ACCC scores early win against Trading Post on Adwords

The competition watchdog has achieved some initial success in a landmark case against the Trading Post and Google for the alleged misleading use of search engine marketing.

In the case before the Federal Court, commenced last July, the Australian Competition and Consumer Commission is alleging that paid search advertising placed at the top of organic search results could mislead consumers who are unable to tell the difference between the two.

The case also targets the wide-spread practice of businesses purchasing paid search terms in the name of their competitors in an attempt to funnel web traffic away from them.

Telstra subsidiary Sensis, which publishes Trading Post, yesterday told the Federal Court it is prepared to admit engaging in misleading and deceptive conduct when it purchased Google adwords in the names of competitors in the car advertising space in 2005. 

It has undertaken to ensure staff responsible for SEM do not include known names of other business in the title of Trading Post search engine advertising where it is misleading to do so, and to conduct independent audits in 2008 and 2009 to ensure its SEM complies with the Trade Practices Act.

“As the first case of its kind in Australia, it has given us the opportunity to subject our internal policies and processes, many of which we put in place in 2005, to a comprehensive review,” Sensis general counsel Niki Hantzis says. “We are now confident we have very strong compliance measures in place and the search engine marketing industry as a whole also has a much clearer view of what is considered acceptable practice.”

The outcome of the litigation is likely to have big implications for business. One lawyer has reported an increase in companies taking legal steps to protect trading names and brands from being exploited by competitors online since the action was commenced.

Without the Trading Post contesting the case, Google is now in the box seat in litigation that will be closely watched by many businesses and search engine marketing practitioners.

Lawyer letters are flying in increasing numbers as businesses attempt to prevent competitors from using their name or brand in search engine marketing, according to IT and intellectual property lawyer Noric Dilanchian.

“There are more and more companies with registered trademarks that are having their lawyers send letters of demand to sites indicating their use of adwords is problematic or infringing trademarks,” he says. “I’ve acted for companies on both sides of the fence doing that, and while generally they are resolved quickly that isn’t always the case, so there is a real issue here.”

But, Trading Post’s decision to settle doesn’t necessarily mean that the ACCC is more likely to be successful in its legal action against Google.

Dilanchian says the Trade Practices Act, which deals with misleading and deceptive conduct, deals differently with publishers of material – which could include Google – and the businesses who actually engage in misleading advertising.

“There is a basic exclusion in regards to the behaviour of the messenger as opposed to the sender of the message – usually that would be a newspaper or TV station, but in this case it could be Google is the newspaper – so no doubt some real legal issues still need to be explored,” Dilanchian says.