Well, that certainly sounds like deceptive advertising, assuming that it can be proven in some way.
As for someone bidding on your trademark for sponsored ads, I don’t think that trademark protection extends to that (at least, I haven’t heard of any major lawsuit involving that yet). And yes, you’re right, they’re extorting you to bid on your own trademark. I read an article related to this, and essentially the strategy is to bid a low amount on your own trademark, just so your competitors can’t bid on it for free. Typically if someone’s searching for your brand name, they’ve already decided to buy your product. So the conversion rate for bids on that keyword is fairly low. This means if they’re paying any substantial cost for those ads it’s going to be a net loser. So what brands do is they’ll bid say, 50 cents on their own brand keywords if the category’s keywords average is $2. What you don’t want is people bidding 2 cents on your brand and getting the exposure because they’re competing against nobody. At a crappy conversion rate, 2 cents is still a great deal, 50 cents, maybe not so much.