Lobbying muscle may help tech titans trump Trump

Introduction

The conventional wisdom in the nation’s capital is that President-elect Donald Trump is bad news for Silicon Valley technology giants and their policy agendas. And it’s easy to see why that’s the script.

Throughout his campaign, Trump teed off on internet companies. He theorized that Amazon.com founder Jeff Bezos bought The Washington Post in 2013 to influence federal policies and warned the largest online commerce retailer it would “have … problems” if he became president. Trump ridiculed Facebook Inc. founder Mark Zuckerberg’s pro-immigration stance. And Trump charged Google Inc. with favoring Hillary Clinton by prioritizing positive news stories about her in search results.

Even Trump’s invitation to tech’s biggest executives to meet him in New York this week could result in a frosty encounter.

But dig a little deeper and a more complex tale emerges. In recent years, internet firms and their trade associations have spent lavishly to become some of the most powerful influencers in Washington, shaping a range of policies that extend from immigration to privacy to taxes. And that may be difficult to change. Companies such as Alphabet Inc. (Google’s parent), Facebook Inc., Amazon.com Inc., and their trade groups such as the Internet Association spent $50.9 million on lobbying in 2015, more than four times what they spent in 2009, according to data compiled by the Center for Responsive Politics and the Center for Public Integrity. Campaign contributions from these technology companies, many less than 10 years old, quintupled between 2009 and 2016.

The investments reflect lessons sometimes painfully learned. Just a few years ago, America’s technology companies held a bemused disdain for Washington, which they saw as an anachronism in the emerging digital culture. But times have changed, and so have the stakes— as digital devices and apps have advanced to collect more of consumers’ personal information. So internet companies have turned their sights and pocketbooks on Congress and additionally have involved themselves on boards and committees that inform the agencies writing oversight rules.

In 2003, at the tender age of 5, Google hired its first two lobbyists, and spent a comparatively paltry $80,000. In retrospect, it almost seems quaint. In 2015 the company had 84 lobbyists, spending $16.7 million, coming in just short of the top 10 biggest spenders, according to the Center for Responsive Politics. Facebook, a relative newcomer in Washington, has ramped up its spending from a scant $208,000 in 2009 to nearly $10 million last year, with 31 lobbyists, according to CRP. More recently, Twitter and Uber have come to Washington spending millions more. Overall, internet companies, as the Center for Public Integrity defined them, now employ nearly 500 lobbyists in Washington — almost three times the number just five years ago — to weigh in on everything from privacy to patents to antitrust to security.

The digital companies, which additionally include Yahoo Inc., eBay Inc. and Netflix Inc., have also grown more comfortable in recent years with their newfound power, showing willingness to push back hard on bills or take other actions that may affect them, said a senior Senate staffer who works on consumer privacy issues.

The result: a veritable freeze for the past seven years in new laws or regulations covering such issues as consumer privacy, which for decades was an annual rite of passage in Congress. Same for securing data. Meanwhile, the emergent giants have succeeded in holding on to controversial policies they favor, like specialized immigration visas for programmers and other tech positions.

“This is an historic shift and it has consequences,” said Alvaro Bedoya, executive director of the Center on Privacy & Technology at Georgetown University, describing the growing influence of these firms. “Internet companies wield an outsized influence, but it’s not so much the power to pass new laws as it is the power to say ‘no.’”

Even for recent rulings that Republicans opposed — such as net neutrality, which blocked internet providers from creating faster lanes for those who can pay — internet companies may not lose all the hard-won ground they gained.

“Deals will be cut,” said Jeff Chester, executive director of the Center for Digital Democracy, a digital rights group in Washington, D.C, “This is a new political battleground here. In the initial start of the Trump administration, it’s going to be all about wheeling and dealing.”

Despite Trump’s animosity towards an industry that has favored Democrats, the digital titans are well placed to negotiate some compromises, even on immigrant visas for technology jobs, which Trump has both supported and opposed, and on net neutrality, in which internet providers and the online content producers are likely to work out some kind of compromise. And just three weeks after the election, Financial Innovation Now, a group formed by Google, Amazon, Apple Inc., Intuit Inc. and PayPal that’s pushing financial reforms for digital commerce, sent Trump a letter laying out possible changes to support online commerce.

“Your business experience, unique for any incoming President in history, offers a rare leadership opportunity that we believe sets the stage for modernizing some of our most antiquated financial rules,” wrote Brian Peters, executive director of Financial Innovation Now.

