Christchurch-based consumer credit provider Moola surrendered to Commerce Commission complaints that a deal it stitched up with competitors to limit online Google advertising was anti-competitive, reducing consumer choice. Moola consented to a High Court order that its conduct was in breach of the Commerce Act. No fine was ordered.
In a vigorous legal campaign starting in 2015, Moola targeted rival credit providers bidding for ad space on Google, alleging they were infringing its registered trademark by adding Moola to their keyword search function.
Google runs a second-price auction for spot bids on its ad rankings. Google Ads posts paid advertisements at the top of user’s searches. Advertisers place their maximum bid on specific words or phrases acting as keywords to gain ranking exposure when a consumer enters that search term in an online search. Relevant ads are ranked on the consumer’s search page according to the amount of the advertiser’s bid price. When a consumer does click on the ad, the advertiser pays Google the ‘price per click’ offered by the second ranking advertiser, not the price per click that advertiser in fact bid for the ranking. Within the Google-sphere, competitive advertising sees competitors bidding on their rivals’ brand names as key words. This will ensure their own ad appears when any consumer searches using the rival’s brand name.
The High Court was told Moola’s aggressive strategy saw competitors threatened with legal action when bidding on ‘Moola’ as a keyword. Moola alleged this was not only a breach of its registered trademark but also amounted to the tort of passing off and was in breach of the Fair Trading Act. In all cases but one, the competitor folded and an informal agreement was struck agreeing that neither would use the other’s brand name as a Google Ads keyword. The one competitor that held out also folded when Moola sued in the High Court.
The Commerce Commission claimed these informal agreements amounted to cartel behaviour, reducing competition between suppliers of consumer credit. Promises not to bid reduced advertising costs; everyone had agreed not to bid on their rival’s brand as a keyword. This was a breach of the Commerce Act; controlling the price paid for Google Ads services. An agreement not to advertise reduced consumers’ access to information; potential customers of Moola would be less likely to receive Google Ads advertisements from rival providers. This lessened consumers ability to compare prices.
After the Commerce Commission challenge, Moola wrote to its competitors stating that their prior agreement over advertising would not be enforced and Moola then consented to a High Court ruling that its commercial behaviour was in breach of the Commerce Act.
Commerce Commission v. Moola.co.nz Ltd – High Court (13.12.21)
22.018