Amazon shares were sent reeling Thursday following the Supreme Court’s decision allowing states to collect taxes on e-commerce sales – a decision that could potentially cost Amazon billions of dollars in taxes a year. The decision featured an opinion by so-called “swing” justice Anthony Kennedy, who argued that the reasoning behind the decision that freed companies like Amazon from this obligation was “unsound” and “incorrect.”
Siding with states and traditional brick-and-mortar retailers on a 5-4 vote, Bloomberg reports that the court overturned a 1992 ruling that had made much of the internet a tax-free zone.
That decision had shielded retailers from tax-collection duties if they didn’t have a physical presence in a state. Delivering the opinion of the court, Justice Anthony Kennedy said the physical presence rule in that former case is unsound and incorrect.
However, shortly before the decision was announced, the Wall Street Journal published a long-winded feature about how Amazon and its founder-CEO Jeff Bezos have built up one of the most formidable lobbying operations in Washington in recent years.
Indeed, the company spent more than $10 million last year alone, more than Exxon Mobil and rivals like Wal-Mart, as Bezos sought to protect and grow his many lines of business – particularly its cloud-computing business, Amazon Web Services. To underscore its lobbying largesse, Amazon has also included three Washington DC-area locations in its list of finalists. Amazon has said that, over the next two decades, its second headquarters will create 50,000 jobs and roughly $5 billion in investment. Bezos has also spent tens of millions to expand his personal presence in the area; he recently bought a $23 million mansion in the city’s Kalorama neighborhood, where his neighbors include Barack and Michelle Obama as well as Jared Kushner and Ivanka Trump.
Even after severing ties with Akin Gump Strauss Hauer & Feld LLP, the biggest lobbying shop on K Street by revenue, and Squire Patton Boggs, another legendary Washington firm where Amazon’s interests were handled by former Senate Majority Leader Trent Lott, the company has still managed to build an army of nearly 100 lobbyists at more than 12 firms.
That was then. Today, Amazon, whose revenues last year topped $177 billion, has become deeply entwined with the federal government. Mr. Bezos has built one of the largest lobbying operations in Washington, bigger than those of powerhouses such as Exxon Mobil Corp. and Walmart Inc. Its cloud-computing business is a major government contractor, with an estimated $1.5 billion in contracts last year, according to consulting firm GBH Insights. And the company has been pushing hard to change the law to allow government employees to buy more of their own supplies on Amazon.com.
To aid its battles, Amazon now has an army of nearly 100 lobbyists at more than a dozen lobbying firms working on a list of issues including taxes, trade, government procurement, internet policy, drone regulation, grocery rules, music licensing and, more recently, food stamps.
Last year, the company spent $13 million on lobbying, five times as much as it spent five years earlier, putting it just behind some of last year’s biggest corporate lobbyists, including Google and AT&T Inc.
What’s more, the company’s political action committee, is growing rapidly as well…
Campaign donations by Amazon’s political-action committee, funded by its employees and directed by the company, have grown in recent years, according to campaign-finance data collected by the nonpartisan Center for Responsive Politics. In this year’s campaign, it has donated $637,500, with half going to Democrats and half to Republicans. That is up from $515,000 in 2016 and $179,500 in 2012, with a similar political split.
…While spending on “advocacy groups” is also on the rise.
Meanwhile, Amazon’s spending on advocacy groups is on the rise, disclosures show. In 2015, it reported giving $10,000 or more to about 47 groups. In 2017, it donated to 82 groups, including conservative-leaning entities that could help in battles with Republicans, such as the American Enterprise Institute and the Competitive Enterprise Institute. In 2015, it hired Jay Carney, Mr. Obama’s former press secretary, as senior vice president of corporate affairs.
