Does he still get charged each time someone clicks on his AD?
If so, I guess it's pretty dumb to have an AD running that doesn't work.
If he isn't getting charged, it would really anger me since his #2 AD is forcing my #1 AD to cost more.
Anyone know how Google deals with this?
When you click on ad, Google ads the click to a database and redirects you to the site advertised, thats all.
I've run into server issues before that have coincided with launching a new campaign.
Clicks were counted/charged before problem was resolved. I'm pretty sure Moltar is correct in that Google would have to check the pages beforehand... which shouldn't be their responsibility.
Quoting from the Editorial Guidelines, here are details regarding AdWords policy for Destination URLs:
* Your Destination URL must work properly. Check your spelling and symbols to make sure you entered the correct URL for the page you want users to visit.
* Your Destination URL must link to a working website. You cannot link to an email address or a file (ex. an image, audio, video, or document file).
* The landing page for your ad cannot be under construction. We require your Destination URL to link to an actual web page with content relevant to your ad. When your site is under construction or down for maintenance, you must pause your Ad Group(s).
Essentially, it is the advertiser's responsibility to submit a correct/functional URL. And yes, the advertiser is responsible for the clicks accrued when they have submitted a URL that is not working, or which leads to a site that is not functional.
However, when an ad is reviewed both the URL and site are checked. If either is not working, the ad will be disapproved. This is to protect the advertiser from additional expense, and also to protect Google users from having the not-so-great experience of clicking on an ad that leads to a 'broken' page.