One of the more common questions I get asked is that of whether it is okay to bid on trademarked terms of your competitors. For instance, if you are Ford, should you bid on “Chevy” so that your ad comes up on Chevy-related KWs?
I generally suggest not doing this. I have data that suggests that while people will click your ads, the conversion rate will be lower than you expect.
It is not illegal in the US to bid on someone’s trademarked term; nor is it against the policies of the major ad platforms.
It is illegal to use the trademarked term in your actual ad though. That’s the point where a reasonable person may become confused.
Additionally, with broad match and behavioral matching, it is quite possible that your ad may show up even when you are not bidding on the competitor’s keyword. I won’t explain how those technologies work in this post however.
I suggest adding most of your competitor’s trademarks to your negative list which will improve your optimization and limit litigation.
Lisa Raehsler at ClickZ writes a great article about how to engage a competitor in a polite manner if you want their ads to stop appearing on your branded keywords. And, if polite doesn’t work, you can have a lawyer send a cease and desist letter, which should do the trick, but of course cost you a few bucks.
Be weary of escalating things to legal though. You can start an “arms race” and create hostile relations with your competitors which may inspire them to do other things in retaliation.