Report: Google close to settling drug ad crackdown

The Wall Street Journal reports that search giant is being investigated for accepting ads from online pharmacies that violate U.S. law.

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Leslie Katz
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Google is close to settling a criminal investigation charging the company with turning a huge profit from displaying illegal ads for online pharmacies, The Wall Street Journal reported today.

Quoting sources familiar with the matter, the Journal said the federal investigation has focused on whether Google knowingly accepted illegal ads from online pharmacies based in Canada and elsewhere. The search giant made hundreds of millions of dollars from such transactions, the report says.

As we reported earlier this week, Google took a surprise $500 million charge in its first quarter to cover potential charges related to resolving an investigation by the Department of Justice.

Google did not offer details of that investigation in its filing, and a company spokesman declined comment because it's a legal matter. A Justice Department spokesman also declined to comment on that unnamed probe. CNET e-mailed Google tonight asking for comment on the reported investigation into drug ads, and we will update this story as soon as we hear back.

The Wall Street Journal reports that the pharmacy-related probe is being conducted by the U.S. Attorney's Office in Rhode Island and the Food and Drug Administration, among other agencies (Jim Martin, a spokesman for the United States attorney's office in Rhode Island, said his office would neither confirm nor deny the existence of the investigation, according to The New York Times).

One matter being investigated, the Journal's sources say, is the extent to which Google knowingly turned a blind eye to the alleged illegal activities of some advertisers--in this case sites that offer to sell prescription drugs that may be counterfeit, expired, or sold without a valid prescription.

Search engines can be held liable if found to be profiting from illegal activity. As the Journal notes, key to this particular investigation would be that illegal activity allegedly took place through Google's paid ad service, and not its search results.

Search engines, of course, are no strangers to ads for illicit pharmacies.

A 2009 report on sponsored search ads on Bing highlighted the ongoing challenges posed by shady drug vendors to Microsoft, Google, and Yahoo. Rogue online pharmacies sell a wide range of medications. The National Association of Boards of Pharmacies does list some certified and recommended online drugstores on its Web site, but many more that are not.

In 2003, Google said it would no longer allow unlicensed pharmacies to buy ads on its Web site, following similar moves by Microsoft and Yahoo. In 2004, the company said it would continue to carry ads for Canadian pharmacies that send medicines to U.S. customers.