FRENCH CJ, CRENNAN AND KIEFEL JJ. The appellant, Google Inc ("Google"), operates the well-known internet search engine "Google" ("the Google search engine"). The respondent, the Australian Competition and Consumer Commission ("the ACCC"), claims that particular search results displayed by the Google search engine between 2005 and 2008 conveyed misleading and deceptive representations, and that, by publishing or displaying those search results, Google engaged in conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the Act").
In July 2007, the ACCC initiated proceedings under Pt VI of the Act, seeking declarations and injunctive relief against Google and another party. At first instance in the Federal Court of Australia, the primary judge (Nicholas J) dismissed the ACCC's application to the extent that it related to Google on the basis that Google had not made the misleading and deceptive representations relied upon by the ACCC. The Full Court of the Federal Court (Keane CJ, Jacobson and Lander JJ) allowed the ACCC's appeal, and made declarations to the effect that Google had contravened s 52 of the Act by publishing the search results. By special leave, Google now appeals to this Court. The ACCC has filed a notice of contention concerning an aspect of the evidence it contends is relevant to conclusions about Google's conduct.
As explained below, the search results which are the subject of these proceedings are "sponsored links" - a form of advertisement created by, or at the direction of, advertisers willing to pay Google for advertising text which directs users to a web site of the advertiser's choosing. It is not now in contention that the sponsored links which are the subject of this appeal - referred to in these reasons as "the STA Travel advertisements", "the Carsales advertisements", "the Ausdog advertisement" and "the Trading Post advertisement" - conveyed misleading and deceptive representations. What the present appeal concerns is whether, in all the circumstances, 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. In the reasons which follow, it will be explained that Google did not contravene s 52 of the Act. Google did not author the sponsored links; it merely published or displayed, without adoption or endorsement, misleading representations made by advertisers.
Relevant principles
At all times relevant to these proceedings, s 52(1) of the Act, found in Div 1 of Pt V, provided that "[a] corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive". The ACCC sought to establish that Google had contravened s 52 directly, and did not seek to rely on s 75B of the Act, which relevantly provided that a person who had "aided, abetted, counselled or procured the contravention" of a provision of Pt V would be a person "involved in [the] contravention" for the purpose of the enforcement and remedies provisions in Pt VI.
Google sought to rely on s 85(3) of the Act. Section 85, in Pt VI, was headed "Defences", and sub-s (3) provided:
"In a proceeding in relation to a contravention of a provision of Part V or VC committed by the publication of an advertisement, it is a defence if the defendant establishes that he or she is a person whose business it is to publish or arrange for the publication of advertisements and that he or she received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that its publication would amount to a contravention of a provision of that Part."
More will be said about s 85(3) later in these reasons.
A number of well-established propositions about s 52 may be stated briefly. First, the words "likely to mislead or deceive" in s 52 make it clear that it is not necessary to demonstrate actual deception to establish a contravention of s 52. The ACCC did not call evidence to show that any user of the Google search engine was misled or deceived in any relevant respect.
Second, where an issue in s 52 proceedings is the effect of conduct on a class of persons such as consumers who may range from the gullible to the astute, the court must consider whether "the 'ordinary' or 'reasonable' members of that class" would be misled or deceived. The primary judge applied that test.
Third, conduct causing confusion and wonderment is not necessarily co‑extensive with misleading or deceptive conduct.
Fourth, s 52 is not confined to conduct which is intended to mislead or deceive. A corporation could contravene s 52 even though it acted reasonably and honestly. However, as Mason ACJ, Wilson, Deane and Dawson JJ observed in Yorke v Lucas:
"That does not ... mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it 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, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive."
In the courts below, there was some discussion of an early case, Universal Telecasters (Qld) Ltd v Guthrie. Guthrie concerned the corporate proprietor of a television station which had been convicted on a charge under s 53(e) of the Act in connection with the broadcast of an advertisement, sourced from one of its customers, which contained a misleading statement concerning the price of certain motor vehicles. A majority of the Full Court of the Federal Court (Bowen CJ and Franki J; Nimmo J dissenting) found that the corporation had successfully established a defence under s 85(3) of the Act, and quashed the conviction. However, all members of the Full Court found that, by broadcasting the advertisement, the corporation had itself made the misleading statement - although, given the result, the opinions of Bowen CJ and Franki J on this issue were obiter dicta. On the question of whether an intermediary broadcasting a statement on behalf of another can be said to "make" the statement for the purposes of s 53(e), Bowen CJ said:
"where there are express words of adoption or exclusion, this may, perhaps, be a proper line to draw. If so, then logically it would seem difficult to distinguish the case where, by necessary implication the statement was made for or on behalf of another. These will be matters for decision when an appropriate case arises ...
