Google Inc v Australian Competition and Consumer Commission [2012] HCATrans 160 (22 June 2012)

Last Updated: 25 June 2012

[2012] HCATrans 160

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S103 of 2012

B e t w e e n -

GOOGLE INC

Applicant

and

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Respondent

Application for special leave to appeal

GUMMOW J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 22 JUNE 2012, AT 9.34 AM

Copyright in the High Court of Australia

MR A.J.L. BANNON, SC: If the Court pleases, I appear with MR C. DIMITRIADIS for the applicant. (instructed by Gilbert + Tobin, Lawyers).

MR S.T. WHITE, SC: May it please the Court pleases, I appear with MS K.C. MORGAN for the respondent. (instructed by Corrs Chambers Westgarth Lawyers).

GUMMOW J: Yes, Mr Bannon.

MR BANNON: Your Honours, however one wrestles with the reasoning process of the Full Court, it does not arise above the following proposition. Because Google published through a user of its search engine a third party advertisement which the user understood to be an advertisement paid for by a third party it made the expression implied representations conveyed by that third party advertisement. To say Google did so in response to a search query is to do no more than recognise that everything Google does is in response to a search query because it is a search engine. Everything it publishes is consequent upon somebody entering a search term.

Beyond the assertion that the statements in Universal Telecasters v Guthrie survive the statements of this Court in Butcher and Channel Seven, namely, the proposition in Guthrie that a television broadcaster is responsible for each and every statement implied or expressed made by an advertisement published by the broadcaster, we submit there is no process of reasoning which explains why a third party representation – it made an advertisement made by Google – beyond mere assertion, indeed, sometimes dramatically so, there can be no other answer.

In particular, there is no attempt by the Full Court to squarely address three incontrovertible propositions, the first of which is that the sponsored link consists of three elements each of which is dictated by the advertiser, namely, the headline, advertising texts underneath that and the URL, and would not exist but for the creation and direction by the advertiser. Secondly, that users understood that they were advertisements paid for by the advertiser and, thirdly, that the misleading conduct alleged was the making of particular representations, namely, a commercial association or other relationship between two entities identified in the ad.

CRENNAN J: Did the Full Court proceed on the basis that the class was correctly identified by the primary judge, the primary judge identifies the class, application book 46, paragraph 122?

MR BANNON: Yes. There is a particular difficulty with the way the Full Court proceeded because it, we respectfully submit, got diverted by its notion of response, which is, in our respectful submission, an entirely opaque and uninformative term, its attraction to that course ran the risk that it necessarily required a consideration of the first class of case identified in Campomar by this Court, namely, specific representations to specific people, because if one has to attempt to identify what the particular reason it is that somebody is entering a particular search term, you then have to identify the particular person.

The way the case was presented, we submit, by Google below and really treated by the parties, that these advertisements could be treated as the publication, and that is how they were pleaded, as a publication of an advertisement and one would look at the advertisement as a publication and, hence, the wider class would be so relevant. Can I just add this proposition. The ACCC concedes that 85(3), of course, is a potentially available defence if we satisfy the other requirements, but 85(3), of course, only applies if the contravention is due to the publication of an advertisement. The case was brought by the ACCC to test Guthrie, the broad proposition whether the publication of an advertisement by a publisher makes a publisher responsible for all ads.

CRENNAN J: Was not the ACCC’s case that reasonable members of the relevant class would not have understood those sponsored links to have been advertisements?

MR BANNON: That was their primary case and they failed on that and they did not appeal that and they did not appeal the findings of the trial judge and the Full Court did not overturn those findings. Those findings are not merely that they appreciated advertisements. If I could invite your Honours to look at the detail of those findings firstly at – perhaps a little bit of background but very briefly – application book 22, paragraph 53, that is:

A sponsored link is a form of advertisement. Sponsored links are created by advertisers –

Then at application book 35 his Honour identifies that the case – this is about line 20, paragraph 86 – the allegations in relation to all of these were a similar form, that they relate to advertisements published by a third party, and then over on the next page, page 36, about the middle of the page, the allegation 24:

By publishing the [advertisement], Google Inc and Trading Post made each of the following representations –

One of those was that it was not an advertisement. Then his Honour, in addressing those matters, starts in relation to what consumers would understand, firstly, at application book 54, about line 30:

Hence, ordinary and reasonable members of the class are likely to understand that Google generates revenue by causing advertisements to appear on its results pages.

