Regulators of global tech

'They’ve been blindsided’: Silicon Valley wakes up to Sacramento

By KATY MURPHY

The powerful tech giants of Silicon Valley may wield some of the biggest lobbying budgets in Washington, but they have been comparatively absent in their home state’s capital — where they are now on the defensive.

California caught the world by surprise last year when it passed the nation’s strongest data privacy law, instantly making Sacramento one of the most important regulators of global tech. As members of the California legislature forged the deal on a defining challenge of the digital age, the internet companies were slow to awaken to the threat, and brought few of their considerable resources to bear.

The combined lobbying firepower of Google, Facebook and two major tech trade associations amounted to just $235,000 in the three months leading up to the vote, compared with $3 million from the four biggest oil interests. Facebook, then mired in the Cambridge Analytica scandal, spent less than $18,000 that quarter, according to disclosure records.

The business community’s recent attempts to roll back parts of the privacy law, which takes effect in January and will give consumers more control over personal data, hasn’t gone much better, further underscoring the disconnect between Silicon Valley and its powerful neighbors a two hours' drive away.

The Washington travails of Mark Zuckerberg and other Silicon Valley czars are well-known, and tech companies have been grappling with aggressive European regulators eager to rein them in for years now — the European Union has the world’s most stringent privacy law. But the companies’ reluctance to plunge into California politics has hurt them, strategists say, as they grapple with proposals from state lawmakers and a ballot initiative system that has produced two data-privacy campaigns in less than three years.

“You just get the sense that they feel that Sacramento is on the other side of the moon,” said Andrew Acosta, a Democratic strategist.

That light touch looks to be changing as California dives deeper into data-privacy regulation. Facebook, Google and the trade groups TechNet and the Internet Association are on track to boost their combined lobbying spending by more than 80 percent this year and next, compared to the last two-year legislative session. Those four groups spent a combined $1.3 million to influence policymakers in the first nine months of the year. And Facebook has just hired a well-connected Sacramento insider, Mona Pasquil Rogers, to run its California policy shop.

But is it too late? Souring public sentiment about tech’s role in society and daily life may undermine companies’ efforts to shape policy in Sacramento, where even business-friendly Republicans have raised alarms. California’s ballot initiative process adds another layer of unpredictability.

This year’s tech lobbying blitz, to the surprise of many, did not yield major carveouts in the new Privacy Act. What’s more, the consumer privacy advocate behind the law, Alastair Mactaggart, said he was so concerned by such efforts to water it down that he decided to advance a second ballot initiative for 2020. The new version would add new consumer protections — and prevent the Legislature from making any changes that would weaken the Privacy Act.

That could explain why tech companies who don’t like California’s new privacy rules are leaning on Washington for regulations that would supersede state laws — an end-run on Sacramento. Last month, a tech and telecom-funded foundation helped send a delegation of California lawmakers to Washington. In meetings with their counterparts in Congress, the tech-friendly caucus discussed the flaws in California’s law and the merits of federal preemption, one of the organizers told POLITICO.

One might assume state politicians facing reelection would shiver at the thought of alienating a company worth the GDP of Argentina or Saudi Arabia. And to be sure, the sector does have friends in the Legislature. But a closer look at campaign finance records shows that Big Tech has not been a big player in candidate races.

Facebook is by far the sector’s biggest spender, with $1.7 million in contributions since 2009 (excluding those made by a former company executive to his own campaign for attorney general in 2010). Google has spent $959,000, state records show, while Apple has given just $256,000.

Compare that to $5.3 million that AT&T funneled into candidates’ coffers during that period, and $6.2 million from labor powerhouse SEIU.

In fact, strategists say, some progressive lawmakers might even welcome opposition from companies like Facebook. “If Facebook did a big independent expenditure against Buffy Wicks,” Acosta said, pointing to a first-term assemblywoman who has championed privacy rights, “Buffy Wicks would say, 'Bring it on!’”

“It’s telling that candidates running for president are now using Mark Zuckerberg in their ads and highlighting him as a negative,” he added. “Facebook’s on the ground and everyone’s kicking them.”

Facebook and Google declined to comment.

Amazon’s foray into local politics offers a cautionary tale. The company suffered a public relations backlash and electoral defeat in November after pouring nearly $1.5 million into a PAC backing business-friendly candidates for Seattle City Council.

But another veteran Sacramento strategist thinks it is even riskier for tech to remain on the sidelines. Steve Maviglio, a ballot initiative consultant, believes the industry’s ambivalence about publicly opposing the 2018 data-privacy initiative created an opening for California’s privacy law.

Maviglio was hired by a tech and telecom coalition to fight the initiative. But rather than pledge millions to defeat it, he said, the companies took a wait-and-see approach, not wanting to be the first to jump. The first contribution didn’t come until February 2018, four months after the initiative was filed, campaign records show. That April, reeling from the Cambridge Analytica fallout, Facebook announced it would no longer fight the privacy measure.

The initiative had strong polling, and in June the Legislature unanimously passed the Privacy Act as part of a deal to get it off the ballot. By passing it in the Capitol, lawmakers regained the power to make changes without going back to the voters.

“There was a fundamental misunderstanding of how the initiative system worked and what they had to do,” Maviglio said. “It was painful to try to get them engaged, and frankly, that’s one of the reasons the Privacy Act passed last year. They simply didn’t know how to engage and head it off.”

Roger Salazar, another veteran Democratic consultant, drew a contrast between the tech startups of today and the hardware and software giants like Hewlett Packard and Apple that ruled Silicon Valley in the 1980s. The valley’s first generation companies tended to hire “old school” executives, he recalled, “types of corporate managers who understood how to deal with government.”

Newer tech businesses don’t tend to have the same kinds of safeguards or relationships, he said, possibly because they’ve grown at such a dizzying rate.

“I think they’ve been blindsided,” Salazar said, “because they didn’t understand the process, they didn’t understand the environment they were operating in, they didn’t understand the political system in California.”

The tipping point for Facebook’s image — in Sacramento and just about everywhere else — was the Cambridge Analytica scandal that exploded in early 2018. The British consulting firm hired by the Trump campaign acquired data from millions of the social network’s users that had been gathered without their knowledge and used it to try to manipulate likely voters with political ads before the 2016 election.

Google’s data-gathering practices and market dominance has also been under the microscope, especially as the company expands into the personal health realm and tries to acquire Fitbit.

In early November, California Attorney General Xavier Becerra revealed an ongoing probe into Facebook’s handling of personal data stemming from Cambridge Analytica. Becerra, a former Southern California congressman, also announced he was suing the company for allegedly stonewalling his investigation.

In a sign of the company’s fall from grace, Becerra’s reelection campaign used the news as fundraising fodder.

“Xavier sued Facebook,” read the email blast. “Big Tech is no longer an infant. These corporations are running at Olympic speed. It’s time for the industry to be treated as an adult.”