"If these initial measures do not produce the desired outcome, we are prepared to take further action with Google."
But technology commentator Paul Brislen said the web giant has no incentive to proactively crack down on the rule-breakers.
"I think what's happening here is that Google is quite happy to continue doing this so long as no one complains and they continue making money."
Brislen said it was baffling the web giant was unable to keep on top of dodgy ads on its own platform.
"I suspect there's actually quite a bit they could do, but it would cost them money."
He said it was not the only instance of third parties using ads to pip official sites in the search results.
"Government has a role to ensure we have access to real information and real services. I think it's high time they stepped up and told Google it's not acceptable it makes money from this."
After our enquiries Google has taken action to remove the ad.
It said in a statement: "We have strict policies that govern the kinds of ads we allow on our platform, and ads that intend to mislead or deceive users, are a violation of those policies. In this instance, we found that the ad violates our policy and we have removed it."