Google Facing Up to $500 Million Penalty for Illegal Pharmacy Ads?

The Wall Street Journal reports that Google has earmarked "$500 million to potentially resolve a case with the Justice Department" involving advertisements Google accepted from online pharmacies that violate U.S. prescription laws. The ads in question have appeared alongside search results as part of Google's popular AdWords marketing platform.

At issue is that Google charges advertisers a small fee each time a user clicks on one of the ads, and given the apparent popularity of being able to buy certain drugs online without a prescription, Google is now facing "allegations it made hundreds of millions of dollars by accepting ads from online pharmacies that break U.S. laws," says the Journal.

While the AdWords platform is a relatively automated system when it comes to setting up various ad campaigns, Google contends the following:"All ads in the AdWords program will be reviewed. If your ads don't meet our guidelines or are performing poorly, we'll notify you by email. We'll often stop running your ads until you're able to make the necessary changes. As soon as you make changes to your ad and save, your ad will automatically be resubmitted to us for review."So if Google has indeed "made hundreds of millions of dollars" from ads placed by illegal pharmacies, how did these ads slip past the approval process? The Journal wonders the same thing:"One question under investigation is the extent to which Google knowingly turned a blind eye to the alleged illicit activities of some of its advertisers—and how much executives knew, the people familiar with the matter said."

As far back as 2003, Google has banned ads from U.S.-based online pharmacies that sell prescription drugs illegally but in 2004 refused to ban ads from "Canadian pharmacies that send medicines to U.S. customers," says the Journal. And in February of last year, Google decided to only allow ads for accredited U.S. and Canadian pharmacies in an attempt to stem the tide of illegal pharmacy ads appearing alongside its search results.

But if some illegal pharmacy ads managed to somehow skirt the AdWords review process and, in turn, generated a substantial amount of advertising revenue for Google, a $500 million settlement (if Google has to shell out all $500 million) "would be among the highest penalties paid by companies in disputes with the U.S. government," according to theJournal.