Google Served Ads from Law-breaking Pharmacies: Report

Google set aside $500 million from first quarter profits to settle the DOJ's complaint that illegal drug companies are using the search engine to hawk their pills.

Google set aside $500 million to satisfy the Justice Department's allegation that the search engine served ads from online pharmacies that violated U.S. laws.

The Wall Street Journal, which uncovered the news after Google befuddled press with an intentionally vague regulatory filing this week, said Google made hundreds of millions of dollars from the ads.

The scoop comes a couple days after Google disclosed to the Securities and Exchange Commission that it was holding back $500 million from its first quarter profits, potentially to settle a dispute with the DOJ.

In the filing, Google noted: "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."

When eWEEK asked Google what it meant by "the use of Google advertising by certain advertisers," the company declined to comment because it is a legal matter. The company reiterated this position to eWEEK May 13.

Google reported Q1 income of $2.3 billion April 14. As a result of the DOJ's scrutiny, the search engine will instead bank $1.8 billion, a fraction of the $29 billion in online ads Google made in 2010.

The latest probe has been conducted by the U.S. Attorney's Office in Rhode Island and the Food and Drug Administration, the Journal found.

At the heart of the DOJ investigation is whether Google knowingly accepted ads from online pharmacies based in Canada and other countries that broke U.S. laws.

The Journal said search engines can be liable for damages if they are found to be profiting from illegal activity, a situation for which there is precedent. Google, Microsoft and Yahoo paid a total of $31.5 million to settle DOJ claims that they had took ads from illegal gambling sites.

Google has battled illegal drug operations for years. Last year, the company said it would begin allowing ads only from U.S. pharmacies accredited by the National Association of Boards of Pharmacy and from online pharmacies in Canada that are accredited by the Canadian International Pharmacy Association.

Then, in September, Google filed a federal lawsuit to block individuals running illegitimate pharmacies from advertising on its search engine and to recover damages.

Noting an increase in these pharmacies, Google attorney Michael Zwibelman wrote in a blog post that Google would invest time and money combating the problem:

"It's been an ongoing, escalating cat-and-mouse game-as we and others build new safeguards and guidelines, rogue online pharmacies always try new tactics to get around those protections and illegally sell drugs on the Web."