The ACCC filed a statement of claim in the Federal Court against Google Inc, Google Ireland Ltd and Google Australia Pty Ltd along with Trading Post Australia Pty Ltd, alleging misleading and deceptive conduct.

The case stems from events in 2005 when the ACCC alleges that the Trading Post contravened sections 52 and 53(d) of the Trade Practices Act 1974 by paying for sponsored links on Google using the names of two car dealerships from Newcastle, north of Sydney. As a result, when people clicked on the car dealerships’ names they were taken to the Trading Post website instead.

The ACCC is also alleging that Google, by publishing the links, engaged in misleading and deceptive conduct in breach of s 52 of the Act.

The ACCC also claims that Google, by failing to adequately distinguish between sponsored links and “organic” search results, continues to engage in misleading and deceptive conduct in breach of s 52.

On Google’s search results pages, sponsored links appear in a coloured box across the top of the page, and in a column on the right-hand side of the page. Each of these areas has a heading saying “sponsored links”. Organisations can pay to be featured in these areas and this is how Google obtains most of its revenue. In contrast, the organic search results are determined based on relevance and the popularity of a page.

An adverse finding against Google in relation to its sponsored links could see the search engine forced to police the use of millions of keywords.

Google spokesman Rob Shilkin said in a statement that the company will fight the claims.

“Google Australia believes that these claims are without merit and we will defend against them vigorously. They represent an attack on all search engines and the Australian businesses, large and small, who use them to connect with customers throughout the world.”

Peter Coroneos, chief executive of the Internet Industry Association said:

“The internet industry has always had a positive relationship with the ACCC. It’s very unfortunate that the ACCC has decided to pursue a litigious strategy against one participant, rather than consulting more broadly on an issue that affects the entire industry.”

The ACCC declined to comment due to the pending litigation.

Google has previously faced court action in the US, France and Belgium, but this has been in relation to trademark use. The ACCC believes it is the first regulatory body to seek clarification of Google’s conduct from a trade practices perspective. The matter has been listed for a directions hearing in the Federal Court, Sydney on 21 August before Justice Allsop.