Google's online advertising faces U.S. probe

The company has taken a charge of US$500 million in this connection

Google is under investigation by the U.S. Department of Justice in connection with its advertising program, and has set aside US$500 million for a potential resolution, the company said in a regulatory filing on Tuesday.

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As a result of the charge, the company also revised its first-quarter net profit to $1.8 billion from the $2.3 billion it announced last month.

In its quarterly report filed with the U.S. Securities and Exchange Commission, Google said that in May it accrued $500 million for the three-month period ended March 31, 2011 in connection “with a potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers”.

Although it cannot predict the ultimate outcome of the matter, Google said that it believes that it will not have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows.

The company did not explain why the charge had been taken retrospectively on its first quarter accounts. It is also not clear to whom Google would have to make the payment in the event of a resolution.

Google declined to comment, stating that it was a legal matter. The company has updated its first-quarter results press release on its web site, to reflect the new charge.

The investigation by the DOJ is one of many that the company faces around the world. It testified in the U.S. on Tuesday on the issue of mobile privacy before the Senate Judiciary Committee's privacy and technology subcommittee, in the wake of recent reports that Google and Apple have been collecting data about the location of Android and iPhone users without their permission.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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