Policy

Tech lobbies more the bigger it gets. A new paper explains why.

A group that challenges concentration in the tech industry argues in a new paper that companies are using their economic power to get better deals from government — and the author says it can start "a dangerous feedback loop."

neon sign of handshake

Lobbying by tech companies has been growing for years.

Photo: Charles Deluvio/Unsplash

As skepticism about corporate power grows on both sides of the aisle, some advocates and politicians have blamed market concentration for ills ranging from slowed innovation, high drug prices and expensive internet service to low wages, reduced online privacy and even risks to U.S. national defense.

Now, a paper from an anti-monopoly group argues that economic consolidation, including in tech, may contribute to increased lobbying as well.

The paper, released Wednesday by the American Economic Liberties Project, focuses on three industries: internet tech, pharmaceutical manufacturing, and oil and gas production. Overall, the research finds a "moderate positive" correlation between measures of concentration in those markets in a given year and how much the sectors spend on lobbying a few years later, even when adjusted for inflation.

"In short, the results of this report suggest that not only is big business good at lobbying, but that bigger business leads to more lobbying," says the report, which was authored by Reed Showalter, a fellow with the group.

While examining what Showalter calls in the paper "a very complex political dynamic," his analysis finds that a common measure of industry concentration in a given year explained "roughly 43% of the variation in lobbying expenditures by internet companies" four years later.

Showalter told Protocol the time lag is a "meaningful" find. Free-market economics has long emphasized the role of lobbying and government action in creating monopolies, and many on the left have also broadly embraced the idea that monopoly is a goal of corporate influence. The paper also notes the expectation that companies would increase lobbying ahead of mergers — although legal fees aren't generally included in lobbying disclosures. Showalter even cites older research that spending to sway government can produce increased market share.

Yet the paper argues that the lobbying increase actually happens later.

"It's not that lobbying gets them big," Showalter said of companies in a follow-up email. "It's that bigness makes a business able/willing to lobby."

Both the number of tech company lobbyists and the fees they command have ballooned significantly in recent years, in many cases displacing traditional Washington powerhouses such as energy, defense contractors and tobacco in expenditures.

Facebook spent nearly $20 million on federal lobbying in 2020 — more than any other company, according to the Center for Responsive Politics. (Some trade groups outspent individual companies, as did Blue Cross Blue Shield, which is a federation of local companies.) Amazon came in at No. 2, spending nearly $19 million. In the first half of 2021, the ecommerce giant is first, with Facebook falling to second, according to CRP.

Both companies are under tremendous pressure in Washington, with Facebook the subject of an antitrust lawsuit by the U.S. Federal Trade Commission. Amazon is also the subject of a competition probe by the FTC, and Big Tech is facing broad threats of regulation overall.


Seeking to influence policy in response to such threats is both common and broadly protected by the U.S. Constitution, but like lawmakers themselves, lobbyists are widely reviled as unethical. The paper cites evidence that the practice benefits businesses more than other types of interests such as consumers or labor, and Showalter suggests lobbying can be "a harm to democracy."

His analysis of tech companies zeroes in on Amazon, Google, Facebook, Microsoft, Oracle and other companies he selected in order to approximate "what a layperson would think of as a primarily internet-based company."

The paper proposes that companies in competitive industries may not have spare resources to put as much toward influence operations. On the other hand, companies that have "less to fear from competition... may reasonably decide it is more prudent to seek rents and power from the government through lobbying rather than trying to make their goods and services better."

Showalter told Protocol that examples of rent-seeking could include Amazon's unsuccessful pursuit of a massive cloud contract from the Pentagon. He also pointed to companies seeking tax breaks and told Protocol that the lobbying power that arises after consolidation may in turn create "a dangerous feedback loop where big business can buy more government favors to harm competitors."

The paper notes that the comparative youth of the industry — still fewer than 20 years old, and in many cases not even that — makes some comparisons difficult, and the analysis doesn't account for campaign contributions, which are another common form of influence. Lobbying at the state level, which may not appear in federal lobbying disclosures, is also a regular response to increasingly local tech regulation. And industry groups have pushed back on the entire notion of a crisis of economic consolidation and rejected claims of specific harms.

To the AELP, however, one key upshot of the research is that antitrust enforcement should go beyond its current focus on prices to encompass a broader mission that could include pushing back on monopolies and concentrated industries with an eye to how they affect government.

Expansion beyond this emphasis, known as the consumer welfare standard, has been a top priority of AELP, as well as would-be reformers like Lina Khan, the new FTC chair.

"Corporate concentration and antidemocratic political influence go hand in hand," the report says.

Policy

The Senate antitrust bill just created some very weird alliances

Democrats and Republicans have found the tech reform debate scrambles traditional party politics — and Tim Cook and Ted Cruz have found themselves chatting.

The Senate Judiciary Committee advanced a bill on Thursday that could remake the tech industry.

Photo: PartTime Portraits/Unsplash

Strange alliances formed ahead of Thursday's vote to advance a key antitrust bill to the Senate floor, with frequent foes like Sens. Amy Klobuchar and Ted Cruz supporting the measure, and prominent Democrats including California Sen. Dianne Feinstein pushing back against it.

