The Australian Competition and Consumer Commission (ACCC) said the ruling meant that not only Google, but other Internet search engines, would now be held responsible for "deceptive paid search results".
Google had earlier won a court ruling on the subject, but a full bench of Australia's Federal Court on Tuesday overturned that decision on appeal by the ACCC.
In its judgment, the court said between March 2006 and July 2007, Google published search results for queries related to Honda Australia, with results showing paid advertisements for a Honda competitor CarSales. It said the advertisements suggested CarSales was linked to Honda Australia.
The court said Google should be responsible for search results and that by publishing the paid advertisements had "engaged in conduct that was misleading or deceptive".
"It is Google's technology which creates that which is displayed," said the judges, who examined four cases of misleading search results.
The court ordered Google set up a compliance program to ensure paid advertisements on its search engine did not mislead consumers, and ordered Google to pay costs for the court action, which has been running since 2007.
Google had argued it was not responsible for the misleading search results, as it was clear that it was only a conduit for the advertiser.
Google did not respond to Reuters requests for comment, but told local media reported that the company was disappointed with the judgment and would consider its options.
The consumer watchdog ACCC said the ruling was an important decision and would impact all Internet search engines.
"It makes it clear that Google and other search engine providers which use similar technology to Google will be directly accountable for misleading or deceptive paid search results," ACCC chairman Rod Sims said in a statement.
(Reporting By Maggie Lu YueYang and James Grubel; Editing by Michael Perry)
Reuters
