Did Google engage in misleading conduct?
79 At the outset of a consideration of Google's responsibility for the advertisements, it is as well to recall that a party may engage in misleading conduct so as to contravene s 52 of the Act without an intention to mislead or deceive. The question is whether Google "engaged in conduct" that was likely to mislead or deceive.
80 The second point to be made is that whether a corporation has engaged in misleading conduct or has merely acted as a conduit for another is a question of fact. In that regard, the case law subsequent to the decision in Guthrie has not altered the legal operation of s 52 of the Act as it was explained by Bowen CJ in the passage from Guthrie set out above at [39].
81 Bowen CJ observed that the fact that a statement is clearly an advertisement for a particular advertiser was not a sufficient basis, in the circumstances of that case, to justify a finding that the statement was not made by the television station. His Honour expressly left open the possibility of a finding that, by necessary implication, the statement would not be seen as that of the television station. The later authorities may have allowed greater scope for the operation of necessary implication than was apparent in the decision in Guthrie. But otherwise there is no tension between the remarks of Bowen CJ and the principles stated by the High Court in the authorities referred to above. The effect of the authorities is that the intermediary's conduct must be considered as a whole to determine whether the intermediary was merely passing on the information. Whether or not there is an implied disclaimer or an implied adoption or endorsement is a conclusion of fact which follows from a determination based on all the circumstances of the case.
82 In ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [57], Gummow J quoted French J in Gardam v George Wills & Co Ltd (1988) 82 ALR 415, in the passage cited by the primary judge, explaining that the issue is whether -
[t]he innocent carriage of a false representation from one person to another [occurs] in circumstances where the carrier is and is seen to be a mere conduit … It will be a question of fact in each case.
83 In Yorke v Lucas (1985) 158 CLR 661 at 666 (Yorke v Lucas), Mason CJ, Wilcox, Deane and Dawson JJ doubted whether a corporation could be said to have engaged in conduct that was misleading or deceptive if it is apparent that the "corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth". The principle to be drawn from this statement is that if a corporation passes on information supplied by another, which information subsequently turns out to have been false, the corporation does not engage in misleading conduct where the circumstances make it apparent that the corporation was merely passing on information supplied by another for what it was worth.
84 In Butcher at [40], in the passage cited by the primary judge, the majority of the High Court said: "The agent did no more than communicate what the vendor was representing, without adopting it or endorsing it". It would be wrong to suggest that there is a tension between this statement and the statement from Yorke v Lucas. Neither side suggested that there was any such tension, and the passage cited from Yorke v Lucas was set out with evident approval in Butcher at [38] by Gleeson CJ, Hayne and Heydon JJ.
85 In Yorke v Lucas and in Butcher, their Honours were endeavouring to explain that a party whose conduct consists of the repetition of a misleading statement is not conduct which is misleading and deceptive on the part of the intermediary if it sufficiently appears that the intermediary is merely passing on the fact that the statement has been made by another. The observations in Yorke v Lucas were not suggesting that a statement by an intermediary will always be attributed to him or her for the purposes of s 52 in the absence of an express disclaimer of personal responsibility. Nor is the passage from Butcher suggesting that express adoption or endorsement is essential to liability under s 52 of the Act. Neither statement was purporting to add a gloss to the language of s 52. The same observation applies to McHugh J's synthesis of the effect of the authorities in Butcher at [123].
86 It is also worth noting that in neither Yorke v Lucas, Butcher nor in ACCC v Channel Seven, was Guthrie disapproved. Further, the observations made by French CJ and Kiefel J in ACCC v Channel Seven at [43] and by Gummow J in that case at [57] are not inconsistent with the view we have expressed about disclaimer, adoption and endorsement.
87 The actual decision of the High Court in Butcher does not assist Google. Butcher was a case where a real estate agent passed on to purchasers a brochure prepared by the agent's principal containing inaccurate statements about the property the subject of the brochure. It was held that it was apparent from all the circumstances in that case that the agent was merely passing on those statements as statements by the vendor for what they were worth. No user of Google's search engine presented by Google with a sponsored link in response to a search query would regard the sponsored link displayed by Google with a clickable link to the sponsor's URL as conveying the message that the sponsored link is a statement by an advertiser which Google is merely passing on. What appears on Google's webpage is Google's response to the user's query. That it happens to headline a keyword chosen by the advertiser does not make it any the less Google's response. And even that occurs pursuant to the AdWords facility made available to the advertiser by Google. Google's conduct cannot fairly be described as merely passing on the statements of the advertiser for what they are worth. In those circumstances, it is an error to conclude that Google has not engaged in the conduct of publishing the sponsored links because it has not adopted or endorsed the message conveyed by its response to the user's query.
88 It is necessary to be clear as to what it is about Google's conduct that is said to be misleading or deceptive on its part. Google's conduct consists relevantly of the display of the sponsored link in response to the entry of the user's search term in collocation with the advertiser's URL. The display of the sponsored link is effected by Google's engine as Google's response to a user's search. That which is displayed by Google is called up by Google's facility as Google's response to the user's search. The clickable link, when clicked, takes the user directly to the advertiser's URL.
89 An ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in collocation with the sponsor's URL in response to the user's search. Even if all these circumstances would not be apparent to ordinary and reasonable users, so that Google could not be "seen" by them to be more than a mere conduit, these circumstances show that Google is, in fact, much more than a mere conduit. The reaction of the ordinary and reasonable member of the class is not solely determinative of the issue. As Gummow J said in ACCC v Channel Seven the question is whether the "carrier is and is seen to be a mere conduit"; and as the primary judge acknowledged, the fact that a representation is not understood by the audience to be an advertisement for another person will not necessarily exclude Google from the scope of s 52 of the Act. His Honour said at [186]:
The mere fact that the relevant class may not have understood the representations to have been made by Google cannot be determinative of the question: Cassidy v Saatchi & Saatchi (2004) 134 FCR 585 per Moore and Mansfield JJ at [28].
90 Critical to this conclusion is the fact that the sponsored link is displayed on the screen in response to the user's query which is made by the entry of selected key words. Thus, the user asks a question of Google and obtains Google's response. Several features of the overall process indicate that Google engages in misleading conduct.
91 First, the response shows, in large blue font, as part of the sponsored link, the keyword entered by the user. The advertiser's message in black font and the URL in green, appear immediately below the keyword and as part of the response. What the user is therefore told is that the advertiser's message and the advertiser's URL are an answer to the user's query about the subject matter of the keyword which includes the identification of a competitor of the advertiser. The falsity of the conduct involved in the four responses in the present case is that the advertiser's URL misrepresents a connection between the searched term identifying the competitor and the URL of the advertiser.
92 The conduct is Google's because Google is responding to the query and providing the URL. It is not merely passing on the URL as a statement made by the advertiser for what the statement is worth. Rather, Google informs the user, by its response to the query, that the content of the sponsored link is responsive to the user's query about the subject matter of the keyword.
93 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 user enters that keyword because the user is seeking information about Harvey World Travel. Instead, the user is given the URL of one of Harvey World Travel's competitors. In this example, the user is not told merely that the advertiser has provided Google with this URL. Rather, Google tells the user that the URL provided below is the contact address for information about Harvey World Travel. The whole purpose of the user's inquiry, to which Google responds by providing organic links and sponsored links, is to answer the user's query. The enquiry is made of Google and it is Google's response which is misleading.
94 This conclusion is reinforced by a consideration of the nature of Google's search engine, and the AdWords program. Google's search engine is the information retrieval system which the user employs to navigate his or her way through the web using keywords that deliver links to other locations on the web. Google supplies its advertising customers with the ability to select keywords which are expected to be used by persons making enquiries through Google's search engine. The ability of advertisers to select "broad match" keywords enables them to trigger sponsored links through Google's search engine based on known associations which are determined by Google's proprietary algorithms. Although the keywords are selected by the advertiser, perhaps with input from Google, what is critical to the process is the triggering of the link by Google using its algorithms. That is a further reason to conclude that it is Google's conduct as a principal, not merely as a conduit, which is involved in each of the four instances that form the subject matter of this appeal.
95 The circumstance that the sponsored link is displayed as Google's response to a user's insertion of a search term into Google's search engine prevents any analogy between this case and the case of the bill-board owner or the owner of a telephone network or the publisher of a newspaper or a telecaster who simply displays an advertisement of another. In those cases the medium is not concerned with the content of the advertiser's message: in the four instances in question here Google created the message which it presents. Google's search engine calls up and displays the response to the user's enquiry. It is Google's technology which creates that which is displayed. Google did not merely repeat or pass on a statement by the advertiser: what is displayed in response to the user's search query is not the equivalent of Google saying here is a statement by an advertiser which is passed on for what it is worth.
96 It is no answer to the ACCC's case to say that it is apparent that the sponsored links were advertisements for persons other than Google. The question is not whether the advertisement was an advertisement for Google or for a third party, but whether Google's conduct in response to the user's interaction with Google's search engine was misleading. As an issue of fact, that question reasonably admits of only one answer.
97 It has been noted that the terms of Google's AdWords Program Terms state that the customer is solely responsible for all advertising, keywords and URLs. The terms also state that the advertisements and keywords chosen by the advertisers must "directly relate" to the content on the landing page of the advertisement. In each of the four instances in question, the advertiser appears to be in breach of the terms by providing keywords and URLs that do not directly relate to the content of the landing page. But it does not follow from this that, as between Google and the user or Google and the advertiser's competitor, the conduct in question is solely that of the advertiser. The matters to which we referred above indicate that Google's conduct is also misleading.
98 The role of "creative maximisers" and other Google personnel who liaise with customers is a feature of the process by which advertisers participate in the AdWords program. This feature would have been relevant to a claim under s 75B of the Act if that had been made. It may also be relevant to the defence under s 85(3), but we have not taken it into account in the conclusion that we have reached that the conduct in question is Google's conduct as a principal, and not as a mere intermediary, which is misleading.
99 As we have mentioned, Google complains that, at trial, the ACCC did not seek to make a case that Google's control of the presentation of sponsored links was such as to make Google the publisher of the sponsored links, either exclusively or concurrently with the advertiser. Google objects that it would be unfair to allow the ACCC to advance this case for the first time on appeal. This objection is without substance.
100 It is apparent from the primary judge's reasons that the circumstances of Google's role in the display of a sponsored link in response to a search query were drawn to his Honour's attention. His Honour said at [52]-[56]:
52 Google's revenues are derived primarily from advertising through its program called AdWords. AdWords advertising appears on the google.com and google.com.au websites as "Sponsored Links" which, when they appear, are located above the organic search results or to the right hand side of them. Hundreds of thousands of AdWords customers advertise through the AdWords program.
53 A sponsored link is a form of advertisement. Sponsored links are created by advertisers who are willing to pay for advertising text which incorporates a link that directs a user to a webpage of the advertiser's choosing. Goggle [sic] provides its advertisers with access to the AdWords program which allows them to create, change and monitor the performance of their advertisements.
54 When a user enters a query into the Google search engine, an "auction" occurs that determines which sponsored links to show, in which order to show them, and how much to charge the advertisers whose advertisements are displayed and clicked on by the user.
55 An AdWords customer may elect to trigger advertisements (or participate in an auction that may have that result) by exact match, phrase match or broad match. Exact match will trigger sponsored links only if the query entered by the user is exactly the keyword chosen by the AdWords customer. Phrase match will trigger sponsored links based on any word in the phrase. Broad match triggers sponsored links based on known associations determined by Google's search algorithms.
56 The factors that influence an auction include which AdWords customers have a sufficient budget to participate and the quality of the advertisement they have created. Google first determines whether the advertisement is eligible to participate in the auction. Eligibility is a function of several factors that determine the "Quality Score" of the advertisement. The Quality Score takes into account factors such as the relevance of the advertisement to the query and the historical user experience of the page associated with that advertisement when it appears as a sponsored link. The advertisements which are deemed eligible according to their Quality Score are subsequently ranked by virtue of the auction process.
101 Further in this regard, at [192] his Honour said:
The ACCC's argument for holding that the relevant representations were made by Google…depended to a considerable extent upon the proposition that ordinary and reasonable members of the relevant class would not have understood that sponsored links were advertisements. However, the ACCC also relied upon Google's use of keyword insertion to generate headlines that matched the terms of the search queries exactly. The ACCC argued that "[i]n a very real sense Google itself is making the representations. It cannot, particularly given keyword insertion, be regarded simply as adopting them and it is very far from 'passing them on for what they are worth'".
102 His Honour went on, in similar vein, at [226]:
I have set out the facts relating to the involvement of Ms Wood in the STA Travel account in some detail first, because it is said by the ACCC to bear upon whether any of the representations that may have been conveyed by the Harvey World Travel advertisements were made by Google and secondly, because of its obvious relevance to Google's pleaded defence based upon s 85(3) of the Act. For the moment it is sufficient to say that the evidence disclosed that employees of Google Australia played a much more substantial role in the management of the STA Travel account than they did in relation to the Trading Post account as to which there is no evidence of any similar involvement on the part of Ms Wood or her colleagues at Google Australia. Before I consider the implications of Ms Wood's involvement it is necessary for me to ascertain which, if any, of the ACCC's pleaded representations were actually conveyed by the Harvey World Travel advertisements.
103 There can be no dispute that the ranking of the sponsored links on the results page displayed in response to a search query by a user is determined by Google not its advertiser. In Google's own filed defence, it pleaded:
… the position and order on the results page of the sponsored links is determined by the AdRank of the sponsored link, which is calculated by multiplying the price per click that the third party has agreed to pay by a "quality score" for the sponsored link, which is based on the click-through rate for the sponsored link, the relevance of the sponsored link to the search query, and other factors.
104 For these reasons, we conclude that the primary judge erred in failing to conclude that Google engaged in misleading and deceptive conduct.