Competitor Brand Bidding: Should You Bid on Rival Dealers?

Bidding on competitor keywords means buying search ads against a rival’s name. Every guide to it is written for the company being bid on, which is why the advice reads as a morality tale. If you are a dealer, you are usually on the other side of it, and the question is practical rather than ethical: is this worth the money, and what are the rules.

This is the companion to an earlier piece on bidding on the brands you sell, which deals with the manufacturer’s trademark and your dealer agreement. This one is about the shop across the street, which is a different problem with different rules.

What competitor brand bidding means

You add a competitor’s name to a campaign so that when somebody searches for them, your ad is eligible to appear. The searcher was looking for a named business and is shown an alternative before they arrive.

That is the whole mechanism, and it is worth saying plainly that it is ordinary and widespread. The reason it generates so much heated commentary is that the people writing the commentary are usually the ones being bid on, and it is genuinely irritating to pay to defend a name you built.

The reseller version is a different problem

For most businesses, a competitor sells a different product. For a reseller, the competitor frequently sells the identical product, from the same manufacturer, at the same minimum advertised price, with the same manufacturer description on the page.

That changes the calculation in both directions, and neither direction shows up in the standard advice.

• The switching cost for the customer is close to zero. They are not choosing between two products, they are choosing between two shops selling one product. Persuasion is cheaper here than it is for a brand trying to displace a rival product.
• Which cuts both ways. Your own name is equally cheap for somebody else to take, and there is nothing proprietary about what you sell to defend it with.
• The manufacturer may be in the auction too, competing with its own dealer network on the network’s own names.
• Everybody in the auction has the same margin structure. When the price is fixed by policy, the dealer who can pay most for the click is the one with the best average order value or the lowest cost to serve, not the one with the better product.

What Google actually permits

Google’s trademark policy draws the line in a place that surprises people: using trademarks as keywords sits on the list of things the policy does not restrict. Targeting a competitor’s name is not a policy violation and never has been.

The restriction applies to your ad text. You generally may not put a competitor’s trademark into your headlines and descriptions, and the trademark owner can complain to Google if you do. The reseller provision that lets you name the manufacturer whose products you stock does not extend to naming a rival shop, because you do not sell that rival’s brand.

• Targeting a rival dealer as a keyword. Permitted.
• Naming that rival in your ad copy. Restricted, and the likeliest thing to draw a complaint.
• Naming the manufacturer you both stock in your ad copy. Governed by the reseller provision, covered in the companion piece.

A great deal of the conflict in this area comes from people who did the second thing while believing they were arguing about the first.

Is bidding on competitor keywords legal?

Two separate questions live inside that one, and they have different answers.

Buying a competitor’s name as a keyword has been litigated repeatedly in the United States and is not, by itself, treated as trademark infringement. What creates exposure is confusion — an ad that leads a reasonable person to think they are dealing with the competitor, or landing them on a page that trades on that impression. The keyword is rarely the problem. The creative and the landing page are where the problem gets made.

Two practical consequences follow from that, and they are worth stating because they are what actually decides whether anybody has a problem with you.

• The same keyword can be fine or not fine depending on the ad it triggers. An ad that offers an alternative is a different object from one that implies you are the other company or an authorised part of it. Nothing about the targeting changes between those two cases.
• Where the click lands matters as much as the ad. A page that names the competitor prominently, or that is built to look like theirs, converts an ordinary competitive tactic into an argument about confusion.

Jurisdiction matters too, and it is the most common thing people get wrong when they read American advice and apply it elsewhere. Rules on using a competitor’s mark in search advertising are not uniform across countries, so if you sell into more than one market, the answer you found is probably the answer for one of them.

All of that is a general description of how these disputes tend to run and not legal advice. If real money rides on it, the answer comes from a lawyer looking at your actual ads, not from an article.

Agreeing not to bid is the part with real risk

Here is the part missing from every other guide on this subject, and for a dealer in a network it is the one most likely to matter.