Ultimately the bill moved out of the Senate Judiciary Committee by a vote of 16-6 after a surprisingly speedy debate (at least, speedy for the Senate). Even some of the lawmakers who called for further changes agreed to move the bill forward — a sign that the itch to finally regulate Big Tech after years of congressional inaction is intensifying, even as the issue scrambles traditional party politics in a way that could threaten its final passage.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

Sponsored Content

A CCO’s viewpoint on top enterprise priorities in 2022

The 2022 non-predictions guide to what your enterprise is working on starting this week

As Honeywell’s global chief commercial officer, I am privileged to have the vantage point of seeing the demands, challenges and dynamics that customers across the many sectors we cater to are experiencing and sharing.

This past year has brought upon all businesses and enterprises an unparalleled change and challenge. This was the case at Honeywell, for example, a company with a legacy in innovation and technology for over a century. When I joined the company just months before the pandemic hit we were already in the midst of an intense transformation under the leadership of CEO Darius Adamczyk. This transformation spanned our portfolio and business units. We were already actively working on products and solutions in advanced phases of rollouts that the world has shown a need and demand for pre-pandemic. Those included solutions in edge intelligence, remote operations, quantum computing, warehouse automation, building technologies, safety and health monitoring and of course ESG and climate tech which was based on our exceptional success over the previous decade.

Keep Reading Show less
Jeff Kimbell
Jeff Kimbell is Senior Vice President and Chief Commercial Officer at Honeywell. In this role, he has broad responsibilities to drive organic growth by enhancing global sales and marketing capabilities. Jeff has nearly three decades of leadership experience. Prior to joining Honeywell in 2019, Jeff served as a Partner in the Transformation Practice at McKinsey & Company, where he worked with companies facing operational and financial challenges and undergoing “good to great” transformations. Before that, he was an Operating Partner at Silver Lake Partners, a global leader in technology and held a similar position at Cerberus Capital LP. Jeff started his career as a Manufacturing Team Manager and Engineering Project Manager at Procter & Gamble before becoming a strategy consultant at Bain & Company and holding executive roles at Dell EMC and Transamerica Corporation. Jeff earned a B.S. in electrical engineering at Kansas State University and an M.B.A. at Dartmouth College.
Workplace

Should your salary depend on meeting DEI goals?

Diversio just raised $6.5 million to use AI to fix DEI.

Laura McGee has spent her entire career thinking about diversity and business. At one point, she helped lead the Trump-Trudeau Council for Advancement of Women, working with the prime minister and president to build a plan to grow the North American economy through diversity. During that time, she kept hearing from CEOs that they cared about diversity and wanted to improve, but that they had “no data and no metrics.”

That was when she decided to build Diversio: a platform that makes data collection, as well as acting on it, “super simple.”

Keep Reading Show less
Michelle Ma

Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.

Boost 2

Can Matt Mullenweg save the internet?

He's turning Automattic into a different kind of tech giant. But can he take on the trillion-dollar walled gardens and give the internet back to the people?

Matt Mullenweg, CEO of Automattic and founder of WordPress, poses for Protocol at his home in Houston, Texas.
Photo: Arturo Olmos for Protocol

In the early days of the pandemic, Matt Mullenweg didn't move to a compound in Hawaii, bug out to a bunker in New Zealand or head to Miami and start shilling for crypto. No, in the early days of the pandemic, Mullenweg bought an RV. He drove it all over the country, bouncing between Houston and San Francisco and Jackson Hole with plenty of stops in national parks. In between, he started doing some tinkering.

The tinkering is a part-time gig: Most of Mullenweg’s time is spent as CEO of Automattic, one of the web’s largest platforms. It’s best known as the company that runs WordPress.com, the hosted version of the blogging platform that powers about 43% of the websites on the internet. Since WordPress is open-source software, no company technically owns it, but Automattic provides tools and services and oversees most of the WordPress-powered internet. It’s also the owner of the booming ecommerce platform WooCommerce, Day One, the analytics tool Parse.ly and the podcast app Pocket Casts. Oh, and Tumblr. And Simplenote. And many others. That makes Mullenweg one of the most powerful CEOs in tech, and one of the most important voices in the debate over the future of the internet.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Enterprise

Why low-code and no-code AI tools pose new risks

The low-code trend has come to AI, but skeptics worry that gifting amateurs with Easy-Bake Ovens for machine-learning models is a recipe for disaster.

The same things that make low- and no-code AI so appealing can pose problems.

Image: Boris SV/Moment/Getty Images

“No code. No joke.”

This is the promise made by enterprise AI company C3 AI in splashy web ads for its Ex Machina software. Its competitor Dataiku says its own low-code and no-code software “elevates” business experts to use AI. DataRobot calls customers using its no-code software to make AI-based apps “AI heroes.”

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Workplace

How 'Dan from HR' became TikTok’s favorite career coach

You can get a lot of advice about corporate America on TikTok. ‘Dan from HR’ wants to make sure you’re getting the right instruction.

'Dan from HR' has posted hundreds of videos on his TikTok account about everything from cover letters to compensation.

Image: Dan Space

Daniel Space downloaded TikTok for the same reason most of us did. He was bored.

At the beginning of the COVID-19 pandemic, Space wanted to connect with his younger cousin, who uses TikTok, so he thought he’d get on the platform and try it out (although he refused to do any of the dances). Eventually, the algorithm figured out that Space is a longtime HR professional and fed him a post with resume tips — the only issue was that the advice was “really horrible,” he said.

Keep Reading Show less
Sarah Roach

Sarah Roach is a reporter and producer at Protocol (@sarahroach_) where she contributes to Source Code, Protocol's daily newsletter. She is a recent graduate of George Washington University, where she studied journalism and mass communication and criminal justice. She previously worked for two years as editor in chief of her school's independent newspaper, The GW Hatchet.

Latest Stories
Bulletins