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Google wins landmark AdWords case in Australia

High Court overturns lower court's ruling that found the Web giant in violation of trade laws for allowing companies to purchase AdWords related to competitors' names.

Google has won a landmark advertising case in Australia with a ruling that the Web giant was not responsible for misleading advertising that ran on its site.

The five judges of Australia's High Court unanimously ruled Wednesday that Google did not violate trade laws by allowing companies to purchase AdWords related to competitors' names. The decision overturned a Federal Court's ruling last April that found four advertisements purchased on the site between March 2006 and July 2007 were misleading and in violation of Australia's Trade Practices Act 1974.

Google appealed the decision, arguing that it was merely acting as a publisher and was not responsible for content and representations made by AdWords purchasers.

The High Court agreed today, saying that even casual users of the search engine would not have confused Google as the creator of the ads.

"At first instance, the primary judge found that although the impugned representations were misleading and deceptive, those representations had not been made by Google," the court said. "Ordinary and reasonable members of the relevant class of consumers who might be affected by the alleged conduct would have understood that sponsored links were advertisements and would not have understood Google to have endorsed or to have been responsible in any meaningful way for the content of those advertisements."

Google said in a brief statement that it welcomed the decision.

The ruling puts to rest a six-year legal battle between Google and the Australian Competition and Consumer Commission (ACCC), that country's consumer watchdog. The ACCC in 2007 accused Google of engaging in "misleading and deceptive" behavior when it displayed ads for a company called CarSales in search results related to Honda Australia.

The ACCC said it brought the case to clarify advertising law in the digital age and would review the judgment to determine whether there were broader ramifications.

"It was not disputed in the High Court that the representations made in sponsored links by advertisers were misleading or deceptive," ACCC Chairman Rod Sims said in a statement. "It remains the case that all businesses involved in placing advertisements on search engines must take care not to mislead or deceive consumers."

AdWords allows anyone to bid on a given keyword and win placement on the top or right side of a search results page based on a combination of factors such as the maximum bid for that keyword as well as the quality of the ad.

Google has been sued before by companies such as American Airlines, Geico, and Rosetta Stone, which argued that keywords are an extension of the trademark they have acquired on their brands and that Google should not be encouraging competitors to violate the trademark by using it to promote their own products.