The ACCC’s Federal Court action against Google for breaching the Trade Practices Act represents the first time a government regulator has specifically taken legal action against the search behemoth (although Google has been subject to various similar legal actions in the US and Europe regarding use of trademarks).

The ACCC is seeking various declarations, but essentially, its two major allegations are that Google:

  1. Wrongly implies an association between advertisers where one doesn’t exist; and
  2. Fails to distinguish “organic” search results from “paid” search results (referred to as “sponsored links”).

In commenting on the ACCC’s action, Crikey’s Margaret Simons and The Age’s James Kirby and Alan Kohler both launched broadsides at Google.

Simons noted that “Google are notoriously secretive and arrogant in accounting for how they construct their algorithms. This case could force some disclosure.”

Simons is correct in noting that Google is secretive, but wrong to suggest that this case has anything to do with Google’s trade secrets.

Google’s algorithms are the key to its business. Well before it made a dime from paid advertising, Google had become by far the most effective search engine because of its PageRank algorithm (Google introduced Adwords several years later).

To suggest that Google is in some way “arrogant” for not disclosing its PageRank is like accusing Coca-Cola of being arrogant for not revealing its mysterious 7X flavoring or KFC of being secretive for not telling Red Rooster what their twelve secret herbs and spices are.

That is not to say Google is totally blameless. In its first claim against Google, the ACCC alleged that Google and Trading Post misled consumers because when a user typed in “Kloster Ford”, a sponsored link appeared listing “Kloster Ford”, but when the user clicked on the link, they were actually taken to the Trading Post’s website (not the Kloster Ford website).

The ACCC does seem to have a fair point here. By analogy, if the Yellow Pages printed a phone number next to an advertisement, you would naturally think that the phone number was of the company which was advertised. The same should apply for search engines.

However, solving this problem does not require Google to reveal its search algorithms. Rather, Google could simply ban the use of trademarked names in paid search terms. (Other search engines, such as Yahoo, are far stricter with the use of trademarked terms).

Allegedly, the reason that Google doesn’t ban trademarked search results is because it earns a significant amount of revenue from such clicks (commentators claim that Google relaxed its policy on trademarked results shortly before its IPO to boost revenue). At the moment, Google only takes action after a person complains about a trademark infringement.

The other claim made by the ACCC goes more to the heart of Google’s veritable cash machine; that is, Google does not properly distinguish “paid” ads from “organic results”. However, this allegation seems strange in that Google does separate paid ads from organic ads, often more than other search engines do. Google clearly notes that advertisements on the right of the page are “sponsored”.

Further, even if some users don’t realise that they are clicking on a “sponsored” link, why does it matter? Sometimes the “paid” link may be of more relevance than the “organic link” (which may have been “optimised” by a SEO anyway).

Ultimately, all users wants is relevant information. If a company has paid for their advertisement to appear after a user searches for a particular term, there is a very good chance that the user would want to see that information anyway.

Google may not be perfect, and some inexperienced users may confuse its organic and sponsored search results. However, given Google revolutionised search, making it far more relevant and useful than all pre-existing search engines, a regulator which brings a legal action alleging that its results are not useful (and are in fact misleading) seems to be the legal equivalent of tall poppy syndrome on steroids.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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