The fact that a statement is clearly an advertisement for a particular advertiser would not seem to constitute a sufficient basis in the circumstances to justify a holding that the statement was not made by the television station.
... Even if it be proper to distinguish statements, on the basis they are expressly or by necessary implication statements of the advertiser and not of the television station, the statement in this case is not seen to be such a statement."
In Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd, the Full Court of the Federal Court (Bowen CJ, Lockhart and Fitzgerald JJ) considered Guthrie in the context of an alleged contravention of s 52 of the Act arising from the publication of several newspaper articles. The members of the Full Court recognised that a newspaper's publication of material encompasses both the making of representations and the passing on of the representations of others. Their Honours found that the publication of an inaccurate statement of another conveys an essentially different meaning from that conveyed by the original statement (unless the original statement is adopted by the publisher), and that mere publication of the statement will not necessarily amount to adoption by the publisher. This approach presaged the formulation of the principle established by this Court in Yorke v Lucas. It also implicitly qualified the Full Court's apparent support in Guthrie for the proposition that the mere fact that a broadcaster is obviously not the source of a misleading advertisement may not be sufficient for the broadcaster to avoid a contravention of s 52. In any event, the Full Court in Global Sportsman noted that Bowen CJ had made it clear in Guthrie that it was necessary to refer to all the facts of a particular case, including the content of an advertisement, before deciding whether an intermediary broadcaster had made any misleading statements contained in the advertisement of another.
In a subsequent case, Gardam v George Wills & Co Ltd, which concerned a defendant who supplied goods with an anonymous label containing product information, French J said:
"The innocent carriage of a false representation from one person to another in circumstances where the carrier is and is seen to be a mere conduit, does not involve him in making that representation ... When, however, a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes that representation. It will be a question of fact in each case".
Gleeson CJ, Hayne and Heydon JJ further explained the correct approach to intermediaries in Butcher. Butcher concerned an alleged contravention of s 52 by a real estate agent who had incorporated an inaccurate survey diagram supplied by the vendor of a property into an advertising brochure, and provided that brochure to potential purchasers of the property. Gleeson CJ, Hayne and Heydon JJ found that the agent had not contravened s 52 because he had done no more than communicate the vendor's representation to purchasers without adopting or endorsing it. Their Honours adopted the principles stated by Mason ACJ, Wilson, Deane and Dawson JJ in Yorke v Lucas, and said:
"In applying those principles, it is important that the agent's conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of its 'conduct' divorced from 'disclaimers' about that 'conduct' and divorced from other circumstances which might qualify its character."
Their Honours went on to say that the conclusion in Butcher flowed from the nature of the parties, the character of the transaction and the content of the brochure.
It has been established in relation to intermediaries or agents that the question whether a corporation which publishes, communicates or passes on the misleading representation of another has itself engaged in misleading or deceptive conduct will depend on whether it would appear to ordinary and reasonable members of the relevant class that the corporation has adopted or endorsed that representation. It has also been established that, if that question arises, it will be a question of fact to be decided by reference to all the circumstances of a particular case.
As will be explained below, the ACCC contends that Google and the Google search engine do not operate analogously to other intermediaries or agents, and that the principles established in relation to intermediaries or agents do not apply to the facts of this case.
Factual background
In order to explain the conduct by Google which the ACCC says contravenes s 52 of the Act, it is necessary to say something about the operation of the Google search engine, its interaction with Google's AdWords program, and how each of the STA Travel advertisements, the Carsales advertisements, the Ausdog advertisement and the Trading Post advertisement came to be created using the AdWords program and displayed using the Google search engine.
