Big Tech's outsized influence draws state-level pushback

New York state Sen. Michael Gianaris was ecstatic when Amazon named Long Island City in 2018 as a front-runner for its new headquarters, a project that would bring 25,000 jobs and $2.5 billion in construction spending to his district in Queens.

But his support faded quickly when he learned that state and city leaders had promised one of the world’s richest companies tax breaks worth $3 billion in secretive negotiations. A public backlash led Amazon to cancel the investment altogether, but to Gianaris the episode still illuminated the massive power of tech companies that dominate their industries, overwhelm traditional businesses and use that leverage to expand their reach even further.

Consumer activists, small business owners and state lawmakers across the U.S. are increasingly calling for measures to rein in companies such as Amazon, Apple, Facebook and Google that wield influence over so much of everyday life.

Normally that task would fall to the federal government. But while the Justice Department and the Federal Trade Commission have filed major antitrust actions against Google and Facebook — both with widespread state support — Congress remains stalled when it comes to making new laws related to Big Tech.

So scores of so-called “techlash” bills are being debated in dozens of statehouses, where lawmakers of both major parties are proposing new regulations related to antitrust, consumer privacy, app store fees and taxes on digital ad sales. Republican lawmakers also are pushing back against what they claim without evidence is an attempt to stifle conservative voices on social media.

Gianaris, a Democrat, is pushing a landmark antitrust bill in the New York Legislature. It would set a new legal antitrust standard — ‘”abuse of dominance” — and allow class-action lawsuits under state laws.

“Our antitrust laws have atrophied and they’re not equipped to handle the 21st century and anti-competitive practices,” he said. “Traditional antitrust enforcement doesn’t work because Big Tech has become too big and too powerful.”

Tech companies aren’t content to play defense. Their lobbyists are pushing state lawmakers to oppose restrictions they deem onerous. In other cases, the companies are working to write their own, more favorable bills. On many issues, they also would prefer federal legislation over a patchwork of state laws.

Of particular concern to two of the biggest companies is legislation being considered in several statehouses that would limit the ability of Apple and Google to collect large shares of the consumer transactions in their app stores.

Critics say the two leading U.S. smartphone companies use their position as app gatekeepers to fatten their profits with fees and undermine rivals that compete against their own music, video and other services.

Leading the pushback are companies such as Epic, which owns the popular Fortnite video game, Spotify and Match.com. They want to force Apple and Google to let them keep the proceeds from subscriptions and in-app sales without taking a cut.

In an attempt to fend off potential government reforms, Apple last year cut in half its standard 30% commission on app purchases for most developers. Google recently followed suit with cuts set to take effect in July.

State Rep. Regina Cobb, a Republican sponsoring app-store legislation in Arizona, said app makers and their customers are being held hostage.

“That’s a Chicago-style mafia kind of thing: ‘You pay us 30 percent or you don’t get to play. We’ll take you off of our platform; your company’s done,’” Cobb said.

Similar legislation is being considered in Georgia, Massachusetts, Minnesota and Wisconsin. App store legislation in North Dakota died in February following intense lobbying by both sides. Apple Chief Privacy Engineer Erik Neuenschwander spoke out against the bill, saying it “threatens to destroy iPhone as you know it” by requiring changes that would undermine privacy and security.

Moves by three states — California, Nevada and Virginia — to enact their own comprehensive data privacy laws have emboldened others to follow suit.

In Oklahoma, a bipartisan bill would require companies to obtain prior consent before collecting and selling the data of state residents. In Florida, legislation would give consumers ownership of the digital information companies collect through their spending, social interactions, news habits and travel.

The Florida bill would require companies to divulge what data they are gathering, force them to delete it upon consumer request, and prohibit them from sharing or selling it when told not to. They could be sued if they don’t comply.

One of its sponsors, Republican state Rep. Fiona McFarland, said it’s a response to the omnipresent collection, sharing and selling of personal information.

“It’s everything from these apps on our phones, to payment exchanges, to calendars,” she said.

Facebook says it supports some online privacy laws and provides as much input as possible while bills are being written. The Internet Association, the tech industry’s major trade group representing Amazon, Facebook, Google and dozens of other tech companies, declined to comment.

In California, a bill dubbed the anti-eavesdropping law seeks to limit how smart speakers can potentially intrude into private lives. Its sponsor, Republican Assemblyman Jordan Cunningham, unplugged a smart device in his bedroom six months ago after it lit up unprompted.

“The only thing stopping all of these recordings from being in the hands of government is one search warrant,” he said. “These things get hacked all the time, so you know, your data can end up in Russia.”

His bill would extend existing limitations on smart televisions and would require companies such as Amazon, which markets Echo smart speakers, to obtain permission before they can record, transcribe or sell information from any conversation.

The companies’ disruption of traditional businesses — and the tax revenue they once provided for governments — also hasn’t gone unnoticed.

Maryland lawmakers this year overrode a veto from Republican Gov. Larry Hogan to create a first-in-the-nation law that taxes digital advertising. The measure, initially approved last year, has prompted a number of other states — including Connecticut, Indiana, Massachusetts, Montana and New York — to consider similar legislation.

Supporters say the law seeks to modernize the state’s tax system and make thriving tech companies pay their fair share. It would assess the tax on revenue tech companies make on digital advertisements within the state, raising an estimated $250 million a year for education.

“Companies like Amazon, Facebook and Google have seen their profits drastically increase during the COVID-19 pandemic while our Main Street businesses are struggling to keep up,” said Maryland Senate President Bill Ferguson, a Democrat who sponsored the measure.

Opponents have challenged the law in federal court and say it violates the Internet Tax Freedom Act, which prohibits states from imposing “multiple and discriminatory taxes on electronic commerce.”

The wave of state legislation follows growing public consciousness over the power of Big Tech and the companies’ ever-expanding influence, said Samir Jain, the director of policy at the Washington, D.C.-based Center for Democracy & Technology.

“With that has come rising backlash against the tech companies in terms of the power they have and ways in which they exercise it,” he said.

By BOBBY CAINA CALVAN and MARCY GORDON