Report: Google ad inquiry focused on pharmacies

May 13, 2011 By MICHAEL LIEDTKE , AP Technology Writer

(AP) -- Google Inc. recently set aside $500 million to cover a possible settlement of a U.S. government investigation into the Internet search leader's distribution of online ads from illegal pharmacies, according to a report published Thursday.

The Wall Street Journal said the U.S. Attorney's office in Rhode Island and the U.S. have been leading the criminal probe into whether improperly profited from ads promoting drug sales by pharmacies or people without the proper licensing. The newspaper cited unnamed people familiar with the matter.

Spokespeople from Google, the FDA and Peter Neronha, the U.S. Attorney in Rhode Island, all declined to comment Thursday.

The Journal's article illuminates a mystery triggered earlier this week by a bombshell contained in Google's quarterly filing with the .

The SEC documents included a vague reference to a Justice Department investigation into the usage of Google's for placing ads alongside search results and other content at hundreds of thousands of websites. Google raised even more intrigue by subtracting $500 million from its first-quarter earnings to cover a potential settlement.

Google co-founder then dodged a reporter's question about the government investigation at a software developers' conference presented by the company in San Francisco.

The evasiveness raised questions about how deeply the government might be digging into Google's ad network, a machine that is expected to generate more than $30 billion in revenue this year. Regulators in Europe are already taking a broad look at how Google's ad system works as part of an into whether the company's business practices are stifling competition.

Although this U.S. probe appears to be focused on a narrower issue, it's still a touchy matter for Google.

Besides sticking Google with a big bill, the inquiry could draw more attention to how vulnerable Google's automated system has been to the machinations of shady operators.

Google acknowledged the problem in a federal lawsuit filed last fall against dozens of "rogue" online pharmacies that were finding ways to place ads for drugs despite the company's efforts to prevent the abuses. The individuals identified in the complaint were based in New York, Tennessee and Ohio.

In one of the more common practices, the illicit drug dealers would plug subtle misspellings of drug names frequently entered into Google's search engine to generate ads alongside the results. For instance, one illegal drug advertiser spelled the anabolic steroid Dianabol as "Diano bol" in Google's automated system to produce an ad, according to the lawsuit in San Jose federal court.

Google has obtained court orders banning some of the rogue pharmacies named in the lawsuit and is still seeking injunctions against the others.

"Rogue pharmacies are bad for our users, for legitimate online pharmacies and for the entire e-commerce industry," Google lawyer Michael Zwibelman wrote in a company blog post on the same day the company filed its lawsuit in September. "So we are going to keep investing time and money to stop these kinds of harmful practices."

The lawsuit came seven months after Google imposed new restrictions on the kinds of pharmaceutical ads it would accept in the U.S. and Canada. The new rules were supposed to only allows ads from U.S. pharmacies that had been accredited by a special program run by the National Association Boards of Pharmacy. In Canada, the accreditation had to come from the Canadian International Pharmacy Association.

Google's critics have complained in the past that the company and other websites haven't been vigilant about policing pharmaceutical ads because they are so lucrative. Drug and health care advertising generated about $1 billion in Internet spending last year and is expected to grow to nearly $1.9 billion by 2015, according to the research firm eMarketer Inc.

Explore further: Unlocking the geoblock with VPNs

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Google near US settlement over ad practices

May 13, 2011

Google is close to reaching a settlement with the Justice Department over allegations it made hundreds of millions of dollars by accepting advertisements from online pharmacies that break US law, The Wall ...

Google braces to pay at least $500M in ad probe

May 11, 2011

Google Inc.'s lucrative online advertising system is facing a U.S. Justice Department investigation that is expected to cost the Internet search leader at least $500 million.

Google to expand TV ad service to online video

Mar 27, 2009

Internet giant Google is testing a new service that would expand its television-ad brokering business to YouTube and video on other websites, The Wall Street Journal reported on Friday.

Texas opens inquiry into Google search rankings (Update)

Sep 03, 2010

(AP) -- Google Inc.'s methods for recommending websites are being reviewed by Texas' attorney general in an investigation spurred by complaints that the company has abused its power as the Internet's dominant ...

Google loosens Europe ad trademark controls

Aug 04, 2010

Google shook up its lucrative online advertising service in Europe on Wednesday, saying it would allow sellers to register other companies' brand names as search "keywords" when shopping on the Internet.

Recommended for you

Unlocking the geoblock with VPNs

1 hour ago

In recent months there have been many reports of Australians covertly signing up for the US streaming service Netflix, using fake postcodes and software workarounds to fool its geo-blocking system.

Twitter-funded lab to seek social media insights

15 hours ago

A new Twitter-funded research project unveiled Wednesday, with access to every tweet ever sent, will look for patterns and insights from the billions of messages sent on social media.

Facebook makes peace with gays over 'real names'

17 hours ago

Facebook on Wednesday vowed to ease its "real names" policy that prompted drag queen performers to quit the social network and sparked wider protests in the gay community and beyond.

User comments : 0