The internet and the Google search engine
The internet is a global network of networks of computers. Computers connected to the internet communicate with each other - requesting and receiving data - by means of a common language, the Internet Protocol. The World Wide Web is a vast system of interlinked documents ("web pages") which can be accessed by computers connected to the internet. Each web page has a unique address, or URL. An internet user who wishes to access a web page at a known address can access that web page by entering the address into the web browser on his or her computer.
An internet user who wishes to access a web page but does not know its address, or wishes to locate a selection of web pages relevant to a particular topic, is likely to use an internet search engine, like the Google search engine, in much the same way that a person who does not know the telephone number of a particular business, or wishes to contact a local provider of a particular product or service, might once have been likely to use a telephone directory.
The Google search engine allows internet users to search for web pages by entering search terms into a search field and clicking on a button marked "Google Search" ("the search button"). Google keeps and constantly updates an index of billions of web pages which enables it to respond to users' search requests. Google does not control the search terms entered by users of the Google search engine, or the material available on the internet.
During the period relevant to these proceedings, if a user of the Google search engine entered search terms into the search field and clicked on the search button, the Google search engine would display two types of search results: "organic search results" and "sponsored links".
Organic search results are links to web pages, which are ranked in order of relevance to the search terms entered by the user. The Google search engine always displays organic search results, and organic search results are always displayed free of charge. Google does not sell placement in its organic search results. Instead, the order of relevance of organic search results is determined by a complex proprietary algorithm developed by Google which is a function of many factors, including the content of each web page which Google has indexed, and the number and type of links between each of those web pages.
As mentioned above, a sponsored link is a form of advertisement. Each sponsored link is created by, or at the direction of, an advertiser who typically pays Google each time a user of the Google search engine clicks on the sponsored link. Not all search terms entered into the Google search engine result in the display of sponsored links. When the Google search engine does display sponsored links, they are listed separately from organic search results. They appear either above the organic search results in a shaded box marked "Sponsored Links" ("top left sponsored links"), or to the far right of the organic search results in a box marked "Sponsored Links" ("right side sponsored links"). Whether the Google search engine displays sponsored links, and the order and position in which such links appear if they are displayed, is not determined by the algorithm which determines the order of relevance of organic search results, but by the AdWords program, described below.
An example of a search results page which includes organic search results, top left sponsored links and right side sponsored links was included in the primary judge's reasons.
Sponsored links and the AdWords program
The AdWords program is a program which allows advertisers to create, change and monitor the performance of sponsored links. Google provides advertisers with access to the AdWords program through AdWords accounts. Worldwide, hundreds of thousands of advertisers use the AdWords program. Google derives most of its revenue from its online advertising business, which involves publishing or displaying advertisements as sponsored links on its search results pages.
A sponsored link consists of three elements: a headline which incorporates a link to a web page (in blue text); the address of the web page to which the headline links (in green text); and some brief advertising text (in black text). An advertiser using the AdWords program to create a sponsored link will specify the headline, the address of the web page to which the headline links, and the advertising text, within certain limits (such as word limits) set by Google. The advertiser will also specify "keywords" which trigger the appearance of the sponsored link when entered as search terms by a user of the Google search engine. In some cases, the advertiser may specify that the headline to the sponsored link will consist of the search terms entered by the user of the Google search engine that correspond with the keywords selected by the advertiser - a facility referred to as "keyword insertion".
Participation in the AdWords program is subject to Google's Terms of Service, the AdWords Program Terms, and applicable Google policies. Google's Terms of Service relevantly provide as follows:
"8.5 You agree that you are solely responsible for (and that Google has no responsibility to you or to any third party for) any Content that you create, transmit or display while using the Services and for the consequences of your actions (including any loss or damage which Google may suffer) by doing so.
...
9.6 Unless you have been expressly authorized to do so in writing by Google, you agree that in using the Services, you will not use any trade mark, service mark, trade name, logo of any company or organization in a way that is likely or intended to cause confusion about the owner or authorized user of such marks, names or logos."
The AdWords Program Terms relevantly provide:
"2. The Program. Customer is solely responsible for all: (a) ad targeting options and keywords (collectively 'Targets') and all ad content, ad information, and ad URLs ('Creative'), whether generated by or for Customer; and (b) web sites, services and landing pages which Creative links or directs viewers to, and advertised services and products (collectively 'Services').
...
