Here is a NY Times article on paid search. From the lead paragraph:
” . . . reputable advertisers increasingly find themselves outbid for top search listings by unscrupulous and perhaps fraudulent e-tailers.”
Example. If you Google “Sony Handycam DCR-TRV27″ today then you will get Broadway Photo as the top paid hit. The article lists various allegations against this site (bait and switch, etc.).
I’m not sure whether the fact that this is occuring on paid search is all that relevant. Something equivalent occurs if the “bad” retailer catches your eye with a huge Sony Handycam ad in a newspaper.
Of interest is the debate as to whether the search engines such as Google or Overture should do anything about this.