Reaching an Aug. 24 agreement with the federal government, the world’s largest search engine company turned over $500 million in revenues from its AdWords online advertising business, which accepted the illegal importation of drugs from Canada.
“The Department of Justice will continue to hold accountable companies who in their bid for profits violate federal law and put at risk the health and safety of American consumers,” said Deputy Attorney General James M. Cole, who announced the settlement.
“This settlement ensures that Google will reform its improper advertising practices with regard to these pharmacies while paying one of the largest financial forfeiture penalties in history,” he said. The half-a-billion dollar figure represents the total revenues from the online ads and the sales of the online pharmacies in Canada.
In addition to the fine, Google acknowledged that it cooperated with Canadian online pharmacies that had loose controls to ensure legitimate physician consultations, including many of the fake companies set up by government investigators to sting Google.
On the surface this looks like a pretty hefty fine negotiated by the federal government against a rogue Internet elephant.
Another way to look at it is to see a team effort at work. Team Obama.
You would not think that the American drug industry was friendly with President Barack H. Obama Jr. The drug companies have been one of the more reliable piñatas for the Democrats for years.
You might even remember the 1993-1994 “Harry and Louise” television commercials, funded by the drug companies that helped defeat the Clinton health care reforms. In those days, the drug industry left a mark. It was a mark that Obama remembered when he engineered his own attempt at national health care. He cut a deal with the Pharmaceutical Research and Manufacturers of America (PhRMA).
At a July 7, 2009, summit at the White House, the two sides came together to negotiate a treaty. In the deal, summarized in a leaked memorandum, the PhRMA, promised give-backs and additional fees and charges worth $80 billion, in addition to its pledge to spend $150 million on an advertising campaign in support of the ObamaCare.
For his part, the President promised to forgo overpayments to drug companies in Medicare Part D and oppose the opening of Medicare Part B, matters too complicated to explain here. The administration further promised not to use the federal government’s buying power to bargain for lower prices for the drugs it buys for its own programs.
It is the fourth promise that brings us back to Google. The White House promised to oppose the importation of drugs—especially from Canada.
The Justice Department investigation of Google began in 2003, and in essence despite the law forbidding freelance importation of drugs from Canada, the Menlo Park, Calif.-based company ignored the law-willfully and actively, to the point of having its emplyees call the Canadian online pharmacies to figure out ways to improve results.
That is, the company was breaking a law that candidate Obama promised to change and one that the President directed the Food and Drug Administration to work around in February 2009. In effect the new rules would have legalized what Google was doing—and set the table for the dropping of the Justice Department investigation.
But, what was started in February was overturned by the July 7 treaty, and without a table setting, the investigation dragged on for two more years.
It was a situation made more difficult because of the tens of thousands of dollars Google and its employees give to Obama and various Democratic committees with virtually no donations to Republican committees. In 2010, Google donated $190,000 to the Democratic National Committee, and was the top contributor to 27 individual Democratic Senate and House candidates, compared with 15 Republicans.
Most awkward. Google, a very heavy contributor to the President and his party, was stuck in a Bush-era Justice Department probe into behavior the President and his party were committed to decriminalize until it neutralized and co-opted PhRMA, removing a major roadblock to federal health care reform.
In Chicago, what do you do when you’re stuck? Cut a deal.
Thus ends an eight-year, nine-agency investigation with a refund. Not with treble damages. Not with punitive damages, but with the forfeiture to the government of ad and sale revenues from the Canadian online drug sales.
What kind of mark will the fine leave?
The Obama administration fined Dell Computer $100 million in 2009 for lying about its payments from Intel, roughly 10% of its annual profits.
It will take Google two weeks’ profit to cover its $500 million forfeiture to the federal treasury.