Google pays $500m forfeit following US investigation into its advertising of illicit drugs

The search engine giant allowed Canadian pharmacy advertisers to market their products at US consumers using the company's AdWords advertising programme, the DOJ said. Google's AdWords system operates by allowing companies to buy the right for their ads to appear beside the natural results when certain terms are searched for.

US laws state that generally it is illegal for foreign pharmacies to import controlled and non-controlled prescription drugs into the US, according to the DOJ. It said that those laws exist because public health officials were not able to verify whether foreign imported drugs were safe for US consumers to use.

Between 2003 and 2009 the search engine giant gave the Canadian online pharmacies "customer support" which enabled them to optimise their use of AdWords and make improvements to "effectiveness of their websites", the DOJ said.

The DOJ said Google accepted that it was wrong to help Canadian drugs companies advertise their drugs.

"Under the terms of an agreement signed by Google and the government, Google acknowledges that it improperly assisted Canadian online pharmacy advertisers to run advertisements that targeted the United States through AdWords, and the company accepts responsibility for this conduct," a DOJ statement said.

"In addition to requiring Google to forfeit $500 million, the agreement also sets forth a number of compliance and reporting measures which must be taken by Google in order to insure that the conduct described in the agreement does not occur in the future," the statement said.

"The forfeiture, one of the largest ever in the United States, represents the gross revenue received by Google as a result of Canadian pharmacies advertising through Google’s AdWords program, plus gross revenue made by Canadian pharmacies from their sales to U.S. consumers," the statement said.

The Food and Drug Administration is responsible for approving drugs for use by consumers in the US. It governs strict rules, including on the labelling of drugs, the conditions in which drugs are manufactured, stored and distributed and insists on drugs being dispensed with a valid prescription, the DOJ said. It said prescription drugs from Canada could not be verified as being safe for US consumers.

"While Canada has its own regulatory rules for prescription drugs, Canadian pharmacies that ship prescription drugs to U.S. residents are not subject to Canadian regulatory authority, and many sell drugs obtained from countries other than Canada which lack adequate pharmacy regulations," the DOJ said.

An investigation by US prosecutors revealed that Google had been "on notice" that online Canadian pharmacies were advertising prescription drugs through AdWords since "as early as 2003", the DOJ said.

Upon hearing of the investigation Google introduced measures to "prevent the unlawful sale of prescription drugs by online pharmacies to US consumers", it said. The measures included requiring the pharmacies to be certified through a program run by an independent public health regulator before they could advertise with the company, but the regulator "does not certify Canadian online pharmacies", the DOJ said.

“This investigation is about the patently unsafe, unlawful, importation of prescription drugs by Canadian on-line pharmacies, with Google’s knowledge and assistance, into the United States, directly to U.S. consumers,” Peter Neronha, a US prosecutor, said in the DOJ statement.

“It is about taking a significant step forward in limiting the ability of rogue on-line pharmacies from reaching U.S. consumers, by compelling Google to change its behaviour.   It is about holding Google responsible for its conduct by imposing a $500 million forfeiture, the kind of forfeiture that will not only get Google’s attention, but the attention of all those who contribute to America’s pill problem,” Neronha said.

The case shows that the operation of Google AdWords is "as controversial as ever", an intellectual property (IP) law expert said.

"Trade mark owners struggle with the fact that Google allows other companies to ‘buy’ their trade marks and the law remains uncertain with regards to the legality of this practice," Iain Connor, IP law expert at Pinsent Masons, the law firm behind OUT-LAW said. 

"When the AdWords programme steps over the line into areas of regulated activity, like the sale of pharmaceuticals, Governments will not allow Google to be used as a conduit for unlawful activity,” Connor said.

Google's AdWords has proved controversial, particularly in France, where courts have ruled that Google cannot sell the right for companies to buy the right for their ads to appear when a rival's trade mark is searched for.

In 2010 the European Court of Justice ruled that Google's AdWords system does not violate the trade mark rights of a brand owner when its trade marks are used by another to trigger adverts. It said, though, that the advertiser does infringe trade mark rights in some cases and that trade mark owners can demand that Google stop the use of its trade marks, and that Google will be liable for that infringement if it does not act quickly to stop that use.