A recent decision of the High Court has confirmed that competitors that coordinate with each other over their use of Google Ads risk breaching New Zealand’s cartel laws, which prohibit anticompetitive collusion.
By way of brief background, Google searches return two types of results:
- organic results; and
- paid results generated through Google Ads.
Google Ads operates primarily by way of a live auction. Advertisers bid on specific words or phrases (keywords) to secure an advertisement on Google when the search terms entered by the user match the chosen keywords. Google Ads also allow advertisers to add ‘negative keywords’, which prevents the advertisers’ advertisements from being triggered by a search for the negative words.
The case before the High Court concerned the conduct of consumer credit provider Moola.co.nz Limited (Moola). Moola had entered into a number of agreements with competing credit providers, resolving not to bid on each other’s brand names through Google Ads and to also use certain ‘negative keywords’ to exclude their ads from their competitor’s search results. The Commerce Commission sought – and the High Court granted – declarations that, by entering into and giving effect to the agreements, Moola had breached the cartel provisions of the Commerce Act 1986, which prohibit anticompetitive conduct such as price fixing and market allocation.
Commenting on the High Court’s recent decision, Commerce Commission Chair Anna Rawlings stated: “By restricting competitive keyword advertising, these agreements may have resulted in consumers paying higher prices and acquiring consumer finance services on unfavourable or less suitable terms. The likelihood of harm would have been higher for vulnerable consumers with less experience and knowledge about consumer finance companies.”
The Moola case is important to all businesses that use competitive keyword advertising, as breaches of the cartel provisions of the Commerce Act are punishable by fines of up to $10 million or higher for companies, and up to $500,000 for individuals. In April 2021, anticompetitive conduct was also criminalised under the Commerce (Criminalisation of Cartels) Amendment Act 2019, meaning that individuals who intentionally engage in cartel conduct can now also face up to 7 years imprisonment.
Immunity from prosecution under the cartel provisions of the Commerce Act is available for businesses or individuals that self-report their involvement in cartel conduct to the Commerce Commission (generally through their lawyer). This is subject to certain conditions being satisfied, most notably that the business or individual reporting the conduct must be the first to bring it to the Commission’s attention, and must cooperate with the Commission in respect of any resultant investigation and/or prosecution.
If you require more information about how the Commerce Act 1986 applies to online advertising, please contact the head of the Competition and Consumer team, Anna Ryan, or another member of Lane Neave’s Corporate team.
