Google to Pay $500 Million in Settlement With DOJ
By Channing Turner | August 24, 2011 5:24 pm

The Justice Department announced Wednesday that search engine-giant Google has agreed to pay $500 million to settle charges that it illegally displayed ads for online Canadian pharmacies in the United States.

The non-prosecution settlement is one of the largest criminal forfeitures ever, according to a department release, and covers revenue Google earned for the ads as well as sales earnings that the Canadian pharmacies received from U.S. customers.

Google entered into a non-prosecution agreement with the department and acknowledged that from 2003 to 2009 its advertising service, known as AdWords, improperly aided the foreign pharmacies, which violated U.S. law by selling counterfeit drugs or failing to require a prescription.

The company also agreed to several compliance and reporting measures going forward, including updating electronic screening and reporting periodically to the U.S. Food and Drug Administration for the next two years.

“We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago,” Google told the New York Times’ Bits blog in a statement. “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.”

The investigation of Google started as part of a separate probe following a fugitive suspected of financial fraud who fled to Mexico, according to the department. While in Mexico, the target began to advertise the illegal sale of drugs through Google’s Adwords, eventually leading the government to probe the program and establish “undercover websites” that unlawfully advertised through it.

Most ads placed by Google are handled electronically without any human oversight, according to the settlement. But the company previously used two third-party services to check whether the online pharmacies were licensed in the U.S. and Canada, hiring Square Trade Inc. from 2004 to 2006 and then switching to PharmacyChecker.com LLC.

But several pharmacies not licensed by either service were still able to place advertisements in the U.S., either by posting ads in other countries first and then switching to the U.S. or avoiding certain “keyword” terms flagged by the certification services.

Google learned of an investigation into the ads by the U.S. Attorney’s Office in Rhode Island and the FDA in 2009, the settlement said. At that time, Google began requiring online pharmacies to show certification by the National Association of Boards of Pharmacy before placing ads on its service.

Google has also hired an independent company to screen its advertising service for flaws in its screening systems, the release said.

The investigation was first revealed in May when Google said in a filing that it had set aside $500 million for a potential settlement with the DOJ.

“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,” Deputy Attorney General James Cole said in a statement.

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