5. ('Use'). Customer represents and warrants that (y) all Customer information is complete, correct and current; and (z) any Use hereunder and Customer's Creative, Targets and Customer's Services will not violate or encourage violation of any applicable laws, regulations, code of conduct, or third party rights (including, without limitation, intellectual property rights)."
Google's Advertising Policies include a statement that an advertiser's "ads and keywords must directly relate to the content on the landing page for [the advertiser's] ad", and that "[p]roducts or services promoted in [the advertiser's] ad must be reflected on [the advertiser's] landing page". Google's Advertising Policies also include a policy entitled "Deceptive use of business names", which advises advertisers that they "may not imply an affiliation, partnership or any special relationship with any unrelated third party". Provision is made for owners of business names to notify Google of any complaint of misuse. Google has a similar policy and complaints procedure in relation to trade marks.
When a user enters search terms into the Google search engine, an "auction" is triggered that determines which sponsored links to show, in which order to show them, and how much Google will charge the advertisers whose sponsored links are displayed when the user clicks on them.
An advertiser using the AdWords program may elect to trigger a sponsored link (or participate in an "auction" that will determine whether to display a sponsored link) by choosing three different types of keyword: exact match, phrase match or broad match. Exact match will trigger a sponsored link only if the search term entered by the user is the exact keyword chosen by the advertiser. Phrase match will trigger a sponsored link if the user enters any word in the phrase chosen by the advertiser. Broad match triggers sponsored links based on known associations determined by Google's algorithms. The advertisers whose sponsored links are relevant to this appeal each selected exact match.
The term "auction" has a particular meaning in this context. The "auction" which determines whether a particular sponsored link will be displayed takes into account: the relevant advertiser's advertising budget for the day; how much the advertiser is willing to pay each time a user clicks on the sponsored link; whether the advertiser has selected exact match, phrase match or broad match for the keywords it has specified in relation to the sponsored link; and the "quality score" of the sponsored link, which depends in part on the content of the sponsored link, as determined by the advertiser.
A keyword which has been disapproved will not trigger a sponsored link until any problem with its use has been corrected. Disapproved keywords can include business names or trade marks which have been the subject of a complaint by their respective owners to Google.
The STA Travel advertisements
The first group of sponsored links relevant to this appeal belonged to STA Travel, a business operating in the travel industry. These sponsored links appeared on 29 May 2007, 18 July 2007, 24 October 2007 and 17 April 2008.
The sponsored link which appeared on 18 July 2007 was generated in response to a search conducted on the Google search engine using the search terms "harvey world travel". This search generated a search results page consisting of organic search results, a single top left sponsored link and three right side sponsored links. The top left sponsored link and the first two organic search results linked to the web site of Harvey World Travel, a significant competitor of STA Travel. The sponsored link relevant to these proceedings was a right side sponsored link which linked to the web site of STA Travel, and was in the following terms:
"Harvey Travel
Unbeatable deals on flights, Hotel & Pkg's Search, Book & Pack Now!
"
The relevant sponsored links which appeared on other dates also featured the headlines "Harvey Travel" or "Harvey World Travel", and linked to the web site of STA Travel.
The primary judge found that, by the publication of the STA Travel advertisements, STA Travel represented to ordinary and reasonable members of the relevant class that it had a commercial association with Harvey World Travel, and that information regarding Harvey World Travel and its products or services could be found at the web site of STA Travel. His Honour found that these representations were misleading and deceptive.
Both Harvey World Travel and STA Travel had AdWords accounts which enabled them to create sponsored links using the AdWords program, and to specify keywords for those sponsored links.
Ms Alice Wood, an account manager at Google, was involved with STA Travel's AdWords account between about March 2006 and March 2007. The evidence before the primary judge showed that the keyword "Harvey World Travel" had been added to STA Travel's AdWords account before Ms Wood became involved with the account. On 7 June 2006, Mr Arjan Goudsblom of STA Travel emailed Ms Wood a document containing keywords including "Harvey World Travel" and "Harvey Travel". On 3 July 2006, Mr Goudsblom emailed Ms Wood another document containing keywords including those terms, and requested that Ms Wood "adjust our categories to contain all these phrases". On 10 August 2006, following a further exchange of emails between Ms Wood and Mr Goudsblom, Ms Wood applied those keywords to certain sponsored links in STA Travel's AdWords account.
