The Steep Cost of Google's Illegal Pharmacy Ads

$500 million isn't all the company's giving up

In one of the largest forfeitures in U.S. history, Google agreed to pay $500 million to settle a dispute with the Justice Department Wednesday for displaying ads for Canadian companies that sell illegal pharmaceuticals in the U.S. As CNET's Jay Greene explains, the settlement "covers the gross revenue received by Google as a result of Canadian pharmacies advertising through Google's AdWords program, and the gross revenue made by those pharmacies from their sales to U.S. consumers." Here's why the settlement is about more than just the money:

The cash itself  Ryan Singel at Wired notes that the $500 million price tag represents over 20 percent of the company's profits from the first quarter of this year. Still, the settlement won't come as a huge surprise to investors. "The announcement was widely expected as Google mentioned in an SEC filing in May it was setting aside half a billion to pay a fine."

It's a blow to Google's reputation, writes Frank Reed at Marketing Pilgrim: "This kind of business activity isn’t anything that a company with any morals or ethics should be engaging in especially since it was quite obvious that this was on the wrong side of the law... Google takes a huge black eye on this one and sets the table for some serious doubt as to just how upstanding they are as a corporate citizen as they are being more heavily scrutinized by federal regulators."

Other parts of its business will be affected, writes Sarah Perez at TechCrunch:

Obviously, such a decision has far-reaching consequences beyond those of just the illegal pharmacies, as Google faces threats from a number of illegal and malicious entities who want to leverage its search engine to expose unsuspecting users to their ads. Traditionally, Google itself has filed lawsuits against advertisers it suspected of breaking its rules, but this has clearly not been enough of a deterrent.

Other penalties  ZDNet's Larry Dignan notes the non-monetary penalties: "Under the settlement agreement, Google acknowledges that it assisted Canadian online pharmacies and is responsible for its conduct. Google will also submit to 'compliance and reporting measures' to ensure that it is keeping up with what is required by the DOJ."

But wait! It's not Google's fault!  Playing apologist for the search giant, Kwame Opam at Gizmodo says Google shouldn't bear all the responsibility. "They were more of an unwilling patsy. In truth, Google's has tried to root out advertising scammers for some time, making new rules and even taking some to court. But, as Google complained, such companies, illegal pharmacies included, often find ways to get around Google's policies. Hence the present investigation and expected settlement."