Google to shell out $500M to DOJ over ads

Google's apparent profit off of ads from illegal online pharmacies has ruffled the DOJ

Google's legal woes are never-ending, but now it's apparently getting slapped with such deep-impacting allegations that it's willing to shell out a sizable chunk of its yearly revenues just to make them go away. Google has set aside $500 million to resolve a case with the Department of Justice over illegal ads from bogus online pharmacies that offer to sell drugs without a prescription, according to a report from the Wall Street Journal.

The Justice Department is investigating how much the company knew as it accepted ads for online pharmacies in Canada and abroad—ads that it subsequently made hundreds of millions of dollars in ad revenue from.

(Let’s be honest here, anyone with an old person in their family could kiss Canada’s feet right now for its cheap drugs, so let’s hold off and get all the facts before we jump into the anti-Google camp once again.)

Much of the pressure comes not only from the DOJ, but from the Food and Drug Administration as well, according to people familiar with the matter. Back in 2003, Google began banning ads from U.S. pharmacies that offered to sell prescription drugs like Vicodin and Viagra without a prescription, as did Yahoo and Microsoft. The shift largely came from pressure from the FDA to crack down on such ads.

But a year later Google incensed the FDA and U.S. pharmacies once again when it announced that it would continue to serve ads from Canadian pharmacies. When the FDA began probing into Google pharmacy ads recently, the company changed its policy once again and promised to serve ads from licensed U.S. pharmacies only.

If Google does, indeed, end up paying $500 million to the DOJ, it would be the largest penalty ever paid by a company to settle a dispute with a government agency. In 2007, Yahoo, Microsoft, and Google together paid a combined fine of $31.5 million to settle a case with the DOJ over allegations that the companies had accepted ads from illegal gambling sites, in violation of the Federal Wire Wager Act.

And yet if Google were to pay the $500 million, it would still be little more than a drop in the proverbial bucket.  Of the $29.3 billion that Google made in revenues for the entire year of 2010, a whopping $28.2 billion came from ad revenue alone.