That is, it is not a free service in the sense that it is a free service but it needs to be – it is not an altruistic service. It is designed to make money. Then at 55 at line 30, second sentence:

The word “sponsored” is likely to convey to users that the links are paid for in the sense that their sponsors have paid Google to cause them to appear –

Then 56, over the page, at line 30, in the middle of that paragraph, that these:

are links for which businesses seeking to promote their goods –

Then at 62 at line 50 his Honour correctly identifies the case for consideration, namely:

The question then is whether, by publishing the [advertisements] to ordinary and reasonable members of the relevant class, Google made any of the representations conveyed by those advertisements.

At 63, important findings not appealed by the ACCC and, we say, certainly not overturned by the Full Court, but not fully addressed at paragraph 87.

Whether or not Google made the representations depends upon all the circumstances . . . In particular, the question should be addressed in the knowledge that ordinary and reasonable members of the class would have understood that:

• a sponsored link is an advertisement –
  

. . .

• the website address displayed beneath the headline will usually be the website address of the advertiser;
  
• the identity of the advertiser will usually be apparent from the website address displayed –
  

Paragraph 188, his Honour’s later reasoning in relation to advertisements, picks up the reasoning in relation to Kloster Ford. The first sentence:

Ordinary and reasonable members of the class would have understood in the case . . . that the advertiser was Trading Post . . . would have understood that the message being conveyed to them by the publication of such an advertisement was one from the advertiser rather than the publisher.

He moves on to the next two paragraphs, I do not need to pause it, but it gives an example of some of the statements in these ads include, for example, “unbeatable deals” or “get the best cars in the history of the world”. The Full Court’s reasoning means Google and any other publisher is responsible for those statements as well.

KIEFEL J: Did the Full Court not deal with the question of what Google may be taken to have conveyed by the representation? They dealt with it mostly on the basis of whether you impute responsibility to Google?

MR BANNON: That is right. What they did not do was, what this Court emphasised in Butcher v Lachlan, was that you have to understand what is the conduct being alleged that is misleading. In that case it was the location of the high water mark, and that informs the question as to whether it is likely that a real estate agent who actually prepared the brochure in that case, contrary to what the Full Court said, would be understood as the source of the information, the suburban real estate agent would be understood as the source of the high water mark information.

In the case here, the allegation was that there was a commercial association or other relationship between two competitors. The Full Court never addressed that that was the conduct to be addressed to answer the question, is it likely that anybody, be it a specific user or a general user, would understand that Google would be entering into that domain to make a statement about whether there was such a relationship between two entities in the context of what is accepted to be an advertisement and which people understood to be an advertisement. The Full Court never got to that point of addressing what the conduct is and asking the question, is it likely to be understood that that conduct was conduct of Google. Indeed, if one goes to the Full Court reasoning - - -

CRENNAN J: Paragraph 89 and just prior on page 162?

MR BANNON: Yes. At 160 they refer to Guthrie and say Guthrie is still good law, in effect. The opening paragraph of the reasoning is at the bottom of 161, paragraph 87. The last sentence of that, which is at the top of 162, is worth noting. The last sentence of that says this, at about line 15:

In those circumstances, it is an error to conclude that Google has not engaged in the conduct of publishing the sponsored links because it has not adopted or endorsed the message conveyed by its response to the user’s query.

With the greatest respect to the Full Court, that cannot advance the reasoning process. There was no issue that we published a sponsored link. It was accepted that we published the ad. This subverts the test into saying, is the debate as to whether we published the sponsored link? Of course we did. Then they talk about adoption or endorsement in a context which is completely and utterly irrelevant. In the next paragraphs they go through a process of disentangling what is the actual ad. For example, the next paragraph, 88:

It is necessary to be clear as to what it is about Google’s conduct . . . Google’s conduct consists relevantly of the display of the sponsored link –

pausing there, that is an ad which includes the URL –

in response to the entry of the user’s search term in collocation with the advertiser’s URL.

But the advertiser’s URL is part of the ad. There is no separate distinct conduct. Same complaint can be made about 89, again in collocation with the URL. At 91, with respect, it gets worse. There is a further disentanglement in 91 where they say:

First, the response shows, in large blue font, as part of the sponsored link, the keyword –

Then, it says, “The advertiser’s message”. Well, the advertiser’s message includes the headline. That is their own finding. Then it says, “the advertiser’s URL”. Then, the conduct – taking up your Honour Justice Kiefel’s point – again there is no analysis of what is the misrepresentation and whether it is likely to be reasonable to attribute that to Google and one really comes to the end of the exercise at paragraph 96 at 164, the very last gasp, what should have been the first matter addressed, at about 40:

It is no answer to the ACCC’s case to say that it is apparent that the sponsored links were advertisements for persons other than Google.

That is the first thing which should have been at the beginning of the analysis in working out the significance of that. They go through this process of response, disentangling the link, talking about whether or not we published, not a single attempt to address the nature of the representation and it says at the end not only – the most important thing is left at the end and then the assertion at the end is to say this is an issue of fact and.....of only one answer. It is a process of reasoning which is opaque, with respect. The use of the language of response is opaque and uninformative.

