The erring Search engine giant has been reprimanded by the Department of Justice and now seeks to make amends with $ 500 million and an affirmation that, henceforth, it will more tightly comply with the federal law relating to online pharmacy advertising.
Google agreed to pay the $ 500 million in federal claims, after a Department of Justice (DOJ) investigation found it both allowed and helped Canadian pharmacies that were advertising and selling drugs to U.S. consumers in violation of federal law.
In May, the company disclosed a $ 500 million charge taken against its first-quarter results to cover potential charges related to the Justice Department investigation. The revelation came in the company’s quarterly filing with the Securities and Exchange Commission. In the filing, Google wrote that it took the charge as “a potential resolution of an investigation by the United States DOJ into the use of Google advertising by certain advertisers.” The company said it took the charge this month, but accrued it against earnings in the period that ended March 31.
According to the DOJ, the settlement is one of the largest ever in the United States and covers the gross revenue earned by Google as a result of Canadian pharmacies advertising through Google’s AdWords program in violation of the Federal law.
Shipping prescription drugs from pharmacies outside the US to stateside consumers violates the Federal Food, Drug and Cosmetics Act and in the case of controlled prescription drugs, the Controlled Substances Act.
The DOJ is of the opinion that Google was aware of this as far back as 2003, but continued with the practice and allowed Canadian pharmacies, while blocking pharmacies from other countries, to advertise and sell prescription drugs to US consumers. The DOJ discovered that Google also knew that some of these pharmacies dispensed prescriptions from online consultations, bypassing a legitimate visit to the doctor.
Interestingly, the probe was initiated via a separate, multi-million dollar financial fraud case. The suspect in the case fled to Mexico, and, while a fugitive, placed pharmaceutical AdWords on Google. When he was captured, he helped law enforcement officials by providing information about his use of the AdWords program. As part of the investigation, the government set up undercover online pharmacy sites, and advertised them on AdWords.
Deputy Attorney General James M. Cole said in a statement, “The Department of Justice will continue to hold such companies accountable who in their bid for profits violate federal law and put at risk the health and safety of American consumers.” This settlement ensures that Google will reform its improper advertising practices with regard to these pharmacies while paying one of the largest financial forfeiture penalties in history.”
In response Google released a statement, “We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago. However, it’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place. Given the extensive coverage this settlement has already received, we won’t be commenting further.”
Google AdWords is Google’s main advertising product and source of revenue. Google’s total advertising revenues were US $ 28 billion in 2010. AdWords offers pay-per-click (PPC) advertising, cost-per-thousand (CPM) advertising, and site-targeted advertising for text, banner, and rich-media ads. The AdWords program includes local, national, and international distribution.