Should you bid on your competitor’s name in PPC advertising?

However strange this question might seem, bidding on your competitor’s keywords, which are the names of a competitor’s company or product, is a common practice. You have been it before – a client would like to tell customers looking for a company X that there is also their company Y providing a similar service or product. The question is whether it is effective and whether you are going to make somebody angry by doing this. But is this legal at all?

Personally, it was always clear to me – if we use the name of a competitor only as a keyword, not in the ad itself, everything is fine. I started to rethink my position after I came across a case from the neighboring Czech Republic, where a company was successfully sued for using a keyword that was also the name of a competitor. Even before we get to why it happened, let’s say why it should not have happened.

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An ad using the name of a competitor as a keyword is nothing out of the ordinary.

Why should it be legal

Advertising policies (in Google AdWords) stipulate only that you need to have a permission from the owner to use trademarks in your ads. However, they do not address the use of keywords outside the context of the ad. However, there is a number of well-known court cases that have already addressed this issue and whose rulings have become a widely recognized precedent.

Louis Vuitton vs Google

In a case known as “Google Cases”, Louis Vuitton filed a lawsuit against Google. It did so because Google through AdWords service has allowed advertisers selling imitations of Louis Vuitton products to bid on the keyword “Louis Vuitton”. The court (in this case: the EU Court of Justice) has ruled that Google is not responsible for the conduct of advertisers. With respect to the advertisers, it has ruled that they would only be held responsible for the use of keywords, if the ad was misleading about the commercial relations or origin. Therefore, the ad for Luis Vuitton product imitations must not pretend to be an ad for the original product or associate the imitations with originals in any way.

Interflora vs. Marks & Spencer

In a nutshell, Marks & Spencer decided to launch a flower delivery service. In the Google AdWords bidding, it used, among others, the keyword “interflora,” which is the name of the plaintiff and also a trademark of one of the largest flower delivery services operating in 140 countries around the world. Interflora sued Marks & Spencer and lost the case.

The court has concluded that while the trademark was used, it would only be considered a misuse if there was a clear link between the keyword “interflora” and the ad it opens, and the ad would mislead the consumer as to who is actually the advertiser. In other words, Marks & Spencer’s flower-delivery ad would have to pretend to be an Interflora ad.

This case was more complicated also because Interflora relied on a trademark with reputation. No, a trademark with reputation is not a compliment, but a legal status that confers on its happy owner a somewhat broader degree of protection. In this case, it can be also considered whether the ad:

  • does not diminish the distinctive character of the trademark
  • does not diminish its reputation (i.e. whether the advertiser/product has a good reputation, whether they are compatible with the trademark, whether a poor-quality ad text is causing harming to the trademark’s reputation
  • does not leech off the brand by using its owner’s ad campaign

What is the takeaway:

Using a keyword that is the name of a competitor (and above all a trademark) is acceptable, if the ad is not misleading and the advertiser can clearly distinguish it from the company’s ad that they were looking for. At the same time, the ad must not damage the reputation of the trademark that has become the keyword in any way.

An example of when an ad using the name of a competitor goes far beyond what is acceptable. I did not have to look for it for a long time.

What does an expert think?

To quote an unnamed Member of Parliament, “I cannot comment on it as I am not a lawyer.” At least I should not. Therefore, I asked JUDr. Tomáš Záhradník, who specializes in commercial law:

Following the rulings of the Court of Justice of the EU, it is possible to say that this practice is acceptable. However, this is not recognized at all national levels. In most cases, the discrepancy arises in the interpretation of the prohibition of profiting on a good reputation of a third party.

In my view, however, there are also many arguments why this should not be against the rules of fair competition. To use a simplified analogy, it is a similar situation to BILLA paying flyer distributors, standing in a public area outside LIDL distributing BILLA flyers to people. This is not forbidden. A competition with the aim of drawing away competitor’s customers and attracting them to one’s own company is acceptable.

Why this might not be legal or what do people that do not understand it think

Let us return to the case from the neighboring Czech Republic, which I mentioned at the beginning. About a year ago on social media, I came across a post from Michael Minář of the Czech company Media Energy. He wrote about his client facing a lawsuit, which – you’ve guessed it, revolved around using a keyword that was the name of their competitor. Most PPC specialists, who commented on the case, expressed the conviction that everything was OK. Nevertheless, the defendant lost the case.

The defendant referred to the Court of Justice’s above-mentioned precedents, pointing out that the advertisement does not mention the name of the competitor or contain anything linking the ad to it, i.e. does not pretend to be the competitor, does not profit from their name and it is a commonly used commercial practice.

Nevertheless, the Court saw it differently, acknowledging that it was “unfair competition”. This was despite the fact that the keyword was not in the ad and is not even a trademark (corrected). The main argument was that the ad concerned the same product sold by the plaintiff. On that basis, the Court concluded that the “average and reasonably attentive consumer” could be misled and presume it to be the plaintiff’s ad. At the same time, the fact that the advertisement contained the text “free shipping, low price”, which could put the plaintiff in an unfavorable position, was seen as aggravating circumstance.

And the answer is…

The answer should be “it is legal, if the ad does not cause harm to the owner of the name,” but … ultimately it is in the hands of national courts. As the case from the Czech Republic demonstrates, it can easily happen that you come across authorities that… do not necessarily have a sufficient knowledge of this issue.

Then the question should rather be: is it worth it? Bidding on keywords that for logical reasons cannot be found in your ad or on your website is considered as irrelevant by the system. Therefore, the ad will most likely be displayed sporadically, in low positions and it will cost you a lot of money.

For high-margin or high customer lifetime value products, this type of advertising can pay off. There are, however, also far more effective ways of using your advertising budget, and – to be perfectly honest – you will not irritate anyone in the process.

Do you have any questions or criticism? Let us know

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