Actually, this is not even about distribution exactly, but about the "Report Abuse" button: what this page lists are categories of things that, if someone with access to the file clicks on "Report Abuse", whoever is acting on those flags may decide is a violation. Note that the page says:
> After we are notified of a potential policy violation, we may review the content and take action…
So (1) it's not about Google proactively scanning all your files (even public ones: though I guess with sufficiently public files, sooner or later someone will click on "Report Abuse", perhaps even by accident), and (2) I imagine it could happen with files you shared with just your friend, if your "friend" decides to "Report Abuse".
(Disclaimer: I work at Google but not on Google Drive or anything related to these policies.)
> After we are notified of a potential policy violation, we may review the content and take action…
So (1) it's not about Google proactively scanning all your files (even public ones: though I guess with sufficiently public files, sooner or later someone will click on "Report Abuse", perhaps even by accident), and (2) I imagine it could happen with files you shared with just your friend, if your "friend" decides to "Report Abuse".
(Disclaimer: I work at Google but not on Google Drive or anything related to these policies.)