Trust is not enough: German Supreme Court tightens liability for Google Ads
Marcel Pemsel
Trust is not enough: German Supreme Court tightens liability for Google Ads
In a landmark ruling in Google-Ads
(I ZR 28/25), the German Supreme Court dealt with the question whether a
retailer is liable for unlawful advertisements placed by Google on
third-party platforms.
Background
The claimant
is a registered qualified trade association whose members include
numerous retailers of household electrical appliances. The defendant is a
retailer for such appliances.
In June 2023, two advertisements
appeared on a third-party platform for a fridge-freezer combination and
an undercounter dishwasher offered by the defendant. Each ad displayed a
product image, the defendant's company name, a product description and a
price. At the bottom, the ads showed the entry "Energie: D" [referring
to energy efficiency class “D” under EU law] but without the graphic
label required by legislation. Clicking on the ad led to the defendant’s
website, where the full energy label could be accessed.
The
claimant argued that the advertisements were unlawful because they
failed to display the energy efficiency class in the graphical format
required by EU law, specifically, an arrow showing the efficiency class
on the available spectrum of efficiency classes.
The defendant
countered that it had neither created nor commissioned the ads. Rather,
under a cooperation agreement, the defendant continuously transmitted
product information to Google Ireland Limited, which then designed and
placed ads on its own platforms and those of Google's partner network at
its sole discretion. The defendant paid Google a fee for each click on
these ads.
Both the District Court of Coburg and the Higher
Regional Court of Bamberg dismissed the claim, holding that the
defendant was not liable for the ads.
The German Supreme Court's decision
The German Supreme Court lifted the lower court’s decision and remanded the case for further proceedings.
The central question was whether Google qualifies as an "agent" of the defendant within the meaning of Sec. 8(2) German Act against Unfair Competition
(“UWG”). This provision attributes unfair competition violations
committed by agents to the business owner, ensuring that a business
cannot escape liability by outsourcing activities to third parties.
The
judges recalled the established test: liability under Sec. 8(2) UWG
requires (1) an extension of the business owner's operations that
benefits the owner, and (2) a certain control by the business owner over
the risk area, including a decisive and enforceable influence over the
agent's relevant activities. Crucially, what matters is not what
influence the business owner actually secured, but what influence it
could and should have secured.
1. Extension of the business operation
The
Court held that the defendant had extended its business operation by
delegating, at least in part, the task of advertising its products to
Google under the cooperation agreement. The decisive factor was that the
agreement amounted to a paid commission of Google to advertise the
defendant's products, with the defendant providing Google the necessary
product information.
a. Distinguishing affiliates from advertising agents
The judges drew a distinction from their earlier Haftung für Affiliates decision (IPKat here).
In that case, the affiliate created its own independent product - a
website - and placed advertising links on it at its own discretion and
in its own interest. There was no "commission" in the sense of
outsourcing the business owner's own activities.
By contrast,
Google in the present case acted like a classic advertising agency: it
offers its own service but it creates and places advertisements for the
defendant's products on the basis of information provided by the
defendant. The fact that Google retains discretion over the content,
timing and placement of the ads does not change this assessment – just
as the discretion of a traditional advertising agency does not prevent
it from being an "agent" under Sec. 8(2) UWG.
b. Google's discretion and competitor ads are irrelevant
The Court rejected two additional arguments raised by the defendant.
First,
the fact that digital advertising on the internet affords Google
greater discretion – for example, in placing ads – does not take the
arrangement outside the scope of Sec. 8(2) UWG.
Second, the
possibility that Google might place ads for competing products right
next to the defendant's advertisements does not preclude liability
either.
2. Control over the risk area
The Court
found that the defendant had sufficient control over the relevant risk
area. Google designed and placed the advertisements on the defendant's
behalf and relied on the product information provided by the defendant.
The defendant's argument that it had no influence over how Google
handled energy efficiency information was dismissed. It is irrelevant
what influence the defendant actually secured in the cooperation
agreement. What matters is what influence it could and should have
secured.
3. Remand on the merits
The Court
could not decide the case on the merits because the lower court had not
made sufficient findings on whether the ads actually constituted an
unfair commercial practice.
However, the judges provided
detailed guidance for the new decision, noting that the ads likely
violated the energy labelling requirements under EU law. In particular,
the mere display of "Energie: D" without an energy label arrow showing
the full efficiency spectrum does not comply with the Delegated Regulations (EU) 2019/2016 (for refrigerators) and (EU) 2019/2017 (for dishwashers).
Comment
1.
Ronald Reagan’s “trust, but verify” appears to be the gist of the
German Supreme Court’s decision. If a retailer outsources its
advertising to a third party, be it an advertising agency, Google or a
similar platform, it should review each advertisement before
publication. Otherwise, it may be liable for infringement of unfair
competition. There is no “I did not know and had no influence” defence.
The retailer could have secured influence.
2. The Court provided
a clear demarcation between affiliate marketing (no liability) and
advertising cooperation agreements (liability). In the Haftung für Affiliates
case, the affiliate created its own product and merely linked to the
retailer's offerings. In the present case, the retailer actively feeds
its product data to Google, which then creates advertisements for those
products. This distinction makes sense: if you provide the raw material
and commission the advertising, you cannot disclaim responsibility for
how it turns out.
3. As noted in my earlier post on the Haftung für Affiliates decision, the liability provision of Sec. 8(2) UWG has near-identical counterparts in German trade mark law (Sec. 14(7) German Trade Mark Act), copyright law (Sec. 99 German Copyright Act) and design law (Sec. 44 German Design Act).
While the Court’s reasoning is specifically tailored to the cooperation
agreement at issue, the underlying principles also apply in cases
involving other IP rights. If, because of a
mistake of the advertising agency or Google, an ad shows the trade mark
of a competitor in an infringing manner, the retailer will be liable for
trade mark infringement even though it had no knowledge of the
infringement.
The picture is by Ebubekir and used under the licensing terms of pexels.com.