Search giant Google is being sued by the Australian competition regulator over claims that the paid-for text ads it displays alongside search results are misleading consumers.
The Australian Competition and Consumer Commission confirmed today that it was bringing a case against Google after an advertiser used the names of two rival companies in its text ad to drive traffic to its own site.
The online classified site, Trading Post, is accused of passing itself off as two competing car dealerships in New South Wales. Web users clicking on the link thinking they were accessing the dealership's website were redirected to the Trading Post website.
But instead of the Trading Post, it is Google itself that is facing what could be a landmark legal case for all websites that use text advertising. The ACCC has accused Google of "misleading and deceptive conduct", claiming the way its pages are designed fail to make a clear distinction between sponsored links and genuine search links.
Google's AdWords programme is fully automated, enabling advertisers to set their own parameters for how frequently their text ads appear, and on what terms.
A court finding in favour of the ACCC could set a worrying precedent for other websites, which could be forced to vet the content of every single ad that appears on their site.
A Google Australia spokesman has described the claims as "without merit" and said the search company would "defend against them vigorously".
"They represent an attack on all search engines," he said.
Representatives from Google have been summonsed to the Federal Court in Sydney, where hearings will begin on August 21.
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