New lineup

No internet company has ramped up its Washington presence more than Google, which moved into a new office just a few blocks from the Capitol in 2014, where employees have access to a video game room and nap capsules. Shortly after the office opened, Google held a party featuring peach cobbler milkshakes, meatball stations and “molecular” gin and tonics. In attendance were numerous politicians including Rep. Darrell Issa, R-Calif., who was a member of the House Judiciary’s subcommittee that oversees intellectual property and the internet, and Sen. Chuck Grassley, R-Iowa, who was a member of that chamber’s Judiciary Committee and sat on the panel governing antitrust, competition policy and consumer rights, all hot topics for the technology industry.

Since 2009, when President Barack Obama took office, Google has spent more than $90.7 million on lobbying, more than twice any of its closest rivals Facebook, Amazon.com and Yahoo. The company has retained 85 lobbyists this year, 10 of whom are in house, headed by Susan Molinari, a former GOP member of Congress from New York City. Among its outside lobbyists: two-time presidential candidate and former House Majority Leader Richard Gephardt and Tony Podesta, brother of Hillary Clinton campaign chairman John Podesta. Podesta’s bio boasts that he is “one of Washington’s ‘super lobbyists.’” Nearly three out of four of Google’s lobbyists have previously worked in Congress, the White House or in a government agency. Because Google’s business operations touch on almost every aspect of American lives, it lobbies on an array of issues, from patent and copyright law to taxes to immigration to driverless cars.

Campaign contributions from the top five internet companies since 2000:

Source: Center for Responsive Politics and Center for Public Integrity

Google, along with other internet companies, has also learned that giving money to trade groups pays off in influencing policy, or stopping it. Google, Facebook and Amazon, along with 37 other internet companies that include the likes of eBay, Netflix and LinkedIn, fund the Internet Association, the self-proclaimed “voice of the internet economy” that was created in 2012 and already ranks among the largest internet lobby spenders. Other trade groups that lobby on the companies’ behalf: the Internet Commerce Coalition and the Interactive Advertising Bureau.

Internet firms have also joined the more established and influential trade groups in Washington. Google alone belongs to 43 trade groups and associations that lobby lawmakers and regulators on policies that include not only digital advertising, but wireless technology, cybersecurity and unmanned aerial vehicles. Among the 43 is the U.S. Chamber of Commerce, which perennially ranks as the biggest lobby spender in Washington.

It doesn’t stop there. Google lists on its website nearly 100 — just “some examples,” Google says — “third-party organizations” that it supports because their “work intersects in some way with technology and Internet policy.” These groups publish academic research (the left-leaning Brookings Institute, the conservative Heritage Foundation), are involved in advocacy (the Consumer Federation of America) and are powerful lobbyists in their own right (the AARP).

Google didn’t respond to repeated requests for comment. Facebook and Amazon declined to comment.

Flexing muscle

Internet companies’ rapid buildup of spending in Washington has affected a wide range of policies, including cybersecurity, taxes, immigration, transportation and, perhaps most dramatically, consumer privacy.

For literally four decades, lawmakers regularly passed bills that expanded privacy protections for consumers — about a law every two years on average. In 2009, as part of a massive economic recovery bill, lawmakers expanded the scope of who must protect Americans’ health information from disclosure, to include just about anyone who has access to the data, such as a claims processor or accounting firm hired by an insurance company.

But in the seven years since that 2009 measure, nothing. Not one major privacy bill has cleared Capitol Hill — this despite unprecedented growth in social networks, advanced technology such as wearable devices and in-home monitoring tools, as well as apps that collect ever-more personal information that companies could use to discriminate against Americans. Only two measures have passed and were signed into law: one that arguably weakens privacy protections governing video downloads and another that affirms the data collected by a car’s “black box” is the property of the vehicle’s owner — but provides no penalties for violating the law.

The post-2009 void has not been due to a lack of effort; some 92 consumer privacy bills have been proposed during the seven-year period since, according to the Center. But that period coincides with internet firms’ cascading investment in lobbying spending, along with a quintupling of campaign contributions from top internet executives and company PACs.

One bill that was no match for the internet lobby: the Location Privacy Protection Act, which Sen. Al Franken, D-Minn., one of Congress’ leading consumer-privacy proponents, first introduced in 2011 when he was chairman of the Judiciary Subcommittee on Privacy, Technology, and the Law. The bill’s aim seemed unobjectionable: outlaw so-called stalking apps, which allow someone, such as an abusive husband, to track the location of his estranged wife using the GPS coordinates emitted by her smartphone. But the bill also would have required internet companies to obtain permission from smartphone and tablet users to collect their location data and to share it with third parties, such as advertisers. Something consumers want, but internet companies and their trade groups didn’t like at all.

Lobbyists representing 54 companies and trade groups — including Google, Facebook, Yahoo, as well as trade groups such as the Interactive Advertising Bureau and the U.S. Chamber of Commerce — descended on the Hill. Calls were made, letters written, emails sent and meetings scheduled.

