New obligation for Google search terms

New obligation for Google search terms - Griffith Hack

23 April 2012

The recent Australian Federal Court decision of Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd [2012] FCA 102 imposes a new obligation to exclude known competitors from Google key terms.

What you need to know



You may be found to have engaged in misleading and deceptive conduct where:
(a)
you have acquired a generic search term as a keyword from Google (or similar provider);
(b)
the search term relates to a product or service that you and your competitors sell;
(c)
your sponsored advertisement involves a ‘hanging representation’; and
(d)

you have not excluded the names of your competitors’ businesses from your keyword arrangement with Google.

The Decision



On 17 February 2012, the Australian Federal Court granted interlocutory injunctive relief to restrain Coastal Contacts from using a series of representations about their products in their sponsored links and website, which appear through a Google search using certain keywords. The representations about the prices of Coastal Contacts’ products were found to be misleading and deceptive conduct, in contravention of section 18 of schedule 2 of theCompetition and Consumer Act 2010 (Cth) (the Australian Consumer Law).

Background



Coastal Contacts is a competitor of Specsavers selling its glasses and contact lenses solely over the internet. Coastal Contacts nominated and paid for the common, descriptive word ‘contacts’, but it had not (until recently) excluded the word ‘Specsavers’ from the search terms. This meant that whenever a consumer entered the word ‘contacts’ in a Google search, the Coastal Contacts sponsored link would appear. This was still the case even if the words ‘contacts’ and ‘Specsavers’ were entered together by a consumer.

The "Save up to 70%' representation



The following text appeared in the Coastal Contacts’ sponsored link: ‘Buy Online and Save Up to 70%’. Specsavers did not contend that the statement was false in itself, but argued that it did not state what the 70% was off.

Counsel for Specsavers described this type of advertising as containing a ‘hanging representation’ because a person would ask “70% off what?”

Where a consumer has entered the words ‘contacts’ and ‘Specsavers’ into a search engine and sees Specsavers’ listings in the organic results and the ‘save up to 70%’ representation in the sponsored links, that person would question what the 70% was off and could assume that the comparison is made with Specsavers. Where this type of hanging representation was used, the Judge found the misleading conduct to be as follows:

“Here, it is (or was) the failure of Coastal Contacts to exclude from the key words the name Specsavers and the knowledge of Coastal Contacts that the name Specsavers will be combined with the common descriptive term ‘contacts’ which brings about the misleading conduct.”


The $18.99 Representation



A Coastal Contacts’ sponsored link which contained the ‘Save 70% Representation’ also stated ‘Focus Dailies Lenses Only $18.99’.

There were two issues with the $18.99 representation, namely:


1.
The $18.99 price was available only if the consumer takes the volume discount that applies to a purchase of eight boxes of lenses. Otherwise, the price is $21.95 per box.
2.

The amount did not include the additional costs of shipping, handling and insurance that were added to the price.

The Court confirmed earlier authorities and found that it is misleading to offer products for a particular price without making clear that it is a prerequisite for obtaining the products at the stated price that the consumer must also pay an additional charge for delivery.

In determining whether the representations were misleading, the Court noted that it is the whole of the impugned conduct that must be looked at. The Court concluded that there was a sufficient likelihood of success to establish a prima facie case and granted an injunction.


Significance of the decision



This decision brings to the forefront a range of emerging issues involving internet advertising, particularly the potential to engage in misleading and deceptive conduct if a competitor is not excluded from your list of search terms with Google (or similar provider).

At first blush, the Judges’ findings about the misleading conduct might suggest a broader obligation arising when generic keywords are purchased by a business. The Judges’ statement in the decision, when taken in isolation, could suggest that any business purchasing a generic keyword would need to exclude the names of any other business which it knows to sell those products (ie. essentially exclude the names of all known competitors at the time of purchasing a generic keyword). The Judge’s findings are likely to require clarification by the Court in the future. The sensible view appears to be to read the Judge’s comments in the context of this case where a generic keyword was purchased and was used with an advertisement that comprised a hanging representation.

By not excluding a competitor, such as Specsavers, Coastal Contacts were able to have their sponsored link, which included the hanging representation, appear when a competitor’s name, such as Specsavers, was searched. This allowed Coastal Contacts to divert internet traffic looking for Specsavers to its own website by catching the customer’s attention with a ‘save up to 70%’ representation.

The advertisement in the sponsored link amounted to a hanging representation as it was unbranded and did not distinguish the advertised products as being from a supplier other than Specsavers, which was the business originally searched for by the consumer. The ambiguity as to the origin of the product is likely to mislead consumers rather than being truly comparative of the products.

Misleading hanging representations can be avoided by identifying your business and the source of the products or services in the sponsored advertisement by keyword insertion or other means.


This decision brings to the forefront a range of emerging issues involving internet advertising, particularly the potential to engage in misleading and deceptive conduct if a competitor is not excluded from your list of search terms with Google.

By Kellie Stonier, Senior Associate and Sheree O’Dwyer, Law Clerk

For further information, please contact:

Kellie Stonier, Senior Associate
Email Kellie