Aggression, Artifice, and Optimisation: NSW Court of Appeal Case Note

06 September 2017

Matthew Mulcahy, Graham Maher

In Oneflare Pty Ltd v Chernih [2017] NSWCA 195 the Supreme Court of New South Wales Court of Appeal considered an agreement for the provision of search engine optimisation services to improve a website’s ranking in search engine results, particularly on Google. One of the issues that arose for consideration was whether "natural" link building (defined below) that complied with Google’s guidelines, as opposed to "unnatural" or artificial and non-compliant link building, could form part of an "aggressive" search engine optimisation strategy.

Background

The appellant, Oneflare, operated an internet business putting people in touch with service providers. In 2013 Oneflare retained the respondents, Mr Chernih and his company Linkbuild ("the Respondents"), to provide search engine optimisation ("SEO") services in relation to its website. The SEO services provided by the Respondents included the creation of links in order to improve the website's ranking in Google search results. This process is known as "link building".

As the Court of Appeal explained in its judgment, link building "may take several forms ranging from encouraging so-called 'natural' links (the product of an authentic editorial decision to create a link to the target website) to generating 'artificial' or 'unnatural' links (including on unrelated websites created or used solely for the purpose of manipulating the search algorithm)." The latter practice is often referred to as link building "for its own sake." As stated in its Webmaster Guidelines, Google opposes the latter practice and uses algorithmic means to identify and then demote or penalise websites that benefit from artificial links in order to discourage it.

Shortly after its creation, the website's artificial links were identified by Google's search algorithm and the website was demoted and penalised, resulting in a significant decrease in traffic to the website.

Oneflare sued the Respondents seeking damages in relation to the decline in traffic to the website and sales resulting from the algorithmic demotion and penalty. Oneflare alleged that the Respondents breached their retainer with Oneflare because they developed and recommended an incompetent SEO strategy which was in breach of the Google Webmaster Guidelines and exposed Oneflare to the real risk of being punished by Google.

The Respondents' response included that they were retained by Oneflare to pursue and execute an “aggressive” SEO strategy which included the creation of artificial links, and that the directors of Oneflare were experienced users of the web and were well aware of the nature of SEO services and in particular what link building "for its own sake" entailed.

Decision of the Primary Judge

The primary judge, McDougall J, dismissed Oneflare’s claim. His Honour's findings included that Oneflare had retained the Respondents to devise and implement an aggressive SEO strategy which included on-page optimisation (improving the content of Oneflare’s website) but also off-page optimisation (including link building). His Honour found that the directors of Oneflare had a clear understanding of link building including the creation of artificial links, and that the Respondents warned the directors that the overenthusiastic pursuit of link building could result in Oneflare's website being demoted in the Google search results.
Oneflare accepted that if his Honour was satisfied that the Respondents were retained to implement an “aggressive” strategy and reasonably believed that Oneflare was aware of the risks associated with that strategy, there could be no breach of the retainer in implementing such a strategy. Accordingly, no question of breach arose.

Oneflare's Argument on Appeal

Oneflare appealed the primary judge's decision. One of the three parts of Oneflare's grounds of appeal challenged his Honour's finding that Oneflare’s instruction to pursue an aggressive SEO strategy involved link building "for its own sake".

Oneflare's primary argument in relation to this part of the appeal was that the primary judge conflated aggressive link building and non-compliant link building, and overlooked that an aggressive link building strategy could include natural link building which complied with Google’s guidelines. Oneflare argued that the primary judge should have found instead that Oneflare’s instruction as to “aggressive” link building required the Respondents to engage in link building that did not breach Google’s guidelines.

Oneflare also challenged the primary judge’s finding that the directors of Oneflare understood what was involved in link building “for its own sake”.

Decision of the Court of Appeal

The Court of Appeal ultimately dismissed Oneflare's appeal. With respect to the grounds of appeal set out above, the Court found that the primary judge did not overlook the fact that link building could comply with Google's guidelines. This was made apparent by the primary judge's recognition that within the range of activities that may constitute such link building, the risk of detection and action by Google increased depending on the number and lack of “quality” of the links created. However, Oneflare’s reference to an “aggressive” strategy was apt to denote both intensified quantity or frequency and the taking of calculated risks. The creation or acquisition of natural links to a website is not “aggressive” in either of those senses. The Court held that the context provided by the parties’ exchanges at their first meeting show that these were the senses in which “aggressive” was reasonably to be understood by the parties.

The Court of Appeal also rejected Oneflare's challenge of the primary judge’s finding that the directors understood what was involved in link building “for its own sake”. The Court found that the Respondents had explained to the directors what was involved in such link building and its associated risks. The directors did not ask for any further explanation or suggest that what they knew about link building did not extend to an understanding of what Google sought to penalise.

The Court of Appeal considered that immediately after the Respondents were retained, it was readily apparent from the email exchanges between the parties that the directors appreciated that the link building being undertaken as part of the "aggressive" strategy involved the creation of links of the kind Google sought to detect and penalise.

The Court considered that these exchanges were wholly consistent with the primary judge's findings that from the outset at least the directors of Oneflare were aware of the associated risks and were prepared to accept, and that it was reasonable for the Respondents to understand that the directors had a good understanding of SEO techniques.

Conclusion

Companies wishing to pursue "aggressive" SEO strategies in relation to their websites need to be aware of the risk that such strategies, to the extent that they include artificial link building, may result in demotion of the website, penalties, and subsequent loss of traffic to the website. In such circumstances, it may be very difficult for the company to obtain compensation from the SEO strategy provider, particularly if the company directors or officers are familiar with SEO or received prior warnings from the provider about the risk of demotion or penalties.

Authors

Graham Maher

Partner
Australia

Call me on: +61 2 9226 9888
Matthew Mulcahy

Matthew Mulcahy

Associate
Australia

Call me on: +61 2 9226 9888