AussieWebmaster asks Why Can't You OutBid Urchin & Other Google House Ads? He reports that "Web Side Story claims to have even tried $100 bid and no go...." AdWordsRep responds that she (I think a she) will look into this, but she says that "'house ads' are well outside of my ordinary realm. I'm not even aware of who places the ads and looks after the account." Mikkel, of course, adds a valid point.
They could be bidding $10,000 or more - after all, if they limit distribution to their own sites they'll get every cent back.