Legal trouble looms for brands in bidding deals
Brands could be facing massive fines for flouting competition laws by entering into 'gentlemen's agreements' following the lifting of Google's trademark bidding restrictions, according to legal specialists.
NMA understands that many well-known brands have agreed with their direct competitors not to bid on each other's brand terms, as they look to limit the affect of Google's decision on their search campaigns.
Google allowed trademark bidding from Monday and has already seen a flurry of activity, with brands appearing on each other's terms.
Some sectors have been noticeably quiet, however, such as automotive, where only affiliate and aggregator sites, rather than direct competitors, have appeared.
Any company entering into gentlemen's agreements may fall foul of Section 2(1) of the Competition Act 1998 (chapter 41). This applies to agreements and practices between UK companies that could affect trade by preventing, restricting or distorting competition.
Leigh Ellis, partner at commercial practice Gillhams Solicitors, told NMA that brands making verbal agreements should be cautious as formal contracts don't have to be in writing. "Therefore the Act applies to gentlemen's agreements," he said.
Search specialists have said they are aware of such agreements being made and have warned brands over the legal ramifications.
Duncan Parry, co-founder and director of strategy at Steak Media, said, "There are some agreements being struck between competitors. We suggest brands consult their legal teams before doing so."
Gavin Ailes, acting MD of The Search Works, said, "There are quite a few gentlemen's agreements going on between brands."
Since restrictions were lifted on Monday, brands have seen the price of search terms inflate. "We've seen some instances of brands that once paid next to nothing now paying 15p, which is a big hike," said Ailes.
The Office of Fair Trading was unavailable for comment.