To encourage members of Congress to answer phone calls and emails, corporations contribute to lawmakers’ campaigns, current and former Hill staffers said. And internet companies have learned the game. The senator with by far the most campaign contributions from internet firms’ employees and their related political action committees is Charles Schumer, D-N.Y., who has been a member of the Judiciary Committee since he was first elected to the Senate in 1998. Schumer and his leadership PAC has received $278, 668 from contributions from employees with internet companies and their PACs since 2000, the second most among members of Congress. Rep. Zoe Lofgren, a Democrat who represents much of Silicon Valley, received more — $332,553—as did just-elected Ro Khanna, who also hails from Silicon Valley. The contributions include those from affiliated leadership PACs, which are associated with a single member of Congress but make contributions to candidates.

Lobbying spending by the top five internet companies. 2016 figures are through September only:

Source: Center for Responsive Politics and Center for Public Integrity

When the bill was considered by the full committee in December 2012, Schumer, who eventually voted in favor of the bill, nevertheless echoed concerns of the tech companies, saying it “still needs a lot of work to assuage the concerns of tech innovators.” Sen. Grassley, who also voted for the measure, said he had the same worries, saying the bill needed to address industry concerns that it would hurt the internet companies’ business model of collecting personal data. Grassley and his leadership PAC has received $60,950 in campaign contributions since 2000 from Silicon Valley employees, their PACs. The committee voted to advance the bill, but it never came up for a vote on the floor.

Two years later, when Franken reintroduced the bill and it was back in the Judiciary’s Subcommittee on Privacy, Technology, and the Law, first-term Sen. Jeff Flake, an Arizona Republican who had also represented the state in the House of Representatives, echoed the same concerns about harming the business model of collecting personal information.

“In our efforts to protect the privacy of Americans, which is extremely important, we got to be careful not to stifle innovation and dynamic sectors of the economy,” Flake said.

Flake has received $29,000 in contributions from the internet companies’ PACs, with most of it coming since he was elected senator and placed on the Judiciary Committee. Google, Facebook, Yahoo, eBay and Yelp Inc., which offers crowdsourced online reviews of local businesses, have all given to Flake.

The bill never came up for a vote.

All that money buys access. Typically, internet companies are relatively cordial in their opposition to a bill, say several current and former Capitol Hill staffers. Often it’s the related trade groups, which many of them belong to, that provide the muscle, they say. One of the most effective is the U.S. Chamber of Commerce, which counts Google and other internet companies as members. In 2012, R. Bruce Josten, the chamber’s top lobbyist, sent a letter to then-Judiciary Committee Chairman Patrick Leahy, D-Vt., and then-ranking member Grassley opposing the location bill. Josten said Franken’s bill would derail “the tremendous growth in wireless applications, services, and devices that has benefited both businesses and consumers.”

Large companies that typically are not considered digital enterprises also weighed in, using their associations. The National Business Coalition on E-Commerce and Privacy, which counts as members credit-tracker Experian as well as Bank of America and Charles Schwab & Co., came out hard against the legislation. In a letter sent to Leahy and Grassley two days before the location bill was reported out of subcommittee, the coalition called the measure “defective” and “counterproductive,” warning that it would threaten what was at the time “a very fragile economy.”

The Interactive Advertising Bureau, which counts Google and Facebook as members, as well as the Direct Marketing Association, which Facebook also belongs to, lobbied against the bill. About 10 consumer and trade groups, including the Center for Democracy and Technology, and the National Consumers League, supported the bill, but they didn’t or couldn’t lobby on behalf of the measure. The Location Privacy Protection Act didn’t stall because it lacked support, it got out lobbied.

“That’s how privacy bills die,” a former Hill staffer said.

In the end, proponents of the bill could count only two lobby groups that supported the legislation — the Consumers Union and the National Women’s Law Center. The two organizations, reported spending just $250,000 in their quarterly lobbying reports that mentioned the location privacy legislation. Of those identified as opposing the bill, 10 at least — including online advertising associations, internet trade groups such as NetChoice, the loyalty program marketer Affinion Group, and nontech organizations like the National Retail Federation and Bank of America — reported collectively spending nearly $155 million in quarterly reports that mentioned the bill, according to the Center’s analysis.

Franken has introduced the location bill in every Congress since then. Franken likely will try again in the new Congress.

Steady as she goes

Trump’s campaign saber-rattling aside, veteran Capitol Hill observers believe Internet companies will likely continue to have their way.

Trump sees himself first and foremost a businessman, they say, having repeatedly boasted about his executive acumen on the campaign trail. Both Trump and Congress understand internet companies have been powering the U.S. economy for years. At one point this year, the five largest companies measured by market capitalization were all technology companies, for the first time, replacing big oil, which held three of the top five spots as recently as 2011.

