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Four Key Things Google Admitted to the Feds

In one of the largest settlements of its kind in U.S. history, Google agreed last week to pay the U.S. government half a billion dollars for allowing its advertising system to be abused by Canadian Internet prescription drug peddlers illegally importing their wares into the country. The size of the settlement wasn't the only eye-opener in the case. The settlement agreement contained some surprises, too, especially in some admissions made by the company whose motto is "Do no evil." Here are four of them.

1. Google knew Canadian pharmacies using its AdSense advertising platform were illegally selling prescription drugs to U.S. consumers and improperly assisted the drug peddlers in doing it .

AdSense is a major money-maker for Google. It displays sponsored advertising in response to queries from users of Google's search engine. Advertisers pay the company for their ads. In addition, the advertisers can target their ads based on the geographic location of a searcher.

As early as 2003, the settlement noted, Google allowed Canadian pharmacies to advertise through its AdSense program and target U.S. customers while blocking advertising from other nations, yet it "was aware that in most circumstances it was illegal for pharmacies to ship controlled and non-controlled prescription drugs into the United States from Canada."

2. Although Google knew the Canadian pharmacies were illegally selling drugs to Americans, the settlement revealed that Google "provided customer support to some of these Canadian online pharmacy advertisers to assist them in placing and optimizing their AdWords advertisements and in improving the effectiveness of their websites."

3. When Google did take action against online pharmacies selling prescription drugs to U.S. buyers, it ignored the fact that the system was being beaten by some pharmacies.

What the pharmacies would do is set up their AdSense accounts to geo-target audiences outside the United States. Once they were accepted into the program, though, they'd change their geo-targeting preferences to include the United States. "Although the Company was on notice that some online pharmacies changed their geo-targeting in this manner, the Company did not prevent these changes in geo-targeting until it became aware of the Government's investigation," the settlement says.

4. Google was aware that online pharmacies were exploiting the company's keyword system to end-run its pharmacy certification program but dragged its feet in cracking down on those exploiters.

Under Google's pharmacy certification program, if a company used pharmaceutical terms in their ads, they might be flagged for review by Google. What the pharmacies discovered was that they could skirt that process by avoiding pharmaceutical terms in their ads and just buying drug keywords.

Keywords are purchased by advertisers from Google. They trigger what ads will appear on a page of search results.

Although Google was notified of the keyword practice, it didn't do anything about it until "it became aware of the Government's investigation," according to the settlement agreement (PDF).

Through the years, Google has always tried to portray itself as something more than a money-grubbing corporation motivated by profit. These admissions suggest that when it comes to optimizing revenues, Google, too, can act like the corporations it haughtily set itself apart from in the past. That will be a liability for Google in the future, according to Harvard Business School Assistant Professor of Business Administration Benjamin G. Edelman.

"Previously, when Google argued that it was difficult to find bad ads, trademark-infringing domains, or copyrighted content, the world could only wonder what made these tasks so difficult for Google," he wrote for Betanews. "Now we know: at least sometimes, Google's difficulties were a farce; behind the scenes, Google employees were encouraging and supporting the very unlawful conduct they claimed to oppose."

Follow freelance technology writer John P. Mello Jr. and Today@PCWorld on Twitter.

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