An Australian court has found Google guilty of misleading and deceiving consumers with its AdWords-generated sponsored links.

Google’s AdWords program inserts “sponsored links” to advertisers in the results of Google web searches.  The content of a sponsored link is determined by the search term entered by the searcher.  Advertisers select the search terms (keywords) in response to which they wish to have their sponsored link displayed.  In various cases, advertisers select keywords that are the name or the trademark of their competitors – so that a sponsored link to the advertiser is inserted in the results of a search for the competitor.

In this situation, according to the decision of Full Court of the Federal court, Google is representing that there is a connection between the competitor business for which the user is searching and the advertiser.  Since there is no such connection in fact, Google’s representation is misleading and deceptive – and hence is prohibited under s.18 of the Australian Consumer Law.

The court also ruled that Google’s conduct was not saved by the s.209 “publisher’s defence”, which applies if the publisher can show it did not know, and had no reason to believe, that the advertisement was misleading or deceptive.  The court found that “No reasonable person in Google’s position could have failed to suspect that the use by an advertiser of a competitor’s name as a keyword triggering an advertisement for the advertiser with a matching headline was likely to mislead or deceive a consumer searching for information on the competitor.”

The court ordered that Google establish and implement a compliance program to prevent future breaches.