The Federal Court has ruled Google breached the law by displaying misleading sponsored links at the top of its search results.

Consumers who used Google to search for Honda, Harvey World Travel, Alpha Dog Training and Just 4X4 Magazine were presented with ads that led to rival websites.

The Australian Competition and Consumer Commission (ACCC) appealed last year after a judge ruled Google's conduct had not been in breach of the Trade Practices Act.

Justice Antony Nicholas found that although a number of the advertisements were misleading or deceptive, Google had not made those representations.

But the full bench of the Federal Court has now overturned that decision, concluding the search engine's conduct did breach the law.

"The enquiry is made of Google and it is Google's response which is misleading," the full court said.

"Although the key words are selected by the advertiser, perhaps with input by Google, what is critical to the process is the triggering of the link by Google using its algorithms."

ACCC chairman Rod Sims says the case raises important issues on the role of search engines as publishers of paid content.

"Google's conduct involved the use by an advertiser of a competitor's name as a keyword triggering an advertisement for the advertiser with a matching headline," he said.

"As the full court said, this was likely to mislead or deceive a consumer searching for information on the competitor.

"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."

The court has ordered Google to pay the ACCC's costs and implement a compliance program.

Google says it is considering its options.

"We are disappointed by the Federal Court's decision that Google should be responsible for the content of four particular ads on its platform," Google said in a statement.

"Google AdWords is an ads hosting platform and we believe that advertisers should be responsible for the ads they create on the AdWords platform.

"We are currently reviewing our options in light of the court's decision."