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July 16, 2007

Google Australia Sued for Deceptive Trade Practices

This one comes from regular commentator Simon Cast.  The Australian Competition and Consumer is suing Google, Google Ireland, Google Australia, and Trading Post Australia over deceptive advertising practices.  Specifically, the suit complains that these entities are in violation of Sections 52 and 53(d) of the Trade Practices Act of 1974.

Section 52 reads:

52 Misleading or deceptive conduct
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).

The relevant section of 53(d) reads:

53 False or misleading representations
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:

* * * *
(d) represent that the corporation has a sponsorship, approval or affiliation it does not have;
* * * *

The acts that the Commission complains of are the appearance of ads for Kloster Ford and Charlestown Toyota under a sponsored ad heading to link to Trading Post.  These dealerships are, in fact, competitors to Trading Post.  Google is charged under Section 52, and Trading Post is charged under Sections 52 and 53(d).

Google Australia denies the charges.  Spokesperson Rob Shilkin stated "Google Australia believes that these claims are without merit and we will defend against them vigorously.  They represent an attack on all search engines and the Australian businesses, large and small, who use them to connect with customers throughout the world."  The ACCC for its part says that it is the first regulatory body to seek legal clarification of Google's conduct from a trade practices perspective.  Peter Coroneos, Chief Executive of the Internet Industry Association said "The internet industry has always had a positive relationship with the ACCC.  It's very unfortunate that the ACCC has decided to pursue a litigious strategy against one participant, rather than consulting more broadly on an issue that affects the entire industry."

The US FTC has examined the issue of the placement of paid or sponsored ads appearing as part of search results.  A 2002 letter responding to a complaint about broad practices found no violation of the Federal Trade Commission Act as most search engines identified ads that were paid in one form or another.  That's not quite the same as the situation in Australia, though it seems on its face that Google is better positioned than Trading Post, assuming Trading Post bought the ad words that created the links.  Courts in the United States have split on whether buying a competitor's name is a violation of trademark law.  Whether that's true in Australia remains to be seen.

The case is scheduled to be heard in federal court on August 21st in Sydney.  The ACCC press released is here.

July 16, 2007 | Permalink

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