Google Earmarks $500M for DOJ Ad Scrutiny

Google has set aside $500 million to settle an issue with the Justice Department regarding some of its advertisers. Sounds like some of Google's ad partners misbehaved, but Google won't say it.

Google lowered its first-quarter net income by $500 million, setting aside the profit cash as part of a resolution to the Justice Department's investigation of its advertising practices.

Google reported Q1 income of $2.3 billion April 14. As a result of the DOJ's scrutiny, the search engine could bank $1.8 billion instead, according to the company's quarterly filing with the Securities and Exchange Commission. Google noted to the SEC:

"In May 2011, in connection with a potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers, we accrued $500 million for the three month period ended March 31, 2011."

Both the DOJ and Google declined to comment on that matter. The DOJ does not discuss ongoing investigations and Google said it could not divulge detail because it is an ongoing legal concern.

Further reading

With both parties refusing to comment, one must turn to the language in the SEC filing.

While it's tempting to assume the legal issue stems from a new antitrust complaint, the emphasis on the "use of Google advertising by certain advertisers" suggest some advertisers are misbehaving. This could include gaming Google to take advantage of consumers, who in turn complained to the DOJ.

Whatever the case, this isn't the first time Google's ad platforms have been scrutinized. Google's search and ad services have come under antitrust scrutiny by the European Commission and Texas in the U.S.

The European Commission is looking into allegations that Google prevented ad partners from placing competing ads from some vendors on their own Websites.

In Texas, Google advertisers MyTriggers and SourceTools claimed Google denigrates their ad placement on its search engine, causing the companies to lose money.

The Federal Trade Commission in U.S. is rumored to be formulating a broad antitrust inquiry into Google's search business, following the loud outcry over Google's winning bid to buy ITA Software for $700 million. The DOJ blessed the deal in April with some strict conditions.

Finally, Google, along with rival Apple, just endured a tough two weeks of congressional scrutiny over its use of location data on smartphones.