Google, the world's largest web-search provider, misled Australian consumers in 2007 by including paid ads from competitors in search results for businesses, an appeal court has ruled.

The Federal Court of Appeal in Sydney yesterday overturned a lower-court decision and ordered the California-based company to set up a protocol to avoid repeating the practice.

The decision makes Google responsible for ads that are displayed and says the company isn't merely a conduit for the advertiser.

Google won't have to pay a penalty because the Trade Practices Act, under which it was sued, didn't provide for fines for misleading conduct. The company was ordered to pay a share of the costs of the trial and appeal.


"The user asks a question of Google and obtains Google's response," the three-judge appeal panel wrote in a 49-page ruling.

"Several features of the overall process indicate that Google engages in misleading conduct."

Google was disappointed with the appeal court ruling and was reviewing its options, it said. It said the company was committed to providing an advertising platform that benefited both advertisers and users.

Google has changed the way results are displayed since 2007.

The Australian Competition and Consumer Commission sued Google, in the first claim of its kind in the world that makes the search-engine company responsible for the content of ads, according to the regulator.

Justice Antony Nicholas dismissed the ACCC complaint in September, ruling that Google didn't know publication of the ads amounted to a contravention of the Trade Practices Act.

The ACCC appealed, citing four advertisements, including those that showed up in a search for Australian company Harvey World Travel, that it said Google should have known would contravene the law.

- Bloomberg