Just to make it clear, at the beginning of the judgment their Honours were quite clear as to what surely did constitute the sponsored link. If one just goes back to 143 at line 40, their Honours correctly recognised that the sponsored link consisted of the three parts in that case but somehow or other three pages on it gets lost in translation. Then over the page, at the bottom of 144, last paragraph, again they correctly recognise that it was created by the advertiser, at the direction of the advertiser.

So that whichever way one, as I say, tries to wrestle with this reasoning, it does not rise above the case which was brought, namely, the publication of advertisement. We respectfully submit, statements made, which this Court has not squarely considered in relation to advertisements which inform so much of commercial life not only on the internet but widely as to whether or not publishers are responsible for representations, and in this case implied representations are made by those publishers, is a matter worthy of this Court’s consideration and it raises the question, in particular, as to whether Guthrie is good law or ever was, a matter which, I must say, that the Federal Court generally has not applied.

It also raises, it may be added, what relationship exists between 85(3) and section 52 – 85(3) still exists in 251 in the current form of the Act and so does 18 obviously in terms of section 52, namely, whether or not the fact that the exemption in 85(3) – does that in a sense, a boot straps way, tell you that publishers are responsible for all the content of ads? We say they are not and this Court’s statements - - -

GUMMOW J: When was 85(3) added, do you know?

MR BANNON: I am not sure whether it was in there originally or whether it was amended from time to time because 52 and 53, for example, 53 in particular, suffered some amendments post Guthrie. In any event, that would be a consideration of precisely when 85(3) came in and whether it is right to inform that question as to the responsibility is relevant. This is a matter which was raised in passing by – well, perhaps not just in passing – by Justice McHugh in Butcher as to whether 65A and the existence of that exemption in 65A informed one whether or not there was a responsibility

for – sorry, perhaps I am thinking of Channel Seven – but the question has been raised by this Court as to whether the exemption informs the content of the primary liability. But even in the case of Channel Seven there were statements by members of this Court that you still have to find, in that case, some form of adoption or endorsement, notwithstanding the existence of the exemption. So for those reasons, we say that this is a matter which warrants the grant of special leave and we submit that the factual compass is very clearly set out.

GUMMOW J: Yes, Mr White.

MR WHITE: Your Honours, special leave should be refused for at least two reasons. Firstly, the poor prospects of success the appeal has and the fact the Full Court applied what we would submit are well-settled legal principles to uncontested facts. The applicant’s principal contention is that the publisher of an advertisement remains a mere conduit representing nothing unless it adopts or endorses the content of the advertisement. Now, that is, with respect, wrong and it faces insuperable difficulties, as does the appeal, for at least three reasons.

Firstly, it places an impermissible gloss on section 52 of the Trade Practices Act. As your Honours are aware, that inquiry involves one in which, having regard to all the conduct, whether the applicant engaged in misleading conduct. The fact that the publication was in relation to an advertisement is but one matter to be taken into consideration and is not determinative of the question whether the applicant remains a mere conduit.

Secondly, the language of section 85(3) speaks against the applicant’s contention. Your Honours, will see section 85(3) set out in the bundle of authorities at page 4. I will not take your Honours to the detail of the wording, but your Honours will see that the defence contained in that section speaks of a contravention committed by the publication of an advertisement. That is why section 85(3) was introduced in respect of publishers who innocently publish an advertisement which is misleading. It does not speak of the gloss that the applicant wishes to place on section 52.

Thirdly, this was a case in which the Full Court found the applicant made the advertisement and therefore the representations conveyed by it. Can I take your Honours to the application book at page 162, paragraph 88 where their Honours set out what the conduct was which was said to be misleading. It was the display of the – if I can interpolate – “clickable” sponsored link:

in response to the entry of the user’s search term in collocation with the advertiser’s URL. The display of the sponsored link is effected by Google’s engine as Google’s response to a user’s search. That which is displayed by Google is called up by Google’s facility as Google’s response to the user’s search. The clickable link, when clicked, takes the user directly to the advertiser’s URL.

89 An ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in collocation with the sponsor’s URL in response to the user’s search.

At page 164, paragraph 95, about line 25:

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 –

Then their Honours go on in 96 to say that it is no answer for the reasons that have already been stated by my friend.

KIEFEL J: Their Honours appear to be drawing quite a lot from the notion of Google responding to an inquiry.

MR WHITE: Yes, and that is so and it is important because it puts in context the way in which the advertisement is to be evaluated because this was a search engine. It was the business of Google to provide responses to the search query by the applicant. What was critical was not only the response but the fact that in that response Google inserted the search term in the blue clickable headline in collocation with the advertiser’s URL, and it is that association between the two which conveyed the representation and it was only because of Google that that was enabled and occurred.