The Carsales advertisements
The second group of sponsored links relevant to this appeal belonged to a classified advertising business called Carsales, which operates the web site carsales.com.au. The relevant sponsored links appeared on 28 May 2007, and at various other times between March 2006 and July 2007.
The sponsored link which appeared on 28 May 2007 was generated in response to a search conducted on the Google search engine using the search terms "honda .com.au". This search generated a search results page consisting of organic search results, a single top left sponsored link and a single right side sponsored link. The first two organic search results linked to the web site of Honda Australia Pty Ltd, a subsidiary of the well-known car manufacturer. The relevant sponsored link was the top left sponsored link, which linked to the web site of Carsales, and was in the following terms:
"Honda .com.au
Buy/Sell Your Civic The Fast Way on Australia's No.1 Auto Website"
The primary judge found that, by the publication of the Carsales advertisements, Carsales represented that users who clicked on the headlines to the sponsored links would be taken to the web site of Honda Australia. His Honour went on to find that this representation was likely to mislead or deceive ordinary and reasonable members of the relevant class.
Like STA Travel, Carsales had an AdWords account. At various times, both Mr Chris Bayley, a customer service representative at Google, and Ms Wood were involved with Carsales' AdWords account. The evidence before the primary judge indicated that Mr Bayley was also involved with a separate AdWords account belonging to a classified advertising business called Carpoint, which operates the web site carpoint.com.au, and is ultimately part of the same organisation as Carsales. The evidence indicated that the keyword "Honda .com.au" had been added to Carpoint's AdWords account prior to March 2006, although it is not clear by whom.
On 7 March 2006, Mr Bayley sent an email to Mr Daniel Johnson of Carsales recommending that keywords used in Carpoint's AdWords account be added to Carsales' AdWords account, and that Carsales use keyword insertion in all of its sponsored links. On 15 March 2006, Mr Bayley sent an email to Mr Johnson attaching a spreadsheet containing a list of keywords for Mr Johnson's approval, including the keyword "Honda .com.au". On 17 March 2006, Mr Bayley added a number of keywords to Carsales' AdWords account, including "honda" and "Honda .com.au". On 6 December 2006, Ms Wood sent an email to Mr Johnson which included her suggestions for "maximising" Carsales' AdWords account. Attached to that email was a spreadsheet in which Ms Wood highlighted certain existing keywords which she described as "the best converting terms for [Carsales]". These keywords included the keyword "Honda .com.au".
The Ausdog advertisement
Alpha Dog Training is a dog training business owned by Mr Gregory Fontana. It operates the web site alphadogtraining.com.au. The Dog Trainer Pty Ltd ("Ausdog") is a competitor of Alpha Dog Training. It operates the web site DogTrainingAustralia.com.au.
The next sponsored link relevant to this appeal belonged to Ausdog. It appeared on 12 March 2008, and was generated in response to a search conducted on the Google search engine using the search terms "Alpha Dog Training". The first of the organic search results linked to the web site of Alpha Dog Training. One of the top left sponsored links linked to the web site of Ausdog, and was in the following terms:
"Alpha Dog Training
DogTrainingAustralia.com.au All Breeds. We come to you. No dog that can't be trained."
The primary judge found that, by the publication of the Ausdog advertisement, Ausdog represented that it had a commercial association with Alpha Dog Training, and that information regarding Alpha Dog Training and its products or services could be found at the web site of Ausdog. His Honour found that these representations were misleading and deceptive or likely to mislead or deceive ordinary members of the relevant class.
Both Ausdog and Alpha Dog Training had AdWords accounts. Ausdog's AdWords account was operated on its behalf by an advertising agency, Agency XYZ. On 16 December 2007, Agency XYZ added 239 keywords to Ausdog's AdWords account, including 15 keywords containing the phrase "alpha dog" or "alphadog".
On 13 March 2008, Mr Fontana sent an email to Google making a complaint about the "[f]raudulent use of our business name". The following day, Ms Casey-Lee Atherton of Google responded, recommending that Mr Fontana take up the matter with Ausdog. On 1 April 2008, Mr Fontana complained to Ausdog. On 12 April 2008, Agency XYZ removed all of the "alpha dog" or "alphadog" keywords from Ausdog's AdWords account.
