The mercury found in Merthiolate and Mercurochrome is toxic to both people and the environment. MedlinePlus says that mercury-containing Merthiolate can cause poisoning if applied to the body in small amounts for a long period of time. Mercurochrome was originally allowed for sale over-the-counter because it pre-dated the FDA, says Cecil Adams.
MedlinePlus says that Merthiolate in over-the-counter products was banned by the Food and Drug Agency (FDA) in the late 1990s. Cecil Adams on The Straight Dope says that Mercurochrome was banned from being sold over-the-counter in 1998 by the FDA.
Due to some reports of mercury poisoning related to the use of Mercurochrome, the FDA re-classified it as a drug in 1998, meaning that someone has to prove it is safe for use before it can be sold again. As of 2014, no one has tried to do so.