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Agreements in relation to competitive keyword advertising declared cartel conduct

Home Insights Agreements in relation to competitive keyword advertising declared cartel conduct

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Contributed by: Troy Pilkington and Sophie Vinicombe

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Published on: December 20, 2021

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Today the Commerce Commission (Commission) announced that the High Court has declared Moola.co.nz Limited (Moola) breached the Commerce Act's cartel prohibition. Earlier this year, the Commission filed proceedings alleging the short-term loan provider had reached agreements with other loan providers to not bid on each other’s brand names on Google Ads and to also ‘negatively match’ certain keywords so their advertisements would not show when those keywords were used. The Commission sought a declaration that these arrangements were in contravention of New Zealand's cartel prohibition.

Background to Google Ads

Google Ads works through a competitive auction process in which advertisers bid on key words. These auctions determine which advertisements will be served to users who enter specific terms when using Google's search engine. Successful bidders will often have their websites displayed at the top of the results' pages, accompanied by an "Ad" label to identify it as a paid promotion rather than an organic search result.
 
In addition to bidding on search terms that advertisers would like to be associated with, the platform also enables advertised to "negatively match" keywords, which prevents their advertisements from being triggered by certain key words. This is a feature typically used by businesses to decrease wasted advertising expenditure through improved audience targeting.

Moola's conduct

Moola and certain other loan providers agreed that they would not bid on one another's business names in these auctions. Those involved also agreed to negatively match certain keywords to prevent their advertisements appearing in relation to searches of their competitors' names.
 
The High Court found that these agreements amounted to cartel conduct. In announcing the decision, Commission Chair Anna Rawlings said that:

  • "[T]his conduct meant that consumers searching for a consumer credit provider on Google may not see ads for other loan providers, limiting their access to information about alternative companies and services. This is likely to have reduced the ability of consumers to make informed choices when selecting a loan provider."

  • “Competitive keyword advertising is important for businesses and consumers alike. It allows businesses to have their online ads shown to potential customers at a time when they are actively searching for the relevant products and services, and consumers benefit from obtaining information on competing products and services in response to searches for a particular brand”.

  • “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."

Key takeaway

While the Commission was not seeking pecuniary penalties in this instance, the declaration makes it clear coordination with competitors in relation to competitive keyword advertising is cartel conduct. With the criminalisation of cartel conduct earlier this year, it is now more important than ever to ensure that businesses do not engage in problematic agreements or discussions with one another about competitive keyword advertising.
 
If you have any questions about your business's approach to competitive keyword advertising, please contact one of the authors below. We have significant experience advising on these issues, and can help you proceed with confidence.
 
The Commission's media release can be seen here.

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