Why the next big technology struggles will take place in state capitals

Google, Apple and others are hiring local lobbyists and immersing themselves in the minutiae of the proposed legislation, according to state representatives. Technology companies face potential rules that would restrict the reach of their platforms, undermine tax revenue, or force them to facilitate additional privacy disclosures.

While federal lawmakers hold hearings and discuss policies to regulate technology companies, debates and votes can take place first in the states. If passed, state laws are important because they can become de facto national standards in the absence of federal action, as with the California privacy law of 2018, which gave consumers the right to access personal information that companies collect from them and the right to request that data be deleted and not sold.

the Facebook Inc.

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initially opposed California’s measures, but supported them after they took effect. Companies like Microsoft Corp.

have chosen to honor the new rules across the country.

“So much has happened since California approved the original [data] privacy ”in 2018, said Sam McGowan, senior analyst at policy research firm Beacon Policy Advisors LLC. Legislators’ concerns now go well beyond privacy, including topics like anti-competitive behavior and how social media companies police content, he said.

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

Republican state deputy Regina Cobb, the main sponsor of the legislation, 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 strongly lobbied against the project, Cobb said.

Apple declined to comment on the Arizona lobby. 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 this very successful model and undermine the strong protections we put in place for customers. “

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

In February, Maryland lawmakers passed legislation that would tax revenue for companies like Google, Facebook and Amazon.com Inc.

of digital ads. This month, Virginia Governor Ralph Northam signed new privacy rules similar to those in California, with additional limits on consumer data that companies can collect online.

The state of Washington has introduced privacy legislation. Some states are targeting moderation of online content, with Texas proposing a measure that would prohibit social media companies from banning users based on their views. New York State recently considered changing its antitrust laws to make it easier to sue technology companies.

States may have an easier way to pass laws than Congress, McGowan said, because many state governments have very short legislative sessions that last a few weeks or months, which means that bills can move quickly through committees and even the polls.

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

The top five companies – Amazon, Google, Facebook, Apple and Microsoft – saw impressive growth in 2020, when Americans and home-based businesses turned to online shopping, cloud computing software and services, smart devices and video streaming. The combined revenue of these companies grew by a fifth to $ 1.1 trillion, and their collective market capitalization skyrocketed to $ 8 trillion during the pandemic.

Given the stakes and what some consider the inevitability of further regulation, technology companies must play a more active role in influencing legislation, said Siegel. Facebook and Google are among the technology companies that now demand federal rules on issues such as data privacy and artificial intelligence.

“Big tech companies have no choice but to engage,” said Siegel. “So much money has been made by these companies, and that has everyone behind them. They have a size and scale and reach that no one has. “

Facebook’s vice president of state and local policy, Will Castleberry, said the company “will continue to support accounts that are good for consumers, but a patchwork approach to privacy does not give the consistency or clarity that consumers or businesses have. need. That is why we expect Congress to pass a national privacy law. “

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

Facebook spent nearly $ 20 million, an increase of about 18% over the previous year, while Amazon spent about $ 18 million last year, an increase of about 11%. Apple reported $ 6.7 million in lobbying spending, down from a record $ 7.4 million in 2019, and Google also reported a decline, spending $ 7.5 million. Google and Facebook are facing several antitrust lawsuits, and Amazon and Apple have been the subject of preliminary investigations that could go even further under the Biden government.

States are also using the courts to seek change. A Colorado-led coalition of attorney generals 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 market, and authorities in Connecticut 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]