Australian gov't agency calls Google ads deceptive

By Eric Auchard

SAN FRANCISCO (Reuters) - Google Inc.'s Web search advertising is said to be promoting deceptive business practices, according to Australian legal proceedings brought by the country's competition authority, the agency said on Thursday.

The claims are the latest in a string of cases centered on trademark rights that argue Google's pay-per-click advertising system -- the company's mainstay revenue generator -- is used by competitors to unfairly grab business from rivals.

The Australian Competition and Consumer Commission, or ACCC, said in a statement on its Web site that it has filed a case in the Federal Court in Sydney against auto dealer Trading Post Australia Pty Ltd. and various Google subsidiaries.

The complaint charges that Trading Post contravened sections of the Trade Practices Act of 1974 when the business named "Kloster Ford" and "Charlestown Toyota" appeared in the title of Google-sponsored links to Trading Post's Web site.

Kloster Ford and Charlestown Toyota are Newcastle dealerships that compete against Trading Post for auto sales.

The Australian commission alleges misleading and deceptive conduct by Trading Post and Google stemming from advertising that appeared on Google's Web site in 2005.

It accuses Google of failing to do enough to distinguish between sponsored advertising links and so-called "organic" search links that result when consumers type keywords into Google's Web search system, which it asserts is deceptive.

Google said in a statement it would fight the allegations.

"Google Australia believes that these claims are without merit and we will defend against them vigorously," spokesman Rob Shilkin said. The statement argues that the case is an attack on the basic functions of Web search services.

In its statement, the commission distinguished between trademark cases brought against Google and what it says is its first-ever regulatory action aimed at Google trade practices.

In at least two cases in U.S. courts, including one lawsuit brought by auto insurer GEICO against Google, the Web search advertising leader has prevailed.

But it lost a ruling last year in a French court by luxury goods maker Louis Vuitton SA. And Google faces a trial later this year in a California court by American Blinds and Wallpaper over similar issues.

Google provided a statement by Peter Coroneos, chief executive of Australia's Internet Industry Association, a trade group in support of the Mountain View, California-based company.

"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," Coroneos said.

Google shares dipped $2.45, or around one-half of one percent, to $542.02 in late-day trading on Nasdaq.