Facebook ($19.7 million) and Amazon ($18.7 million) outspent all US companies on lobbying for a second consecutive year in 2020. They far exceeded other top spenders, including:
- Comcast: $14.4 million
- Lockheed Martin: $13.0 million
- Boeing: $12.6 million
- Northrop Grumman: $12.1 million
- Raytheon Technologies: $12 million
Hardly a coincidence: Amazon CEO Jeff Bezos testified in front of Congress for the first time last year, while Facebook CEO Mark Zuckerberg did so twice amid federal and state antitrust lawsuits against his company. That’s why every quarter we track DC lobby expenditures for major tech companies with numbers from the Center for Responsive Politics. We think the data provides useful insight into the industry’s own perceptions of regulatory risk.
Here are the latest numbers for Q4 2020 and the year as a whole:
- Q4 2020: Facebook spent $4.7 million on lobbying last quarter, up 6 pct y/y. The quarterly record was $5.3 million in Q1 2020 since this data was first tracked in 2009.
- 2020: FB spent $19.7 million on lobbying last year, up 18 pct y/y and the most of any company even outside of tech. It also exceeded its prior annual record of $16.8 million in 2019.
- Q4 2020: Amazon spent a quarterly record of $5.0 million last quarter, up 12 pct y/y. That topped the company’s prior peak of $4.7 million in Q3 2020.
- 2020: The company spent $18.7 million on lobbying last year, up 12 pct y/y. That bested its 2019 prior record of $16.8 million.
- Q4 2020: Alphabet spent $2.5 million on lobbying last quarter, down 17 pct y/y.
- 2020: The company spent $8.9 million on lobbying in 2020, down 30.8 pct y/y. This year-over-year pullback in spend is not because of less regulatory pressure with Google the target of antitrust lawsuits, but rather likely due to the company reorganizing its lobbying operations over the past couple of years. Alphabet spent a record sum of $21.85 million on lobbying in 2018, for example, more than any other US company during that year.
- Q4 2020: Apple spent $1.5 million on lobbying last quarter, down 23 pct y/y. The company spent a quarterly record of $2.2 million in Q1 2020 back to 1998.
- 2020: The company spent $6.7 million on lobbying last year, down 10 pct y/y from a record of $7.4 million in 2019.
- Q4 2020: Microsoft spent $2.2 million on lobbying last quarter, down 8 pct y/y.
- 2020: The company spent $9.5 million last year, down 7.8 pct y/y. The annual record was $10.5 million in 2013.
Here are our takeaways from this data:
#1: Despite disruptions from the pandemic, such as limited social interactions from lockdowns, Facebook and Amazon still spent record sums on DC lobbying once again last year. Facebook actually switched spots with Amazon to take first place in terms of federal lobby expenditures in 2020 versus 2019. The former spent $3 million more than in 2019 and Amazon laid out nearly $2 million more.
By comparison, Twitter (another highly scrutinized name from a regulatory standpoint) only spent $1.5 million total on lobbying last year, while Tesla (another top weight in the S&P 500) spent just $400k on lobbying in all of 2020.
#2: We expect “Big Tech” to further ramp up lobbying efforts this year given the change in political regimes. Many anticipated gridlock heading into 2021 with Democrats expected to win the White House and maintain the House, and Republicans likely to hold onto the Senate. After an upset in Georgia’s special elections earlier this month, Democrats now control the executive branch and all of Congress (albeit by just one tie-breaker vote in the Senate). This shift in power gives Democrats more ability to regulate major tech companies on everything from antitrust issues/monopolistic practices to concerns about privacy and misinformation.
#3: Federal lobby expenditures are a useful reminder of the severity of regulatory risks on both the index and sector level for the S&P 500.
- Facebook and Amazon may have spent the most on lobbying in 2020 (i.e. indicating their anticipation of potential regulation), but other major tech companies including Alphabet and Apple are also at risk. Their CEOs testified in front of Congress last year as well, for example.
- While Alphabet and Apple may have pulled back their lobby spending in 2020, their combined expenditure of $15.5 million last year would put them right behind Facebook and Amazon as the third highest lobby spender if they were one company.
- These four companies have a combined weight of 16.8 pct in the S&P 500: Apple (7.02 pct), Amazon (4.32 pct), Facebook (2.05 pct) and Alphabet (3.44 pct). That’s a higher weight than every other entire S&P sector except for Information Technology (27.8 pct).
As for sectors, here are the three with exposure to the 5 companies we’ve discussed today:
- Information Technology: Apple (23.66 pct) and Microsoft (19.56 pct) Total: 43.2 pct
- Communication Services: Facebook (21.17 pct) and Alphabet (23.70 pct) Total: 44.9 pct
- Consumer Discretionary: Amazon (21.93 pct)
Bottom line: we think investors in Communication Services and Consumer Discretionary are most vulnerable to “Big Tech” regulatory risk given their high exposures to Facebook, Amazon and Alphabet. The former two spent the most on lobbying in 2020 versus the other companies we listed, and we think that rightly matches their impending regulatory headwinds; Facebook and Alphabet are also the subject of antitrust lawsuits. Although the pandemic caused Americans to rely more heavily on all five companies’ products and services, that did not reduce the regulatory heat from Congress which even resorted to virtual testimonies by their CEOs. By contrast, we continue to believe the Information Technology sector is a more insulated option, as reflected by Apple and Microsoft’s annual declines in lobby expenditures amid their somewhat less scrutinized business models.