The Trading Post advertisement
The final sponsored link relevant to this appeal belonged to Trading Post Australia Pty Ltd ("Trading Post"), a classified advertising business which operates the web site tradingpost.com.au. It appeared on 29 May 2007, and was generated in response to a search conducted on the Google search engine using the search terms "just 4x4s magazine". This search generated a search results page consisting of organic search results, two top left sponsored links and a number of right side sponsored links. The sponsored link relevant to this appeal was a top left sponsored link which linked to the web site of Trading Post, and was in the following terms:
"Just 4x4s Magazine
New & Used 4WD Cars - See 90,000+ Auto Ads Online. Great Finds Daily!"
Just Magazines Pty Ltd is a competitor of Trading Post. It publishes a number of magazines throughout Australia, including one titled "Just 4x4s". Among other things, the Just 4x4s magazine contains classified advertisements for four-wheel drive vehicles.
The primary judge found that, by the publication of the Trading Post advertisement, Trading Post represented that it had a commercial association with the Just 4x4s magazine, and that information regarding the Just 4x4s magazine could be found at the web site of Trading Post. His Honour found that these representations were misleading and deceptive or likely to mislead or deceive.
Trading Post had an AdWords account which was operated on its behalf by an advertising agency, Sensis. On 26 December 2006, Mr Eric Wan of Sensis uploaded the keyword "just 4x4s magazine" to Trading Post's AdWords account, as part of a batch of 246 keywords.
Proceedings below
Primary judge
The ACCC made two claims against Google before the primary judge. First, the ACCC alleged that Google had engaged in conduct contrary to s 52 of the Act by failing sufficiently to distinguish between organic search results and sponsored links. The primary judge rejected this claim. Second, the ACCC alleged that Google engaged in conduct contrary to s 52 of the Act by publishing or displaying particular sponsored links, including the STA Travel advertisements, the Carsales advertisements, the Ausdog advertisement and the Trading Post advertisement. The primary judge made three significant findings in relation to this claim.
First, as described above, the primary judge found that each of the STA Travel advertisements, the Carsales advertisements, the Ausdog advertisement and the Trading Post advertisement contained representations which were misleading or deceptive or likely to mislead or deceive.
Second, the primary judge found that Google had not made the representations conveyed by the advertisements. Relying on and applying the decisions of the High Court in Butcher and ACCC v Channel Seven, which his Honour treated as developments in the law clarifying the reasoning of the Full Court of the Federal Court in Guthrie, the primary judge found that Google had acted merely as a conduit, passing on the advertisements of others without endorsing or approving them.
The primary judge described the ordinary and reasonable members of the relevant class of consumers who might be affected by the alleged conduct as follows:
"The relevant class will consist of people who have access to a computer connected to the internet. They will also have some basic knowledge and understanding of computers, the web and search engines including the Google search engine. They will not necessarily have a detailed familiarity with the Google search engine but they should be taken to have at least some elementary understanding of how it works. It is not possible to use a search engine in any meaningful way without knowing something about how it operates."
His Honour found that ordinary and reasonable members of this class would have understood that sponsored links were advertisements, and were different from organic search results. His Honour also found that ordinary and reasonable members of the relevant class would not have understood Google to have endorsed or to have been responsible in any meaningful way for the content of the advertisements; rather, they would have understood that the advertisements were messages from the advertisers which Google was passing on for what they were worth. Drawing an analogy with other publishers or broadcasters of advertisements who provide technical facilities which permit advertisements to be seen or heard, the primary judge specifically rejected the ACCC's argument based on the keyword insertion facility, about which more will be said below.
Third, the primary judge found that, if Google had made the representations conveyed by the advertisements, then the defence afforded by s 85(3) of the Act would not have been available to Google in respect of any of the STA Travel advertisements, the Carsales advertisements, the Ausdog advertisement or the Trading Post advertisement.
Full Court
The ACCC's appeal to the Full Court focused on the primary judge's finding that Google had not made the representations relied upon by the ACCC, but had acted as a mere conduit. The Full Court unanimously found that Google had itself engaged in misleading and deceptive conduct, and therefore allowed the appeal.
