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Google gets a wake-up call on questionable ads

By D.C. Denison
Globe Staff / August 29, 2011

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Search for “ringtones’’ on Google, and you’ll get a few hundred million results - and about 10 small ads on the first page you see, including one that promises “Get Free Unlimited Ringtones Here. No Catch. No Hidden Charges or Fees.’’

But click on the ad, and it’s unlikely that you will find the ringtones that are free. Instead, all the colorful, blinking, compelling graphics lead you down slippery paths that quickly commit you to plans that charge your phone bill or credit card.

Does such online sleight of hand constitute illegal deception on the part of the advertiser, or Google Inc., which places such ads on websites? Or both?

Google, based in Mountain View, Calif., but also with operations in Cambridge, was compelled to address that issue in last week’s settlement with the US Department of Justice.

The Internet search giant agreed to pay $500 million to the federal government and admit the company’s ad service helped online pharmacies illegally sell prescription drugs to US consumers.

Google pulled down the ads for Canadian drugs after learning of the Justice Department investigation, but the settlement, one of the largest of its kind in US history, opened the door for more investigations into the role it plays in publishing questionable advertisements.

“Many state attorneys general are probably now looking at Google very closely, wondering whether there are deceptive ads worth investigating and prosecuting,’’ said Ben Edelman, assistant professor at Harvard Business School and a consultant on Web advertising fraud. “Google could be sitting on billions of dollars of ill-gotten gains.’’

While Google has admitted that it was in the wrong to run the Canadian pharmacy ads (“It’s obvious with hindsight that we shouldn’t have allowed these ads on Google,’’ the company said in a prepared statement), it insists that it is aggressively policing the ads that currently run on its service.

“Google has a natural long-term financial incentive to make sure that the advertisements we serve are trustworthy, so that users continue to use our services,’’ spokeswoman Diana Adair said last week. “And we aren’t afraid to take aggressive action to achieve that goal.’’

Yet some Google critics say that may no longer be enough.

“There has been this imaginary line that Internet companies aren’t responsible for what people do on their applications,’’ said Scott Cleland, author of “Search & Destroy,’’ a book critical of Google. “But that didn’t apply in the Canadian pharmacy case. Instead, you had one of the largest brands in the world admitting to felonies and paying a half-billion-dollar fine for restitution.’’

Prior to the settlement, Google had successfully defended its role in the courts. In one frequently cited 2009 case, a woman alleged that she was harmed by Google because she clicked on allegedly fraudulent advertisements for mobile subscription services.

The ads were placed through Google’s online advertising service.

A federal court in California dismissed the complaint, citing a law known as the Communications Decency Act, which includes a clause stating that a website cannot be held responsible for third-party content such as ads.

Eric Goldman, an associate professor of law at Santa Clara University School of Law and director of the school’s High Tech Law Institute, said that with the notable exception of federal criminal prosecutions, the act will in most cases protect services like Google from being liable for third-party ads.

“The CDA has been tested many times unsuccessfully, and it will likely continue to be tested,’’ Goldman said. “Most of those cases will be thrown out as not meritorious. But that will not stop people from filing them.’’

The Communications Decency Act didn’t apply in the Canadian pharmacy case, because it is a federal crime to import illegal pharmaceuticals. Today, Google accepts ads for prescription drugs only from companies certified by the National Association of Boards of Pharmacy, and bars any ads from Canadian pharmacies.

But Harvard’s Edelman said he believes that many of Google’s other advertisers still “push and exceed the limits of ethical and legal advertising.’’

On his website, he flags six categories of Google ads that he says are unlawful: advertisements charging for something that is actually free; advertisements promising a free service but imposing a charge; advertisements offering tools for copyright-infringing audio and video downloads; advertisements touting counterfeit software; advertisements for programs that bundle spyware/adware with advertised software downloads; and deceptive mortgage modification offers.

Adair, the Google spokeswoman, declined to comment on the types of ads cited by Edelman, referring to a statement that said the firm “has strict policies covering the content of AdWords ads [the kind of ads that appear on Google’s search results pages], as well as the sites these ads take users to once they click. These policies and guidelines are enforced by both automated systems and actual human beings.’’

Edgar Dworsky, a former Massachusetts assistant attorney general who now runs the consumer education website Consumerworld.org, said he thinks future cases “will turn on whether Google knew of the falsity or misleading nature of the advertisement when it advertised it on its site.’’

But Edelman thinks the search giant is still vulnerable. Google is “still running various ads that are deceptive, and, I’m confident, unlawful,’’ he said last week.

D.C. Denison can be reached at denison@globe.com.