The common informal fix is a handshake: each dealer agrees to leave the other dealers’ names alone. Sometimes they arrange it between themselves, sometimes the manufacturer encourages it to keep the network calm. It feels like good manners rather than a legal event.

It is not necessarily either. In the 1-800 Contacts matter, the Federal Trade Commission alleged that the company had entered bidding agreements with at least fourteen competing retailers that “eliminate competition in auctions to place advertisements” on search results pages. The mechanism at issue was precisely the informal one above: competitors agreeing not to bid on each other’s marks and to add them as negative keywords. The Commission ruled against 1-800 Contacts in 2018.

The history did not end there, and the ending matters. On 11 June 2021 the United States Court of Appeals for the Second Circuit vacated that order and remanded with instructions to dismiss, holding that the Commission had applied the wrong framework and that trademark settlement agreements are owed significant deference. The court was clear that such agreements are not automatically immune from antitrust scrutiny, only that they are not condemned on sight.

When it pays, and when it burns money

Assume you are clear on the rules. The money question remains, and competitor campaigns are where a lot of ecommerce budget quietly goes to die.

When it tends to pay

1. You genuinely have the better offer. Free freight, faster delivery, stock when they are backordered, a longer return window. Under MAP, these are the only differences that exist, and the competitor search is where somebody is most open to hearing one.
2. The rival has a weak or slow site. You are not stealing a loyal customer, you are catching somebody who was about to have a bad experience.
3. Their name is generic enough to be ambiguous. Plenty of dealer names are two ordinary words, and a meaningful share of that traffic was never looking for them.
4. You can afford to lose the auction. Competitor terms convert worse than your own name. Treated as a small, permanently-capped line item they are fine; treated as a growth channel they are not.

When it does not

1. The rival is much better known than you. You are buying expensive clicks from people with a destination in mind, and quality signals on somebody else’s name will not favour you.
2. You are doing it because they did it to you. Retaliation is the most common reason these campaigns exist and the worst one. Two dealers bidding on each other’s names raise both their costs and neither one’s orders.
3. Your own brand campaign is not sorted. Defending your name is cheaper than attacking theirs, and if both are unbuilt, yours comes first.
4. You cannot measure it separately. If competitor terms are mixed into a general campaign, they will be subsidised by traffic that would have converted anyway and you will never see what they cost.

Measured properly, this is a small line item with a clear job. Measured badly, it is the line item most likely to be flattering itself, which is the same failure mode as an unmeasured brand campaign and it is covered in more detail in the brand bidding piece.

What to do when somebody bids on you

The reverse happens too, and the instinct to escalate is usually wrong.

• Check whether they used your name in the ad text or only targeted it. The first is something Google will act on through a trademark complaint. The second is not, and asking Google to stop it will go nowhere.
• Make sure you are actually showing on your own name. The cheapest defence is occupying the result properly yourself, and plenty of dealers being bid on are not running a brand campaign at all.
• Consider doing nothing. If they are ranking below you and converting poorly, they are paying for the privilege of losing to you. Escalation is what turns that into a bidding war you now fund too.
• Be careful what you propose. An email suggesting a mutual no-bid arrangement is the exact artefact discussed above. Whatever you decide, decide it with advice rather than in a hurry.

The check I would run this week

Three things, in this order:

1. Search your own store name and see who is there. If a rival dealer is running against you, note whether they merely targeted the name or wrote it into the ad, because that single distinction decides whether you have a complaint or a competitor.
2. Find out what a competitor click is actually costing you. If those terms are not in their own campaign with their own budget, they are hiding inside a number that looks fine. Separate them before deciding anything.
3. Work out your contribution margin per order. Under MAP this is the number that sets what you can pay for a contested click, and most dealers competing on these terms have never calculated it. Everything above is guesswork without it.

If that last one is uncomfortable to answer, it is the most useful thing on this page, and it is roughly where an audit starts.

Questions people ask