Search company Google has fallen foul of an Australian consumer watchdog for allegedly misleading users by blurring the distinction between paid and unpaid search results in favour of one of its advertisers.

The Australian Competition and Consumer Commission has placed a suit in the Federal Court against the search engine giant and one of its main advertisers, the Trading Post.

The commission said that the pair "engaged in misleading and deceptive conduct" in breach of trade practices laws.

Trading Post submitted as keywords the names of two local car dealerships that were direct competitors to the Trading Post's online classifieds.

Users who typed in the business names "Kloster Ford" and "Charlestown Toyota" were directed first to the Trading Post's website.

Google Australia said that the case was without merit and an assault on all search engines.

More here.