Big tech firms have been active in Washington since the early days of the Microsoft antitrust case, but in recent years they have increased their political spending, allowing us to get a sense of the scope of their influence.
The political footprint of Big Tech has become the subject of much debate in recent years. As concerns over the role played by large tech platforms during elections has grown, so has their political clout. Wary of potential regulatory scrutiny, the large tech platforms have been increasing their lobbying expenditures and campaign donations: Led by Google and Facebook, tech firms spent more than $64 million on lobbying in 2018 alone. For both Google and Facebook, 2018 was a record year in terms of spending on political influence.
What distortions might be related to the tech industry’s mounting political contributions and lobbying efforts? How distortive or informative are the government relations operations of the five large tech platforms — Apple, Microsoft, Facebook, Amazon, and Google? While further study is needed to accurately determine the political clout of Big Tech, it is possible to draw upon existing data to get a sense as to the source and scope of its influence.
Let us begin with Political Action Committee (PAC) campaign donations. Since the Tillman Act of 1907, legislated during Theodore Roosevelt’s second term (around the time of the Roosevelt administration’s antitrust efforts against Standard Oil and JP Morgan & Co), corporations cannot donate directly to federal candidates, but can do so through employee-organized PACs. We trace Big Tech’s contributions in Figure 1.((Data taken from opensecrets.org, a website managed by the Center for Responsive Politics, a US based independent organization dedicated to political transparency.)) Apple does not have a PAC and is therefore absent from these graphs. Apple’s employees, however, contribute individually—they gave $2,392,000 to political candidates in the 2016 cycle alone.((Here we did not use the individual contributions data files of each employee of the respective corporations, but typically, individual contributions co-vary strongly with PAC giving.))
As can be seen in Figure 1, Big Tech has been actively playing a political role since the early days of antitrust pressures on Microsoft. The rest of the major tech platforms have been progressively entering the money in politics game after reaching a certain scale. This pattern is a regularity in Washington DC, and large tech firms appear to be no exception.((See Kerr, William R., William F. Lincoln, and Prachi Mishra, “The Dynamics of Firm Lobbying,” American Economic Journal: Economic Policy (2014).)) The amounts have clearly increased over time and should be expected to maintain a similar trajectory for all players during the 2020 cycle. The figure shows that large tech firms are more politically active than the average for large firms.((The “S&P/Fortune 500 average” line in this figure is an attempt to give some frame of reference, although finding the appropriate benchmark can be a bit complicated. We report the average across all firms in the firm sample used in Bertrand, Bombardini, Hackinen, Fisman, and Trebbi 2018 (NBER WP#25329). These are Fortune 500 and S&P 500 firms that also donate/lobby/comment at least once in a given year (since 1995).))
Despite being headquartered in heavily Democratic areas, all the big tech platforms are bipartisan in their giving, with Microsoft providing the most funding to Republican candidates. This bipartisanship can be seen by comparing Figure 2 (contributions to Republican candidates) and Figure 3 (contributions to Democratic candidates).
Besides information derived from federal election campaign data, one can look at the time series profiles of federal lobbying expenditures over time. Here, the picture actually changes slightly, with Google hiring the most lobbyists to further its message and policy goals, and Microsoft appearing more subdued. It should be noted that data are obtained from federal lobbying disclosures, and that those have become extremely inaccurate after the increased tightening under the administration of President George W. Bush and the Honest Leadership and Open Government Act of 2007. The 2007 Act was followed by several executive orders by President Barack Obama in 2009, none of which were met by adequate enforcement efforts vis-à-vis the heightened disclosure requirements.
The scope of unreported (underground) federal lobbying since 2008 is staggering, as research by Tim LaPira and others have shown. This problem comes on top of billions in disclosed lobbying, and the natural concerns that the billions spent on K Street may distort public policy.((See Bertand, Marianne, Matilde Bombardini, and Francesco Trebbi, “Is It Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process,” American Economic Review (2014).)) Figure 4, however, reports only the official lobbying expenditure data by technology corporations, with no interpolation.
Even with a likely amount of under-reporting, the upward trend in political pressure exerted by Big Tech is obvious. Since the data on lobbying is still incomplete for 2018, the time series ends in 2017, which means that Facebook’s lobbying efforts following the pushback it received after the Cambridge Analytica scandal are not included.
Finally, the political footprint of Big Tech can be detected in the active role platforms play in informing regulators. The notice and comment phase of regulatory rule-making under the Administrative Procedure Act of 1946 requires a fairly direct interfacing of regulators with the public and industry participants. Firms typically file lengthy and technical comments on rules of direct interest to them, and these comments are filed and kept by regulators.
Together with Matilde Bombardini at the University of British Columbia and Brad Hackinen at Western University, we have developed a full database of linked industry comments and regulatory streams from regulations.gov, a government repository which hosts the bulk of the comments for most regulatory agencies in the United States (around ten million pages of comments). These data are at the core of work we are conducting with Marianne Bertrand at the University of Chicago and Ray Fisman at Boston University. We report the relevant matches in Figure 5.
Unfortunately, the Federal Communications Commission (the likely target of the bulk of Big Tech’s commenting activity) has a separate commenting system, which we have yet to access fully and codify. So, this plot might not be optimal for detecting regulatory influence by Big Tech specifically. Nonetheless, in Bertrand et al. (2018), we have shown, using Natural Language Processing tools in the context of notice-and-comment regulation, that the words of these special interests do matter, greatly, for those final rules that end up on the Federal Register, directly affecting firms’ bottom lines. The analysis of these regulatory comments and their impact on final rules is, in essence, the most obvious place to look for the political impact of tech platforms: their ability to write the rules of the game in which they are active players.
Next week, the Stigler Center will hold its annual concentration conference, titled Digital Platforms, Markets and Democracy: A Path Forward. The conference will address the economic and societal impact of tech platforms’ market power and produce independent white papers that will inform decision and policy-making. Keep following ProMarket for further comments and analyses.
Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.
