Search Engine Heavies Pay Up to Settle Gambling Ad Prosecutions

  |  December 20, 2007   |  Comments

Microsoft, Yahoo, and Google will pay millions to settle federal claims.

Only Microsoft, Google, and Yahoo know how much money they lost in the years since they stopped accepting ads promoting online gambling sites. But the price of getting the U.S. government off their backs for the practice was announced today: $31.5 million.

Google might be the big boy of search and search advertising, but it was Microsoft that agreed to pay the most to resolve claims it promoted illegal gambling by running the ads. U.S. Attorney Catherine Hanaway said Microsoft will pay $21 million, including a $7.5 million contribution to the International Centre for Missing and Exploited Children (ICMEC).

Additionally, Microsoft agreed to create a $9 million online, public service advertising campaign "to inform and educate a target audience comprised of college level or younger people that online gambling enterprises are illegal under U.S. law," said a statement announcing the settlements. According to Hanaway, the educational advertising campaign will begin early next year and run for three years.

She noted that Microsoft neither contests nor admits it was involved in an illegal activity, but the settlement resolves government accusations that from 1997 to June 2007, the company was paid from online gambling companies for advertisements it published.

In agreeing to pay $7.5 million, Yahoo also neither admits to nor contests the government's claim it accepted ad payments for online gambling between 1997 and now. "The company has now forfeited $3 million directly to the United States," Hanaway's statement said.

Yahoo agreed to provide $4.5 million worth of online advertising, which according to Hanaway is valued at $1.5 million per year for three consecutive years, for a public service advertising campaign. The campaign, to begin next month, "will be designed to inform and educate users that operators and participants in online or telephonic sports bookmaking and casino-type gambling activities doing business in the United States may be subject to arrest and prosecution," according to the statement.

Google got off with the lightest penalty. It will settle its case -- neither admitting nor denying wrongdoing -- for the comparatively paltry sum of $3 million, an amount the Associated Press calculated to be about a half-day's profit for the behemoth.

Altogether, the settlements total $31.5 million, and they put an end to the government's pursuit of claims that Google, Microsoft, and Yahoo violated the Federal Wire Wager Act, federal gambling excise tax laws, some state statutes, and even some municipal ordinances outlawing gambling.

"Unregulated gambling is illegal throughout the United States," reminded Hanaway in the statement.

She noted the search engine settlements aren't the only money the U.S. government got for its effort to snuff out online gambling and online gaming advertising. "These sums add to the over $40 million in forfeitures and back taxes this office has already recovered in recent years from operators of these remote-control illegal gambling enterprises," said Hanaway. "Honest taxpayers and gambling industry personnel who do follow the law suffer from those who promote illegal online behavior."

Legislation passed in 2006 that outlaws U.S. Web gambling transactions threw a wet blanket on a booming online ad industry driven largely by affiliate marketing.

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