By Jessica Rabe
As calls for more tech regulation grow louder, some big US tech companies are responding with record levels of lobby spending. Facebook, Alphabet, and Amazon, for example, spent more on lobbying in 2018 than ever before. Here’s a breakdown of the numbers, with data courtesy of the Center for Responsive Politics:
- Facebook spent $12.6 million dollars on lobbying in 2018, surpassing its prior record of $11.5 million in 2017. Last year’s figure was up 28% since it spent $9.85 million on lobbying in 2015.
- Amazon spent $14.4 million on lobbying in 2018 versus its previous record of $13.0 million the year before. That’s also up 53% since spending $9.44 million in 2015, or when the company started to more aggressively ramp up its lobby spending.
- Alphabet, Google’s parent company, spent a record $21.2 million on lobbying last year, more than its prior record of $18.0 million in 2017. That’s up 27% from $16.7 million in 2015.
All together, these three companies spent an aggregate of just under $50 million on lobbying last year, a collective record. Although notable, it’s not surprising given that it was the same year Google CEO Sundar Pichai first testified in front of Congress, as well as appearances from Facebook’s CEO Mark Zuckerberg and COO Sheryl Sandberg. As for Amazon, it’s a behemoth disrupting a myriad of industries with a target on its back from President Trump.
Moreover, there are also other US tech companies spending big money, albeit off their highs:
- Apple: $6.6 million (2018) vs. its peak of $7.2 million (2017) vs. $4.5 million (2015)
- Microsoft: $9.6 million (2018) vs. $8.7 million (2017) vs. its record high of $10.5 million (2013)
- Oracle: $7.7 million (2018) vs. its high of $12.4 million (2017) vs. $8.5 million (2015)
So how does big tech compare to other companies in terms of lobby spending? Here’s a list of the ten companies that spent the most on “K Street” last year:
#1: Alphabet ($21.21 million)
#2: AT&T ($18.53 million)
#3: Boeing ($15.12 million)
#4: Comcast ($15.07 million)
#5: Amazon ($14.40 million)
#6: Northrop Grumman ($14.30 million)
#7: Bayer ($13.43 million)
#8: Lockheed Martin ($13.21 million)
#9: Facebook ($12.62 million)
#10: Southern Co ($12.30 million)
The upshot: big US tech holds its own when it comes to lobby spending even versus large defense and telecommunication companies. Three tech titans make the top ten list with Alphabet leading the pack, and each boosted their lobby spending to new highs over at least the past two years.
What do we make of all this data? The top tech lobby spenders – Facebook, Amazon and Alphabet – all depend on user data to generate incremental profits, a source of industry criticism over the past few years. Just last week reports revealed that the Federal Trade Commission is set to charge Facebook a record fine after investigating the company over its Cambridge Analytica privacy pitfalls. Aside from data privacy, there’s also been increasing pressure to break up these companies and to ensure they don’t allow any further meddling in US elections. Potential data collection and antitrust regulations from Congress could hurt their top lines.
By contrast, this puts companies like Apple in a unique position since their data collection/usage model differs from the rest. Apple, for example, notoriously won’t allow the government to hack into even criminals’ iPhones. This is, in part, why Tim Cook has been on the forefront of calling for more regulation in his own industry. As recently as this month he wrote a piece for Time Magazine asking Congress to pass comprehensive federal privacy legislation and outlined what that could entail. Recall that unlike Facebook, Alphabet and Amazon who had to spend a record amount on lobbying in 2018, Apple actually decreased its lobby spending by 7.4% last year.
Bottom line, we see incremental regulation as one of the tech industry’s biggest threats as it is a more bi-partisan issue than most and has wide public support. That said, there are certain companies less vulnerable than others (Apple) as well as certain sectors. A few points here to end on:
- The S&P Dow Jones Indices committee actually lowered the Tech sector’s regulatory risk last fall after it pushed some companies to other sectors. It did keep Microsoft and Apple, now the top two weightings in Tech at 18.4% and 15.8% respectively.
- The committee moved Facebook and Alphabet into the new Communication Services sector, now its two top weights at 17.0% and 23.4% respectively.
- Remember that Amazon is not in the Tech sector, but is rather the top weight in consumer discretionary at 23.0%.
- Therefore, we favor the Tech sector out of the three since it does not hold the three most controversial technology names (Facebook, Alphabet and Amazon), most exposed to near-term regulation.