U.S. Inquiry of Google on Drug Ads
U.S. Inquiry of Google on Drug Ads
By CLAIRE CAIN MILLER
Federal regulators are investigating Google on suspicion of illegally displaying ads for online pharmacies that are operating outside the law, government officials said Thursday.
Google has set aside $500 million to pay for a potential settlement, according to a Securities and Exchange Commission filing the company made on Tuesday. It said the money was for the “potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers,” but gave no details.
The United States attorney’s office in Rhode Island is leading the investigation into pharmaceutical advertising on the Web search engine and the Food and Drug Administration and Justice Department are also involved, people briefed on the investigation said.
Google and the Justice Department declined to comment. An F.D.A. spokeswoman confirmed there was a continuing investigation. Jim Martin, a spokesman for the United States attorney’s office in Rhode Island, said, “We neither confirm or deny the existence of an investigation.”
Web sites are liable for advertising that breaks federal criminal law, according to Eric Goldman, director of the High Tech Law Institute at Santa Clara University.
Google has been trying to clean up ads from so-called rogue pharmacies, which sell counterfeit drugs or do not require valid prescriptions. In the last year, Google has made significant changes to its policies for accepting pharmaceutical ads, most recently in January. But Michael Zwibelman, litigation counsel for Google, has described it as “an ongoing, escalating cat-and-mouse game.”
In February 2010, Google changed its AdWords policy to accept ads only from pharmacies certified by the National Association Boards of Pharmacy in the United States or the Canadian International Pharmacy Association. Previously, Google had accepted ads verified by a company called PharmacyChecker.com.
In September 2010, Google filed a civil lawsuit in federal court against pharmaceutical advertisers that it believed had broken its advertising rules.
“Rogue pharmacies are bad for our users, for legitimate online pharmacies and for the entire e-commerce industry — so we are going to keep investing time and money to stop these kinds of harmful practices,” Mr. Zwibelman wrote in a company blog post at the time.
It is unclear why the investigation and penalty are coming now, after Google’s cleanup efforts.
Google said the $500 million charge reduced its net income last quarter by 22 percent, to $1.8 billion from $2.3 billion. “We believe it will not have a material adverse effect on our business,” the company said in the S.E.C. filing.
The investigation is Google’s latest run-in with regulators, who have also been investigating the company on, and in some cases penalizing it for, antitrust issues and privacy violations.
Gabriel Levitt, vice president of PharmacyChecker.com, said that Google’s measures to crack down on rogue pharmacy ads went too far, preventing people from getting drugs they needed.
But critics of online pharmacies say that Google and other Web sites feed the business.
“It’s very hard to police these sites because they change every couple of days,” said Joseph A. Califano Jr., founder of the National Center on Addiction and Substance Abuse at Columbia University. “The only things that keeps them in business are the Googles of the world.”
The focus of the investigation was first reported by The Wall Street Journal on its Web site.
