The New Zealand High Court recently held that competitors who agreed on keyword search terms for online search advertising engaged in cartel conduct in breach of competition law.
This is an important lesson for Australian companies – what could seem innocuous and “ordinary practice” especially in dual distribution models, may in fact and in law, constitute cartel conduct.
In December 2021, the NZ High Court declared that finance company Moola.co.nz (Moola) and its competitors had engaged in cartel conduct by agreeing not to bid on each other’s brand names or certain keywords for Google Ads. The parties also agreed to ‘negative matching’, i.e. ensuring that each of their respective advertisements would not appear in Google search results associated with certain words or brand names.
The cartel conduct was instigated by Moola through a series of letters to its competitors, in which it threatened legal action if they bid upon (and used) certain key words or brand names in their Google search advertising. In these communications Moola also undertook not to use (or bid upon) certain key words and brand names in its own Google search advertising. In one instance, the agreement came about after Moola began court proceedings against one of its competitors for bidding on Google search keywords that Moola claimed were associated with its brand, and part of its intellectual property. In that case, Moola and its competitor reached an out-of-court (cartel) agreement on key words and Google search adverting.
The High Court found that as a result of these cartel agreements Moola and its competitors were able to control the price paid for Google Ads, and restrict or control who purchased those same advertising services. This limited the range of advertisements a consumer would see when searching for credit products, directing them instead to a particular provider (depending on the keywords used). This in turn may have resulted in consumers paying higher prices for consumer credit products and acquiring consumer finance on unfavourable or less suitable terms.
Despite obtaining the declaration of cartel conduct, the New Zealand Commerce Commission did not seek any financial penalties in this case. This may be due, in part, to the fact that Moola cooperated with the NZCC investigation, accepted that it contravened the law and had agreed to the declarations made by the court. Future cartelists may not be so lucky.
In Australia, there have been a handful of cases in relation to agreements or conduct relating to keyword search terms but these have all involved potential breaches of the Australian Consumer Law or infringement of a trademark.
For example, in 2021, the Australian Federal Court held that Employsure (a private company offering employment law advice, but not affiliated with the Fair Work Ombudsman) had engaged in misleading and deceptive conduct by making its Google advertisements responsive to search terms such as ‘Fair Work Ombudsman’, and by including misleading phrases within those advertisements.
We would expect that if conduct similar to the Moola case was engaged in by competitors in Australia, the ACCC would take action and seek penalties. You should accordingly exercise caution when setting the parameters of their keyword searches, and be careful not to discuss keyword searches (or excluded terms) with your competitors.
Whether agreements on use of keyword searches between suppliers and distributors who also compete is uncertain. While such conduct may appear to be cartel conduct on its face, there may be reasons why such conduct is lawful (either because the parties are not in competition to acquire keyword search terms or the conduct could be characterised as a joint venture).
It will be important for parties in this situation to obtain legal advice as suppliers may want to restrict distributors using certain keyword search terms while not breaching competition law.
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