SAN FRANCISCO (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. Food and Drug Administration have been leading the criminal probe into
whether Google 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 Securities and Exchange Commission.
The SEC documents included a vague reference to a Justice
Department investigation into the usage of Google’s automated system 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 Sergey Brin then dodged a reporter’s
question about the government investigation at a software developers’
conference presented by the company in San
The evasiveness raised questions about how deeply the
government might be digging into Google’s ad network, a moneymaking 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 antitrust
investigation into whether the company’s business practices are stifling
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
Google has obtained court orders banning some of the rogue
pharmacies named in the lawsuit and is still seeking injunctions against the
“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.