So information is now the economy’s hottest commodity. And Trump, who incessantly talked about jobs, jobs and jobs on the stump, is unlikely to take actions that might retard the growth of an industry that has expanded at breakneck pace, privacy concerns aside, experts say. Revenue from selling targeted ads, for instance, is estimated to reach $33 billion by 2020, with advertising accounting for 90 percent plus of Google’s and Facebook’s revenue.

“Unfortunately, it feels like Congress and the incoming policymakers have prioritized businesses’ ability to make money and profits over consumers’ right to protect their own privacy,” said Claire Gartland, consumer protection counsel at the Electronic Privacy Information Center, which advocates for privacy and civil liberties protections.

During the Obama administration, a revolving door spun between Google and the federal government, with Google employees moving into top positions within the federal government or national political campaigns, and federal or campaign employees leaving to work for Google — with a total of 251 individuals moving one way or the other, according to the Campaign for Accountability, a government watchdog group. Google veteran Alan Davidson works as the director of digital economy at the Commerce Department and Megan Smith is the U.S. chief technology officer in the White House. Austin Schlick, general counsel at the FCC, joined Google as the company’s head of communications law, and Suzanne Michel left the FTC where she served as deputy director of the Office of Policy Planning to be a senior patent counsel at Google.

Internet companies such as Google are now evaluating their approach to the Trump administration and the Republican party, which includes possibly funneling more money to conservative groups and causes, according to a long-time tech lobbyist who requested anonymity. Just days after the election, Google posted a help-wanted ad for a “Manager for Conservative Outreach and Public Policy Partnerships,” who would act “as Google’s liaison to conservative, libertarian and free market groups,” Bloomberg reported. The new hire would also “work with partner organizations on shared projects to advance Google’s public policy goals,” according to the post.

Policy experts with Google ties are also working with Trump’s transition team. Joshua Wright, who conducted Google-supported research while a professor at George Mason University just outside Washington, D.C., is leading the team looking at the Federal Trade Commission, which oversees consumer protection and anti-competitive practices. Even top government executives with Google experience wouldn’t rule out working with Trump. Former 12-year Google veteran Smith and Michelle Lee, head of the U.S. Patent and Trademark Office and formerly in charge of Google’s patent strategy, both told Politico that they were open to a position in a Trump administration.

And even tech startups that have lobbied the government over workplace issues such as benefits might find a friend in Trump’s nomination for Labor Department secretary, anti-regulation crusader Andrew Puzder, who is a big fan of startups.

“Whatever kinship individuals at Google may have felt with this president and this administration, that will not stop them to build up a sphere of influence in the incoming administration,” said Anne Weismann, executive director of the Campaign for Accountability. “They have money and enormous power.”

Which is not to say there aren’t some nasty policy fights in the offing. There are. Republicans have been looking to kill the net neutrality rules the FCC passed in 2015 and defended successfully in court this year. Trump named to oversee the FCC transition net-neutrality-foes Jeffrey Eisenach, a visiting scholar at the American Enterprise Institute, and Mark Jamison, head of the Public Utility Research Center at the University of Florida, who wrote, “Net neutrality in the U.S. is backfiring.”

Trump also met in late November with Rep. Marsha Blackburn, R-Tenn., who is vice chair of the Energy and Commerce Committee and a Trump surrogate during the campaign, to discuss numerous issues. Blackburn has led the charge against the FCC’s rules, calling them “a Trojan horse for government takeover of the Internet.”

Contributions from the top five internet companies since 2000:

Source: Center for Responsive Politics and Center for Public Integrity

But on issues internet firms care about writ large, Trump remains an enigma, just as he is on other policy fronts — changing positions and making it difficult to discern his intentions. For example, on so-called H-1B immigrant visas, which technology companies heavily rely on to hire programmers, engineers and other technologists — and the subject over which he took Zuckerberg to task — Trump has waffled. He said he would “end forever the use of H-1B as a cheap labor program” after he said “as far as the visas are concerned, if we need people, it’s fine.”

Like other policy issues, it’s likely the tech giants can carve out a compromise on the visas to their liking, said digital-rights advocate Chester.

That leaves lobbyists, government officials and privacy and security advocates confused — and apprehensive. But almost everyone comes back to this: Trump is a capitalist. And so he will aim to do what is right for corporations, whether they make widgets or search engines.

“I think the consumer is going to be the loser,” said Weismann of the Campaign for Accountability. “At his heart, Trump is a businessman, which will make it easier for corporations like Google and others to appeal to the bottom line as something to protect. That, he understands.”

A version of this piece ran in Fortune.com.