The members of the Full Court differed from the primary judge in their treatment of Guthrie and Butcher. The Full Court relied on the reasoning in Guthrie, and held that Butcher did not stipulate that an intermediary must expressly adopt or endorse a statement for the intermediary to be liable under s 52. Further, and critically, the Full Court construed the sponsored links as being "Google's response to a user's insertion of a search term into Google's search engine" and "Google's conduct in response to the user's interaction with Google's search engine". Relying in part on the fact that Google's technology was involved in applying the "broad match" feature of the AdWords program, the Full Court found that what was in issue was "Google's conduct as a principal, not merely as a conduit", and went on to say:
"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."
Their Honours found that, even if ordinary and reasonable members of the relevant class perceived Google as a mere conduit, "[t]he reaction of the ordinary and reasonable member of the class is not solely determinative of the issue" because the circumstances showed that in fact Google was more than a mere conduit.
The Full Court rejected Google's argument that it was entitled to the defence afforded by s 85(3) of the Act in relation to the STA Travel advertisements and the Trading Post advertisement.
Submissions in this appeal
ACCC
The ACCC contended that, by publishing or displaying the STA Travel advertisements, the Carsales advertisements, the Ausdog advertisement and the Trading Post advertisement, Google had engaged in misleading and deceptive conduct as a principal. In terms of the relevant law discussed above, the central proposition advanced by the ACCC was that Google was the maker or creator of the sponsored links. The ACCC relied on the fact that Google used its technology to display the sponsored links in response to search requests made by users of the Google search engine. This, it was said, established Google's liability under s 52, notwithstanding that the advertisers were the source of the sponsored links, and notwithstanding the fact that Google did not endorse or adopt the contents of any of the sponsored links. Employing the language of Yorke v Lucas, the ACCC contended that, in the light of the relevant facts and circumstances, Google had done more than merely pass on the sponsored links for what they were worth.
The starting point for the ACCC's arguments was that the clickable headline in each of the sponsored links contained the name of a trader (and, in one case, the URL of a trader) different from that of the relevant advertiser. Referring to the keyword insertion facility, the ACCC argued that Google had inserted search terms chosen by users of the Google search engine as headlines in the sponsored links, and was therefore responsible for the collocation of the clickable headline containing the name (and, in one case, the URL) of another trader and the advertiser's URL. The ACCC also emphasised that Google had provided the functionality of the clickable headline (that is, the ability for users of the Google search engine to click on the headline of a sponsored link and be taken to the advertiser's web site). In addition, the ACCC submitted that, by displaying the sponsored links, Google had informed users of the Google search engine that the sponsored links were responsive to the users' search requests.
Google
Google always admitted that it published or displayed the STA Travel advertisements, the Carsales advertisements, the Ausdog advertisement and the Trading Post advertisement. However, Google contended that the fact that it displayed the sponsored links in response to users' search requests was not sufficient to justify a finding that Google had itself made the misleading representations conveyed by the sponsored links, or otherwise engaged in misleading and deceptive conduct.
Google emphasised that each relevant aspect of a sponsored link - the headline, the advertising text, the advertiser's URL, the keywords and the use of keyword insertion - was specified by the advertiser, and that Google merely implemented the advertiser's instructions. Google submitted that the technical facilities it provided through the AdWords program were different in kind, but not in principle, from facilities provided to advertisers by other intermediaries such as publishers and broadcasters. Google further contended that any commercial association or affiliation between an advertiser and another trader was something peculiarly within the knowledge of the advertiser, and was not a matter within Google's expertise. Google also relied on the primary judge's findings that ordinary and reasonable users of the Google search engine would have understood that the sponsored links were advertisements paid for by advertisers to promote their products and businesses, and that Google was merely passing them on for what they were worth.
Did Google contravene s 52?
It is axiomatic that the Google search engine operates by the mechanism that users' search requests are framed as search terms chosen by the user for the purpose of generating organic search results. What every advertiser seeks to achieve by use of the AdWords program is that its sponsored links will be triggered by search terms entered by a user (corresponding to keywords chosen by the advertiser) which indicate that the user may have an interest in the advertiser's products or services. Google has no control over a user's choice of search terms or an advertiser's choice of keywords.
