Google Forfeits $500 Million in Online Drug Ad Settlement

Google will forfeit some $500 million to the U.S. Department of Justice to settle claims it allowed Canadian online pharmacies to target U.S. customers.

Google (NASDAQ: GOOG) will forfeit some $500 million to the U.S. Department of Justice in a bid to settle allegations it allowed Canadian online pharmacies to target ads at U.S. consumers.

That $500 million represents the revenue Google apparently received from the ads, which were delivered via AdWords, in addition to the revenue those pharmacies collected from domestic buyers. Shipping prescription drugs to U.S. customers from outside the country is a violation of the Federal Food, Drug and Cosmetic Act and possibly the Controlled Substances Act, the latter depending on the drugs in question.

"The Department of Justice will continue to hold accountable companies who in their bid for profits violate federal law and put at risk the health and safety of American consumers," Deputy Attorney General James M. Cole wrote in an Aug. 24 statement. "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."

According to the Department of Justice, Google spent a roughly six-year period (from 2003 to 2009) assisting some Canadian online pharmacies with placing and optimizing AdWords ads. The company became aware of a federal investigation in 2009, after which it moved to prevent those online pharmacies from advertising for U.S. customers. The search-engine giant began requiring online pharmacy advertisers certify themselves with the National Association of Boards of Pharmacy's Verified Internet Pharmacy Practices Sites program. It also employed an independent company to sniff out those pharmacy advertisers who might try to subvert Google's own advertising safeguards.

Under the terms of the agreement reached by Google and federal authorities, the former apparently agrees to acknowledge it "improperly assisted" those online pharmacies in running advertisements via AdWords, and institute unspecified compliance and reporting measures. Google is also required to accept responsibility for its conduct.

For its part, Google seemed anxious to put the whole matter in the past as quickly as possible. "We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago," a Google spokesperson told The Wall Street Journal. "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."

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