CRENNAN J: That seems to suggest if you have a response from an inquiry in this setting, a question of whether or not a misleading statement has been adopted or endorsed is not relevant.

MR WHITE: Well, yes, that is right, but, of course, it also depends on all the circumstances of the case. In this case, the functionality and display of the advertisement by Google was critical to the representation that was being conveyed. An example of the representation is at page 203 of the application book and your Honours may have seen them and no doubt are familiar with the type of result pages that are thrown up by a search, but by way of example only, to give your Honour a flavour of what influenced the Full Court, was, for example, the one at page 203.

Your Honours see that the Google user has inserted the term “Harvey World Travel”, the name of a business engaged in the travel industry, appearing in the box to the right of the Google logo. The search results appear beneath and your Honours will see the first is one that has a blue headline containing the search term that had been entered by the Google user and that sits above the uniform resource locator, or URL, “statravel”. Now, your Honours will note that is in a yellow background. That is an advertisement.

CRENNAN J: For a rival? That is taking you to a rival’s link, is it not?

MR WHITE: Absolutely correct.

CRENNAN J: Therefore, the misrepresentation is a pretty clear one as to an association between Harvey World Travel and STA Travel.

MR WHITE: Yes, and by Google. By Google because it was Google for a number of reasons - - -

CRENNAN J: That is the issue, is it not?

MR WHITE: That is the issue.

CRENNAN J: It is a clear misrepresentation, but it is it the advertiser’s misrepresentation or is it something in relation to which Google by reason of responding to an interrogation or inquiry?

MR WHITE: Exactly, or is it both?

GUMMOW J: Well, you have to say that it is not even a serious question about that.

MR WHITE: Yes. And their Honours said that anyone who read that search result, seeing the person’s search term inserted in the clickable blue headline above the URL, would think, properly, that he or she has been told that there is an association between the two, and it was Google that made that occur. It allowed it to occur because it provided the technology for the blue clickable headline and as a result of Google’s auction process, which has regard to relevance and the price paid by the advertiser, it determined whether the advertisement would appear at all.

KIEFEL J: Where did their Honours deal with how the inquirer would have understood what was conveyed?

MR WHITE: At application book 163 at paragraph 92 and also at paragraph 89 on page 162 where their Honours said:

An ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in collocation with the sponsor’s URL in response to the user’s search.

KIEFEL J: That takes you some part of the way, but perhaps does not conclude the question.

CRENNAN J: The primary judge dealt with the same issue at page 63, paragraph 188, which Mr Bannon took us to. He found that the reasonable members of the class would have understood it is the advertiser who determines the content and then the final sentence as well. Did the Full Court expressly deal with that aspect of the primary judge’s judgment and reasoning?

MR WHITE: No.

GUMMOW J: I think not.

KIEFEL J: Did the ACCC contend to the contrary of that finding?

MR WHITE: No, it did not, but we contended that what his Honour set out at paragraph 187 on page 63 is part of the circumstances and his Honour, we submit, did not fully have regard to the functionality that Google permitted in relation to the search term, in other words, the blue clickable headline containing the search term. So, your Honours, we say in relation to the advertisement itself, the Full Court was clearly correct in finding that the representation as to the association was also made by the publisher, the applicant in this case.

In relation to the question of the decision of Guthrie and the more recent High Court authorities, your Honours, we say that those were cases that involved, in relation to the High Court authorities, adoption or endorsement. Guthrie, of course, was a case involving publication by way of a broadcast of an advertisement and, in those circumstances, the Full Court found that the broadcaster had made the representation. In our respectful submission, that was exactly what occurred here. The Court was not concerned with adoption or endorsement, it was concerned with the making of the representation having regard to the insertion of the key word in the headline and the collocation with the advertiser’s URL.

For those reasons, we submit that the more recent High Court authorities are not directly on point and that Guthrie has not been overtaken

by nor is it inconsistent with those decisions and the Full Court in this matter was correct to apply it. For those reasons, your Honour, we submit that special leave should be rejected.

GUMMOW J: Thank you, Mr White. We do not need to hear you in reply, Mr Bannon. There will be a grant of special leave in this matter. Is the draft notice of appeal at 188 adequate to cover the matters canvassed this morning?

MR BANNON: .....

GUMMOW J: This would be a one day matter I would have thought.

MR BANNON: Yes, your Honour.

GUMMOW J: There are some directions as to what has to be done by the solicitors now to get it ready which the Registrar will give them on the way out.

AT 10.01 AM THE MATTER WAS CONCLUDED