The ACCC contended that Google, rather than the advertisers, "produced" (in the sense of making or creating) the sponsored links which are the subject of this appeal. That submission must be rejected. It is critical to appreciate that, even with the facility of keyword insertion, the advertiser is the author of the sponsored link. As Google correctly submitted, each relevant aspect of a sponsored link is determined by the advertiser. The automated response which the Google search engine makes to a user's search request by displaying a sponsored link is wholly determined by the keywords and other content of the sponsored link which the advertiser has chosen. Google does not create, in any authorial sense, the sponsored links that it publishes or displays.
That the display of sponsored links (together with organic search results) can be described as Google's response to a user's request for information does not render Google the maker, author, creator or originator of the information in a sponsored link. The technology which lies behind the display of a sponsored link merely assembles information provided by others for the purpose of displaying advertisements directed to users of the Google search engine in their capacity as consumers of products and services. In this sense, Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online), who publish, display or broadcast the advertisements of others. The fact that the provision of information via the internet will - because of the nature of the internet - necessarily involve a response to a request made by an internet user does not, without more, disturb the analogy between Google and other intermediaries. To the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers.
The primary judge's findings about the way in which ordinary and reasonable users of the Google search engine would understand the sponsored links were not disturbed in the Full Court. These findings - that ordinary and reasonable users would have understood the sponsored links to be statements made by advertisers which Google had not endorsed, and was merely passing on for what they were worth - were plainly correct. They also support the conclusion reached above. On its face, each sponsored link indicates that its source is not Google, but an advertiser. The heading "Sponsored Links" appears above both top left sponsored links and right side sponsored links, and the URL of the advertiser, appearing within each sponsored link, clearly indicates its source. Ordinary and reasonable users of the Google search engine would have understood that the sponsored links were created by advertisers. Such users would also have understood that representations made by the sponsored links were those of the advertisers, and were not adopted or endorsed by Google.
In its notice of contention, the ACCC asserted that the role of Google personnel advising or assisting advertisers in the selection of keywords (described above in relation to both the STA Travel advertisements and the Carsales advertisements) was relevant in determining whether Google had engaged in misleading or deceptive conduct. The evidence of the role of Google's personnel in relation to the STA Travel advertisements and the Carsales advertisements was not irrelevant. However, while it showed correspondence between Google personnel and the advertisers concerned, it never rose so high as to prove that Google personnel, as distinct from the advertisers, had chosen the relevant keywords, or otherwise created, endorsed or adopted the sponsored links.
It is true that Google has a system in place which will preclude use of certain keywords as triggers for advertisements when Google is on notice of a possible misrepresentation to which an advertiser's choice of keywords may give rise. However, the facts in respect of the Ausdog advertisement show the difficulty that Google might have, in the absence of notification, in determining whether a trader whose name (or name and URL) appears in the headline of an advertiser's sponsored link is a competitor or associate of the advertiser.
Taken together, the facts and circumstances considered above show that Google did not itself engage in misleading or deceptive conduct, or endorse or adopt the representations which it displayed on behalf of advertisers.
Section 85(3)
While the conclusions reached above make it unnecessary to determine the issues raised under s 85(3), a possible question about the scope of s 85(3) may arise given the line of authority in this Court commencing with Yorke v Lucas. That line of authority identifies a process of enquiry to be followed when determining, as a question of fact, whether an intermediary can be said to have itself made the misleading representation of another which it has communicated to a third party. Section 85(3) provided a defence in proceedings in relation to a contravention of Pt V or VC of the Act which was limited to publishers of advertisements.
If an intermediary publisher has not endorsed or adopted a published representation of an advertiser, that circumstance may be sufficient, in the context of a particular case, to justify a finding that the intermediary has not contravened s 52. By way of contrast, an intermediary publisher who has endorsed or adopted a published representation of an advertiser without appreciating the capacity of that representation to mislead or deceive may have resort to the statutory defence. In those circumstances, recognising that its business carried a risk of unwitting contravention, an intermediary publisher may need to show that it had some appropriate system in place to succeed in the defence that it did not know and had no reason to suspect that the publication of that representation would amount to a contravention. It is sufficient for present purposes to state that the recognisable distinctions between these different scenarios illustrate the different spheres of operation of the line of authority in this Court commencing with Yorke v Lucas and the statutory defence in s 85(3).
Orders
Orders should be made as follows: