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FAQ: How will the Google settlement affect Internet advertising laws?

Google has agreed to a $500 million settlement for illegally assisting online pharmacies via its AdWords program. Here's why the Google settlement could have wider ramifications.

In August , Google Inc. agreed to pay the U.S. government $500 million to settle charges that it assisted online Canadian pharmacies in targeting U.S. consumers via its AdWords program. The charges came after an investigation found that Google knew importing prescription drugs into the United States is almost always illegal.

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The $500 million forfeiture was trumpeted by the government as one of the largest ever. Some legal experts have suggested that the Google settlement demonstrates a growing effort by the United States to regulate the Internet, and question how it will affect online business.

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Why did Google agree to pay the U.S. government $500 million due to ads by online Canadian pharmacies?

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Google signed a nonprosecution agreement with the U.S. Department of Justice (DOJ) on Aug. 19 to settle charges that it knowingly accepted ads from Internet-based Canadian pharmacies that were in violation of U.S. bans on importing prescription drugs. The charges stemmed from an investigation conducted by the U.S. Food and Drug Administration and the Rhode Island U.S. Attorney’s Office. The government charged that as a result of the pharmacies’ ads, drugs such as Oxycontin and Ritalin were illegally imported into the United States.

The shipment of prescription drugs from pharmacies outside the United States to U.S. customers typically violates the Federal Food, Drug and Cosmetic Act and, in the case of controlled prescription drugs, the Controlled Substances Act, according to the DOJ.

" Google Reaches $500 Million Settlement With Government,” The New York Times

Did Google break any laws in this case?

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In its nonprosecution agreement with the DOJ, Google acknowledged that it “improperly assisted” the online Canadian pharmacies in targeting U.S. consumers via the AdWords program. The investigation by the U.S. Attorney’s Office in Rhode Island and the FDA found that as early as 2003, Google was on notice that online Canadian pharmacies were advertising prescription drugs to U.S.-based Google users through AdWords. The investigation found that also as early as 2003, Google was aware that it’s generally illegal for pharmacies to ship controlled and noncontrolled prescription drugs into the United States from Canada.

The government had charged Google with violating federal law 21 U.S.C. § 331(a), which prevents the “introduction or delivery for introduction into interstate commerce of any food, drug, device, or cosmetic that is adulterated or misbranded.” (The drugs are considered “misbranded” because they had not been approved by the Food and Drug Administration.)

Google was not involved in actually introducing or delivering prescription drugs into the United States, but the government’s case positioned the company as an accomplice, of sorts. The company had taken steps to prevent other foreign pharmacies from using the AdWords program, but it didn’t take the same steps against the Canadian pharmacies. In fact, it acknowledged that it provided customer support to some of the Canadian advertisers by helping them place and optimize their advertisements.

" Canadian Pharmacy Advocacy Group Weighs in on Google’s $500 Million Forfeiture to DOJ,”

How was the amount of the forfeiture determined, and what other provisions were included in Google’s agreement with the Department of Justice?

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The $500 million forfeiture that Google agreed to pay the U.S. government represents the estimated combined total revenue Google’s AdWords program received from the online Canadian pharmacies and the revenue the pharmacies acquired from U.S. consumer sales. The DOJ trumpeted the forfeiture as one of the largest ever handed over in the United States.

The nonprosecution agreement also requires Google to submit a report detailing its compliance efforts every three months for two years to ensure that the conduct leading to the agreement does not occur in the future.

Learn more about Google’s nonprosecution agreement with the DOJ by reading the entire document.

What is the settlement's potential impact on Internet regulations?

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In announcing the Google settlement, the government touted the $500 million forfeiture’s expected impact on online pharmacy advertising. “The result of this investigation has been a fundamental transformation of Internet pharmacy advertising practices, significantly limiting promotion to U.S. consumers by rogue online pharmacies,” Kathleen Martin-Weis, acting director of the FDA’s Office of Criminal Investigations, said in a statement.

Legal experts have questioned whether the Justice Department took a particularly aggressive stance in viewing Google as an accomplice in the illegal import of prescription drugs. Peter J. Hennings, a professor at Wayne State University Law School, has noted that even if a defendant has been shown to have provided assistance in a crime, the prosecution must demonstrate that the defendant was aware of the intention to commit the crime and provided assistance in actually completing it.

The settlement “reflected an effort by prosecutors to extend the reach of federal drug laws,” Hennings wrote in an article published by The New York Times. “The fact that the case was resolved by a nonprosecution agreement can be seen as an indication that the Justice Department understood its position on accomplice liability could be open to challenge if criminal charges were filed in court.”

How will the Google settlement affect online business?

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Other legal experts have suggested that the Google settlement is an example of the United States getting U.S. companies involved in efforts to regulate the Internet. “They’re going out of their way to cut off these bad actors internationally and enlisting U.S. enterprises to help them in that fight,” Eric Goldman, director of the High Tech Law Institute at Santa Clara University, told The New York Times.

There are also concerns that the heavy forfeiture could affect other search engine businesses. “The Internet allows messages to be better focused on particular groups of potential customers. With that ability comes the growing possibility that the Justice Department will view search engines as more than mere passive conduits of information, and instead as potentially active participants in conduct that may violate the law,” Hennings cautioned in his article.

" Behind Google’s $500 Million Settlement With U.S.,” DealBook, The New York Times

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