Google will pay $500 million to the federal government for allowing ads from Canadian pharmacies to be displayed through its AdWords program, the Department of Justice announced today.

The ads made it easy for US residents to order controlled and non-controlled prescription drugs from Canada, which is illegal. The $500 million fine takes into account the gross revenue Google received through running ads from Canadian pharmacies, as well as the gross revenue made by those pharmacies from sales to the US.

As I wrote back in May, when inklings of the settlement were first reported, the half a billion dollar fine would be among the largest paid to the government to settle investigations. It’s a sign that Google is willing to pay whatever it takes to make this investigation go away. And it’s a wakeup call to the company, which generated nearly $30 billion in ad revenue last year, that it needs to be particularly careful with the ads it accepts.

The DOJ notes that Google was aware since 2003 that it was illegal for pharmacies to ship prescription drugs into the country. Even more damning, Google offered customer service to the pharmacies between 2003 and 2009 to make their ads more effective.

Once the company was aware of the investigation, led by the U.S. Attorney’s Office in Rhode Island and the FDA, it took steps to prevent prescription drug sales via its ads. The company began requiring pharmacy advertisers to be certified by the National Association of Boards of Pharmacy’s Verified Internet Pharmacy Practices Sites program, which the DOJ says has strict standards against selling drugs via online consultations, but which doesn’t certify Canadian online pharmacies.

In a statement to the New York Times today, Google said, “We banned the advertising of prescription drugs in the U.S. by Canadian pharmacies some time ago. However, it’s obvious with hindsight that we shouldn’t have allowed these ads on Google in the first place. Given the extensive coverage this settlement has already received, we won’t be commenting further.”

The DOJ also revealed that its investigation into Google started from an unlikely source: “[It] had its origins in a separate, multimillion dollar financial fraud investigation unrelated to Google, the main target of which fled to Mexico,” the agency wrote in today’s announcement. “While a fugitive, he began to advertise the unlawful sale of drugs through Google’s AdWords program. After being apprehended in Mexico and returned to the United States by the U.S. Secret Service, he began cooperating with law enforcement and provided information about his use of the AdWords program.”

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