Google facing $500m settlement over rogue pharmacy ads

Google has set aside a $500m contingency fund to cover a possible settlement in a US federal probe into rogue online pharmacies which peddled their medicines via the search engine giant's paid ad service, according to the Wall Street Journal.

The US Food and Drug Administration (FDA) and Justice Department probe focuses on the sponsored links generated when an Internet user enters a relevant search term. It does not concern 'organic' search results – the main body of results generated over which search engine operators have little control.

The federal investigation has concentrated on whether Google knowingly accepted ads from illegal online pharmacies, says the WSJ report.There is a precedent for liability in cases of advertising of illegal activities. In 2007, for example, Google, Microsoft and Yahoo paid more than $30m to settle allegations they had knowingly accepted ads from illegal gambling sites. 

Google generated nearly $30 billion in total ad revenue in 2010.