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Google Put Aside $500 Million for Drug Ads

The Department of Justice (DOJ) has been investigating Google for making millions off ads from illegal online pharmacies.

The resolution could cost Google $500 million according to a SEC filing earlier this week. The filing said:

"In May 2011, in connection with a potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers, we accrued $500 million for the three month period ended March 31, 2011. Although we cannot predict the ultimate outcome of this matter, we believe it will not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows."

According to the Wall Street Journal, it is the U.S. Attorney Office in Rhode Island, the Food and Drug Administration and other agencies who are conducting the ongoing investigation. The pharmacies were apparently based in "Canada and elsewhere." When contacted, none of the agencies would comment because of the ongoing investigation.

Back in 2007, Google settled civil allegations for £3 million after the government cracked down on them for accepting ads from illegal online gambling sites.

The current investigation dates back to early 2010, when Google updated their AdWords policy. They decided to "only accept ads from pharmacies accredited by the National Association Boards of Pharmacy VIPPS program, and from online pharmacies in Canada that are accredited by the Canadian International Pharmacy Association (CIPA). Pharmacies will be restricted to advertising to consumers in their country. U.S. pharmacies can only advertise to U.S consumers and Canada to Canadian consumers."

The $500 million charge lowered Google's Q1 2011 net income to $1.8 billion from the $2.3 billion reported on April 14.

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