SYDNEY - AUSTRALIA'S consumer watchdog has launched legal action accusing Internet giant Google of misleading web users in a case that analysts said would 'send a shudder' through the global IT industry.
In what it describes is the first legal claim of its type in the world, the Australian Competition and Consumer Commission (ACCC) says Google has misled users by mis-identifying sponsored links that appear on its results page, a major source of income for online search engine providers.
'The ACCC is alleging that Google, by failing to adequately distinguish sponsored links from 'organic' search results, has engaged in and continues to engage in misleading and deceptive conduct,' the regulator said in a statement.
It said the case arose in 2005 when Google's search engine listed two car dealerships from the New South Wales city of Newcastle - Kloster Ford and Charlestown Toyota - as sponsored links, paid for by companies to attract Internet users.
However, the links led to the website of a rival to the dealerships, the classifieds magazine Trading Post which competes with them for automotive sales.
The ACCC claims that Google, by causing the Kloster Ford and Charlestown Toyota links to be published on its website and failing to adequately distinguish sponsored links from 'organic' search results, was in breach of the Trade Practices Act.
Ms Shara Evans, the head of IT consultancy Market Clarity, said the case would have major implications if the court found that a search engine was responsible for monitoring everything that advertisers paid to put up as sponsored links.
'What would have a real impact is if Google had to take a policing role into the content of the advertisers; that, I think, would send real shudders down the industry,' she said.
The ACCC has named Google Inc, Google Ireland Ltd and Google Australia Pty Ltd as defendants in the action, along with the Trading Post magazine.
Google Australia said it would fight the action.
'Google Australia believes that these claims are without merit and we will defend against them vigorously,' spokesman Rob Shilkin said.
The chief executive of Australia's Internet Industry Association, Mr Peter Coroneos, said the regulator should have consulted the industry before taking Google to court.
The case is listed for an initial hearing in the Federal Court on Aug 21.
