Why the next big tech struggles are in state capitals

Google, Apple and others are hiring local lobbyists and diving into the details of the proposed legislation, according to state officials. Tech companies face potential rules that would slow the reach of their platforms, limit tax revenue, or force them to facilitate additional privacy disclosures.

While federal lawmakers have held hearings and are in discussions about policies to regulate tech companies, debates and votes could happen first in the states. If passed, state laws are important because they can become de facto national standards in the absence of federal action, such as with California’s 2018 privacy law, which gave consumers the right to access personal information that they are using. companies collect from them and the right to request such data. be removed and not sold.

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He initially opposed the California measures, but supported them after they went into effect. Companies like Microsoft Corp.

They have chosen to abide by the new rules across the country.

“A lot has happened since California passed the [data] privacy law ”in 2018, said Sam McGowan, a senior analyst at policy research firm Beacon Policy Advisors LLC. Lawmakers’ concerns now go far beyond privacy and encompass issues such as anti-competitive behavior and how social media companies control content, he said.

In Arizona, a closely monitored bill on app store payments has passed the state House and is expected to be debated in the Senate in the coming weeks. The legislation would free some software developers from the fees Apple and Google impose on apps, which can generate up to 30% of sales for paid apps and in-app purchases. Application developers could charge people directly through the payment system of their choice. The bill would apply to Arizona-based app developers and consumers, but it could set a broader precedent.

Republican state Rep. Regina Cobb, the legislation’s main sponsor, said the bill is about “consumer protection and transparency” and said the final vote could take place next month. Ms. Cobb said she believes there are enough votes to pass the bill in the narrowly divided Senate. Apple and Google have lobbied heavily against the bill, Cobb said.

Apple declined to comment on the lobbying in Arizona. A company spokeswoman said Apple “created the App Store to be a safe and reliable place for users to download the apps they love and a great business opportunity for developers. This legislation threatens to break that very successful model and undermine the strong protections we have put in place for clients. “

Google declined to comment on the legislation or any lobbying efforts in the state.

In February, Maryland lawmakers passed legislation that would tax the income of companies like Google, Facebook and Amazon.com. Inc.

of digital ads. This month, Virginia Governor Ralph Northam enacted new privacy rules similar to California’s, with additional limits on the consumer data that businesses can collect online.

The state of Washington has introduced privacy legislation. Some states have focused on moderating content online, and Texas is proposing a measure that would prohibit social media companies from banning users based on their views. New York State recently examined the possibility of changing its antitrust laws to ease the demand for technology companies.

States may have an easier way to pass laws than Congress, McGowan said, because many state governments have fairly short legislative sessions lasting a few weeks or months, meaning that bills can quickly pass through committees. and voting.

The rapid growth and influence of tech companies during the pandemic has increased urgency at the state level, according to Robert Siegel, a professor of management and a business strategy researcher at Stanford University.

The five largest companies – Amazon, Google, Facebook, Apple and Microsoft – saw astonishing growth in 2020 as Americans and stay-at-home businesses turned to online shopping, software and computing services on the web. cloud, smart devices and video streaming. The combined revenues of those companies grew by a fifth to $ 1.1 trillion, and their collective market capitalization soared to $ 8 trillion during the pandemic.

Given the stakes and what some see as the inevitability of more regulation, tech companies must play a more active role in influencing legislation, Siegel said. Facebook and Google are among the tech companies now asking for federal rules on issues like data privacy and artificial intelligence.

“Big tech companies have no choice but to compromise,” Siegel said. “These companies have made so much money, and everyone has shot them up. They have a size, a scale and a scope that nobody has. “

Facebook Vice President of State and Local Policy Will Castleberry said the company “will continue to support bills that are good for consumers, but a mosaic approach to privacy does not provide the consistency or clarity that consumers or businesses need. That is why we hope that Congress will pass a national privacy law. “

Tech companies have recently increased legislative spending at different levels of government. Facebook and Amazon spent more than all other US companies on federal lobbying last year, The Wall Street Journal reported in January.

Facebook spent nearly $ 20 million, 18% more than the previous year, while Amazon spent about $ 18 million last year, 11% more. Apple disclosed $ 6.7 million in lobbying spending, down from a record $ 7.4 million in 2019, and Google also reported a drop, spending $ 7.5 million. Google and Facebook face multiple antitrust lawsuits, and Amazon and Apple have been the subject of preliminary investigations that could go further under the Biden administration.

States are also using the courts to seek change. A Colorado-led coalition of attorneys general filed an antitrust lawsuit against Google in December for its dominance in online searches. Meanwhile, California is investigating how Amazon treats sellers in its online marketplace, and Connecticut authorities are investigating how Amazon sells and distributes digital books.

Amazon declined to comment.

Write to Sebastian Herrera at [email protected] and Dan Frosch at [email protected]