Search and advertising giant Google had acted in a "misleading and deceptive" way over its advertising system, an Australian federal court ruled on Tuesday.
The Australian Competition and Consumer Commission (ACCC) alleged that Google's AdWords system would generate headlines within advertisements which would match the users' search results, but would in fact lead to a site that was not the business the user was searching for.
The appeals court overruled a judgement from last September in Google's favour, after it was found to not have breached Australian trading laws.
Google was said to have published search results between March 2006 and July 2007 relating to Honda Australia, with results showing paid advertisements to a competitor, CarSales, leading the consumer to believe the two companies were somehow connected.
A series of other examples were brought before the court.
Australian competition regulators, the ACCC, can impose fines of up to A$10 million ($10.5m), or three times the value of the revenue collected from the deemed illegal act. It can even impose sales injunctions on products if Australian law is breached.
But this section of the law will not force the search giant to hand over a fine. The court did order the Google to prevent future breaches and to pay court costs.
The search giant said that it believes advertisers should be responsible for the ads they create on its AdWords advertisement hosting platform, and claims that it has no place to vet adverts that are published.
The ACCC recently fired at Apple for selling the iPad 3 under false pretences after it was found the 4G-enabled tablet would not connect to Australia's Telstra 4G LTE network, as the hardware was incompatible with next-generation networks outside of North America.
But the regulator hinted that Google was not the intended target, more rather it was the entire search engine population that operates within the country.
"This is an important outcome because it makes it clear that Google and other search engine providers which use similar technology to Google will be directly accountable for misleading or deceptive paid search results," ACCC chairman Rod Sims said in a statement.
Google is expected to appeal the decision to Australia's High Court.
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