Google's search business was once considered a monopoly. Now its advertising business is on trial

(CNN) – Google suffered what may be its biggest court defeat in the company's history this summer when a federal judge deemed its flagship search engine a illegal monopoly siding with state and federal officials.

Now, the Justice Department is hoping to reap a double benefit when it goes to trial against Google once again this week — this time, in a separate antitrust case that could potentially reshape some of the most basic economics of running a website.

The highly anticipated showdown beginning Monday will pit the U.S. government and more than a dozen states against each other in a challenge to another major source of Google's economic power: its massive advertising business.

Specifically, the high-stakes legal battle centers on the $31 billion part of Google’s advertising business, which connects website publishers with advertisers and determines which banner ads appear on countless sites across the web. When an Internet user visits a publisher’s website, for example, it is often Google working behind the scenes as the page loads. The company conducts billions of real-time auctions a day, in fractions of a second, to determine which ads to show where.

Google’s search engine may have been the revolutionary app that made it a daily destination for millions of consumers, but it was the company’s advertising technology that helped Google monetize much of the rest of the web — and Google took illegal steps to thwart competition in that space, according to states and the Justice Department.

The governments allege that Google raised prices for advertisers and reduced revenues for websites either by absorbing its ad tech rivals through anti-competitive mergers, by intimidating companies into using Google's advertising products, or by controlling key companies in every part of the advertising supply chain.

The complaint even names the U.S. military as one of the advertisers allegedly harmed by Google's practices. The U.S. government has spent $100 million since 2019 buying ads on the internet, according to the suit.

Authorities have called for dismantling Google's alleged monopoly on advertising technology (which is distinct from the search or search ad business).

It is the second of two challenges the Justice Department has brought to Google’s power since the Trump administration, and the latest test of the United States’ renewed commitment to enforcing the country’s competition laws. But for Google, which has denied monopolizing the ad tech industry, the case is an attack on what it says are essential tools for small businesses and publishers.

Google described the online advertising industry as vibrant and competitive, calling it Government lawsuit filed last year as a misguided attempt to pick winners and losers.

In its court filings, Google argued that the Justice Department’s lawsuit focuses too much on advertising on websites. Google competes with hundreds of companies that offer their own ad exchanges or ad tech tools, including Amazon, Meta, Microsoft and TikTok, to name a few, according to its filings. Advertisers can choose whether to use Google’s tools or rival tools, or even shift ad spending away from websites and onto other formats and platforms that don’t involve Google’s ad tech, such as Instagram or Netflix.

“As applications become more important for digital content providers,” Google wrote in a pre-trial filing “the amount of inventory they sell through apps and the spending on advertising technology to manage that inventory increases.”

Both sides are scheduled to make opening statements Monday before U.S. District Judge Leonie Brinkema of the U.S. District Court for the Eastern District of Virginia. Brinkema, a Clinton appointee, is a former Justice Department attorney who, as a judge, has also presided over numerous cases involving terrorism and immigration.

The trial, which is expected to last several weeks, could include testimony from prominent Google partners as well as its critics. The list of potential witnesses includes current or former executives from Comcast, Disney, Gannett, The New York Times and Meta, along with some high-ranking Google employees, such as YouTube CEO Neal Mohan.

In an Alexandria courtroom across the Potomac River from the U.S. Capitol, government lawyers are expected to argue that, among other things, Google’s control of technologies that serve advertisers and publishers, coupled with an advertising exchange where advertising bids occur, create conflicts that encourage Google to trade on its own interests.

“In effect, Google positioned itself to function simultaneously as a buyer, seller and auctioneer of digital display advertising,” the company said. 2023 demand.

That deal has hurt publishers and advertisers to the tune of hundreds of millions of dollars in additional fees since 2019, according to estimates contained in a pre-trial filing by the Justice Department.

Google, for its part, has argued in its filings that the price of advertising continues to fall across the industry and that its own market share in the display advertising market has been “steadily declining since 2013.”

It's unclear what specific penalties Google might face if Brinkema ultimately reaches a settlement with the Justice Department. The trial that begins Monday is just the first step toward determining whether Google violated the law. Still, a split of Google's advertising technology business could trigger a restructuring of the digital advertising industry and Google's role in it.

The US government believes a breakup would create new or different financial incentives for everyone in the market, but Google has argued that it could instead hurt smaller websites that rely on its tools or simply benefit other established giants in the digital advertising industry.