They have been doing this for a while. Look at the "safe browsing" stuff... Google will blacklist your website if it doesn't like the ads you're showing. That blacklist is used by firefox, chrome, safari. Your website will then just show a "safe browsing" blocked error.
massive abuse of power. It's amazing that the company that controls most internet advertising, also controls which websites are blacklisted by the vast majority of browsers.
Not using adsense? Maybe we blacklist that website until they use adsense! :)
And the biggest problem is, there is no oversight, or communication or recourse. If your website gets blocked, you won't know why, and will just have to click a "reconsider" button to ask Google to see if it's acceptable now.
And the conflict of interest is possibly anti-trust level. (IANAL)
A company that gets the majority of their revenue from ads is penalizing sites in their near-monopoly search results for showing the "wrong" ads.