Lender’s Advertising Arrangements Deemed Cartel Conduct

Cartel conduct is usually thought of as referring to classic anti-competitive arrangements such as fixing the prices of products or services. However, a December 2021 decision of the High Court has illustrated that the prohibition can extend beyond such stereotypical cases, such as to cover agreements on the acquisition of services.

The case related to the use of the online advertising platform ‘Google Ads’, which allows businesses to place advertisements in Google search results. The advertisements are triggered when particular keywords and phrases are used in Google searches, such as topics relevant to the advertising business, including the names of competitors.

The consumer finance company ‘Moola’ sent letters through its lawyers to other lenders who had placed advertisement ‘bids’ that would be triggered by keywords and phrases relevant to Moola, including “Moola” itself. The letters alleged that these bids breached their intellectual property rights and the Fair Trading Act 1986, and sought confirmation that the other lenders would stop placing such bids, as well as use “Moola” as a ‘negative’ keyword which would prevent their advertisements showing up when “Moola” was searched.

A number of lenders complied with Moola’s requests, and Moola itself refrained from using keywords and phrases relevant to some of the other lenders and also introduced some relevant ‘negative’ keywords.

The Commerce Commission filed proceedings against Moola, alleging that in sending the letters and giving effect to the arrangements proposed in them, Moola had breached the prohibition on cartel conduct contained in the Commerce Act 1986.

The Commerce Act prohibits contracts, arrangements, and understandings that have the purpose, effect, or likely effect of fixing prices or restricting the acquisition of services by businesses that are in competition with one another. In this case, Moola admitted it had indeed breached the Act by restricting the acquisition or likely acquisition of Google Ad services by itself and other lenders, and by having the effect or likely effect of controlling or maintaining the price of those services.

The High Court made declarations to that effect, explaining that Google Ads pricing is determined based on the differentials between ‘bids’ for certain keywords and phrases made by different Google Ads customers.

This case demonstrates that cartel conduct is not limited to stereotypical cases of fixing the prices of products and services that businesses are selling. Here the cartel conduct was found to be anti-competitive arrangements in the acquisition of advertising services.

It also highlights the inherent competition law risks in communicating with competitors, even when such communications do not relate to the core business and are intended to protect legal rights. It is advisable to use great caution when considering any communications with competitors.