reply

      Asking Google to remove offending sponsored links was one of the banes of my existence when I was an in-house marketing manager. We’d fire off letters and emails to both Google and the offending advertiser.
      Every couple of weeks, there would be someone new ‘trying it on’ and popping up in the sponsored listings.
      There was a sense of Groundhog Day about it all – and now it’s only going to get worse. http://explorecomms.com.au/2013/02/06/google-wins-australian-high-court-adwords-battle/

      • Posted 11/02/2013 at 5:05 pm | Permalink | Reply

        Welcome to my world. There are dozens of sites out there doing RSS feeds of Delimiter and popping up in search results. Eventually I just gave up trying to stop it …

        • Trevor
          Posted 11/02/2013 at 5:13 pm | Permalink | Reply

          Sounds like an area ripe for a new piece of security kit to aggregate all the offending sites, create a detailed report and ask for permission to send it off to aome appropriate body

        • Trevor
          Posted 11/02/2013 at 5:14 pm | Permalink | Reply

          Sounds like an area ripe for a new piece of security kit to aggregate all the offending sites, create a detailed report and ask for permission to send it off to some appropriate body to process and enforce copyright violations…

          • Posted 11/02/2013 at 5:44 pm | Permalink | Reply

            There is no “appropriate body” when the sites are hosted in Russia …

            • Trevor
              Posted 11/02/2013 at 7:20 pm | Permalink | Reply

              True… Pity ICANN or similar won’t just block DNS to them or something :-\

    2. David Brooks
      Posted 11/02/2013 at 5:29 pm | Permalink | Reply

      So, “…but had no reason to suspect that the advertisement was illegal…” ignorance of the law is an excuse! And the High Court says so.

      Will this decision trickle down to the poor sods in the local courts who get told that “ignorance of the law is no excuse” and who don’t have multi million $ lawyers to defend them?

      • NPSF3000
        Posted 11/02/2013 at 11:45 pm | Permalink | Reply

        There’s a difference between being ignorant of the law, and ignorant of the fact x, y or z is breaking law.

      • Tinman_au
        Posted 12/02/2013 at 11:48 am | Permalink | Reply

        Think it through David, should you be liable just because you know someone that was breaking a law, even though you didn’t know they were breaking it?

        • David Brooks
          Posted 12/02/2013 at 7:48 pm | Permalink | Reply

          This matter is a little deeper than so far stated.
          Yes, NPSF3000, Tinman_au: if my neighbour breaks the law there is no reason to believe that I, or any third party, knew about it; unless evidence exists to the contrary. This has not stopped magistrates from finding people guilty of an offence to which they have been an unknowing party to. But at the local and district court level we are dealing with individuals, who, in many cases, rely on the public advocate if one is available and are simple for authorities to push around.
          If you know someone is breaking the law you are obliged to inform the authorities. Failure to do so is itself a criminal offence. You may not know the other person was breaking the law, try telling that to the magistrate. Your association with the third party is why you end up in court. Guilt by association is well enshrined in our laws.
          The case in hand, Google versus ACCC is somewhat different because it involves a “company” ie Google. You cannot send a company to jail. You cannot stop them trading. You cannot stop investors investing in them. At best they can be fined. And the fines usually amount to no more than pocket money for the “company”. All these, and many more matters re companies, must be kept in mind when they are challenged on some legal matter. If the same rules of evidence applied to companies as those that apply to individuals then Google would now be in jail.
          And that was the point of my post on this matter.

      • Dean
        Posted 13/02/2013 at 10:02 am | Permalink | Reply

        If there is a bulletin board inside my apartment building, is the body corporate liable if someone posts a misleading poster?

    3. Karl
      Posted 11/02/2013 at 5:35 pm | Permalink | Reply

      “This article is by Stephen King”
      The link on the name goes to the twitter of @charispalmer

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