Testing ground for competition watchdog

It it a well established legal precedent that if a newspaper or television network carries an advertisement that is deemed false or misleading the fault lies with the advertiser and not the media that was merely a conduit to its print or broadcast.

But the law that specifies this was written well before the internet was conceived. The internet is now the largest advertising medium and how this law applies to online providers will require regular testing.

The Australian Competition and Consumer Commission took on the giant of cyberspace, Google, five years ago but it took three courts - two appeal processes - to get Wednesday's High Court judgment that Google ranks as a medium for advertisers in much the same way as a newspaper, radio or television.

All three courts found the ads run on Google via its sponsored search links were misleading but Google was not responsible for the content. Thus the High Court decision was a victory for Google.

On the face of it this appears to be simple enough, but the facts of the case are not particularly black and white.

Some companies were paying for ads on Google via sponsored links using the names of competitors. For example, a Google search of Harvey World Travel produced a sponsored link to a website of STA travel. This behaviour was found to be misleading.

The grey area arises because in some of the instances laid out in the ACCC case, evidence suggests that account managers from Google had been involved in advising or assisting advertisers on the addition of keywords to the "AdWord" accounts and that these formed part of what was deemed misleading.

In other words, there was a closer content creation relationship between Google and the advertisers than there would be in straight placement of an ad in traditional media.

But it wasn't close enough in the eyes of the High Court, which concluded, "while it [the ACCC] 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".

More widely, the High Court was unanimous in finding Google did not create the sponsored links that it published or displayed. It also agreed with the Federal Court and the full Federal Court that "ordinary and reasonable users of the Google search engine would have understood that representations conveyed by the sponsored links where those of advertisers".

The High Court case followed an appeal of the full Federal Court judgment that found in the ACCC's favour. It has been an expensive five-year-plus process and arguably times have changed since it started.

New technology opens new grounds that need to be tested across many industries - and many of these will be battles that fall within the bailiwick of the ACCC's protection of the consumer and competition. If legislation remains unchanged the onus rests on the ACCC to undertake regulatory testing.

Last year the commission netted a better outcome against Apple, which copped a fine of $2.25 million for running misleading advertisements that claimed its latest iPad was "Wi-Fi and 4G" when the device didn't work on any existing Australian 4G networks.

Earlier this week the ACCC started proceedings in the Federal Court against Visa for alleged misuse of its market power to prevent the use of dynamic currency conversions (DCC) to new merchant outlets in Australia. Again, the use of DCC is a rapidly evolving technology and entrance into this market by competitors to Visa is relatively recent.

The question that needs to be asked is whether some sections of the Competition and Consumer Act that the ACCC works with have kept up with the fast pace of changes in IT and technology.

There is no suggestion from ACCC chairman Rod Sims that he is about to push this envelope any time soon. But the ACCC statement notes it will review carefully the judgment of the High Court to understand whether it has broader ramifications and will consider any consequences for enforcement of competition law.

The Apple outcome worked, Visa has only just got under way and the Google outcome is one about which he says he is happy enough to abide by the umpire's decision.

But Sims did see some silver lining from taking on Google. Since the court action began Google released a "business names policy" that prohibits advertisers' use of unrelated registered business names in the first line of ad text when they are using that business name to imply affiliation. It has now applied this policy internationally.