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](http://economics.com.au/?p=8563](http://economics.com.au/?p=8563).
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.