Utah, whose legislature previously attempted to restrict the use of spyware, unanimously passed a law which would lead to the creation of "electronic trademarks".
It will, under the new regulations, become illegal for search engines to display the advertisements of rival companies alongside search results for an electronically trademarked company name.
Utah senate house majority leader David Clark claimed that the law was simply an attempt to tame the "wild west" atmosphere of the internet.
Mr Clark likened keyword advertising to accosting customers at the entryway to a rival store.
"You get right to the front door and somebody whisks you away to a different store," Clark said.
Google is considering a legal challenge to the law and consumer groups are also protesting.
Corynne McSherry, an attorney for the public-interest group Electronic Frontier Foundation said that the law "isn't just harmful to Google".
It is also, according to Ms McSherry, "harmful to consumers who benefit from comparative advertising".
Google doesn't only benefit from generating vast advertising revenue but also invests in traffic acquisition itself, spending $976 million during the last quarter of 2006 alone.
