I don't think Google discourages this in any major capacity. I will say that Grubhub and DoorDash certainly have an ethical quandary. It certainly doesn't look good from a PR standpoint but I imagine it's a common practice.
Not a case that Google does but for Apple's App store ad system. I've worked at Lyft and I know years ago the top ad for searching Lyft was Uber and vice versa in the app store. Both companies would pay for advertisements against the other. But it was cheaper to trade jabs than defend your search term.
I still think that buying an ad against a competitor's brand in search (Uber buying an ad to show when user searches for Lyft and vice versa) is very different from the behavior shown in the article where the advertiser is literally using the restaurant's name in the ad itself to try to convince the user that the advertiser is the restaurant.
On one hand, you can do the responsible thing and link the user to what they wanted. On the other hand, you could make money. This is an unsolvable ethical problem.
Not a case that Google does but for Apple's App store ad system. I've worked at Lyft and I know years ago the top ad for searching Lyft was Uber and vice versa in the app store. Both companies would pay for advertisements against the other. But it was cheaper to trade jabs than defend your search term.