And or course, let’s not forget Bezos’ $250 million purchase of the Washington Post – which President Trump famously alleged has become one of the most powerful lobbying tools in Bezos’ toolkit – though the tech plutocrat insists that his purchase was made purely in the public interest of promoting good journalism, and not for any nefarious, personal purposes. Trump has insisted that the US Post Office should stop behaving like Amazon’s “delivery boy” and start charging more for delivering Amazon packages, a decision that could cost the company billions of dollars at a time when delivery costs already constitute some 12% of Amazon’s total revenue (perhaps this is why Amazon is slowly building its own delivery service).
Trump’s tweets have, at times, sent Amazon share spiraling lower and, in one famous incident, wiped more than $13 billion off Bezos’ net worth. But the skirmishes with Trump have mostly been a side show: Amazon’s biggest political beefs have been with its rivals, who vehemently oppose a controversial measure known as the “Amazon Amendment”. The measure would allow federal employees to buy goods straight from Amazon, skipping bureaucratic channels (and further padding Amazon’s revenue from the federal government). But Amazon’s rivals have been angered by a provision in the original measure that would seemingly allow Amazon to circumvent competitive bidding.
Last year, Amazon pushed a provision to allow federal employees to buy a broad array of goods online, from cleaning supplies to bottled water, instead of through usual bureaucratic channels. An early draft in Congress drew opposition from competitors such as Home Depot and Grainger because it stated the contract could be made without competitive bidding to “one or more” online retailers “used widely in the private sector.”
Competitors dubbed it the “Amazon amendment” and went to war. Rivals said it could give Amazon a near-monopoly on billions in sales and complained about the lack of congressional hearings and careful study of the consequences.
They made such a fuss that senators on the Armed Services Committee called a meeting so critics could voice their complaints—a rare occurrence. Lobbyists for Amazon’s rivals took turns criticizing the measure.
Lawmakers have since expanded the proposal to allow federal employees to buy supplies through multiple online retailers. Final details are still being hashed out and the plan hasn’t yet been launched.
But Trump’s accusations that Amazon has become a job-killing monopoly are beginning to gain traction. Amazon was responsible for 4% of total US retail sales and more than 40% of e-commerce. And when it comes to cloud computing, Amazon is expected to reap $2.8 billion in 2018 and $4.6 billion in 2019 from its government contracts alone. That’s up from less than $300 million in 2015. Indeed, nearly 10% of the revenue and profits from AWS come from government contracts.
But all of this is being threatened by a hostile new administration (Barack Obama was stridently pro-Amazon, even using AWS to run some of the web services for his campaign) and the American left, which now views Amazon as the avatar of Silicon Valley corporate greed. US Senator and former presidential contender Bernie Sanders published a video earlier this year under his “Faces of Greed” series scrutinizing how Amazon – and Bezos personally – have avoided paying their “fair share” of taxes while the company mistreats employees at both its “distribution centers” and it corporate offices.
The video also points out that the jobs created by Amazon aren’t nearly as desirable as the jobs the company is destroying.
But Bezos, of course, can’t be bothered with such trifles as working conditions in the here and now. He’s already focused on bigger things – like space. Bezos hopes to eventually win government contracts for his Blue Origin LLC to send equipment and astronauts into space for the National Aeronautics and Space Administration and Pentagon (Trump’s order earlier this week to create a Space Force could create some serious opportunities for Bezos, though he will no doubt need to first fight it out with Elon Musk’s SpaceX) . Amazon is also seeking permission from US regulators to begin using drones for delivery purposes. All of these efforts mean that Amazon will likely only seek to grow its lobbying presence in the coming years. But how much more can the company really spend before it reaches the a point of diminishing returns? The company must already contend with the antipathy of the most powerful man in America, as well as a coterie of corporate rivals who increasingly view Bezos as a threat, and who are banding together to undercut the company.
Perhaps, at this point, the company should consider just building its own in-house lobbying presence. Maybe it could even pull a maneuver similar to its acquisition of what’s now Amazon Robotics: That is – buy out the firms that its competitors rely on, then refuse to extend those contracts so the firms can focus exclusively on Amazon.
What can we say, other than it has worked before.