NY’s Leaders Pledged to Support ‘Innovation’ to Get Amazon Here. What Exactly Does That Mean?

Most of the memorandum of understanding among Amazon, New York State and New York City about the deal to bring part of the corporation’s second headquarters to Long Island City requires little in the way of translation. Subsidies are going one way. Jobs are coming the other. The helipad is for helicopters.

Clause 14’s meaning, however, is less clear. “The Public Parties understand that an innovative economy that supports new technology development, environmental sustainability and forward-looking products and services is of paramount importance to the Company,” it reads, “and agree to continue their commitment to foster and develop this type of atmosphere within New York State, New York City and Long Island City, while balancing the needs of workers and the public.”

The passage clearly relates to the policy environment in which Amazon’s new hub will operate. What’s not spelled out is exactly what it means when the “public parties,” i.e. the city and state, “agree to continue their commitment to foster and develop” an atmosphere that promotes an “innovative economy.”

Innovation is, after all, in the eye of the beholder. One needn’t look further than Uber, AirBnB or Stingray for examples of innovation that have sparked ferocious public debate about the impact of new technology on traffic, livelihoods, rents and civil liberties.

A spokesperson for Amazon says the New York clause is standard language to ensure that the entity Amazon is doing business with understands the value of innovation, and notes that the same clause is in the Virginia MOU.

That’s revealing, because the Virginia memorandum of understanding (a.k.a. MOU), covering the other part of Amazon’s East Coast HQ, is much more explicit. There, public officers promise to “actively encourage the Commonwealth’s regulatory authorities to implement forward-looking regulatory frameworks that, to the extent appropriate” includes steps to “increase consumer choice and allow new and innovative forms of technologies and services to enter the marketplace,” “reassess existing laws and regulation to assure they are not unduly harming innovation and competition in pursuit of their objectives” and “limit prescriptive conditions on the operation of new technologies or devices,” among other things.

A spokesman for the Cuomo administration notes that the MOU is not legally binding, insists that New York’s Clause 14 does not refer to any specific policy issues, and argues innovation is no sweat for the Empire State. “From the Erie Canal to unmanned aerial systems and electron microscopes, innovation is embedded in New York State’s DNA,” the spokesman writes. “This legacy of innovation and our current efforts to grow the high-tech economy are part of why Amazon chose New York, and we’re proud to continue this work to diversify and strengthen our economy.”

For its part, the city’s Economic Development Corporation explains the clause this way: “We support piloting new technologies that could potentially diversify our economy, improve the quality of life for New Yorkers and ultimately strengthen the city’s fiscal health.”

Beyond their particular wording, and aside from the question of their legal weight, the parallel passages in the New York and Virginia MOUs with Amazon are a reminder that, whatever the pros and cons of the HQ2 deal in terms of economic impact and neighborhood change, Amazon’s arrival will bring to New York’s political stage a player with the power to have a booming voice in critical discussions about workers’ rights, personal privacy and government finances.

A review of Amazon’s corporate disclosures, and lobbying records in Washington state and New York, offers hints about what that voice will sound like when it reaches full volume in the Empire State.

Political risks and responses

There’s nothing shocking about the fact that Amazon lobbies the government and makes campaign contributions to people seeking elected office. Both activities are 100 percent legal and incredibly common. Even small companies cut checks to candidates, and even minor players sometimes hire lobbyists.

What makes Amazon different is its massive size and reach—not just its geographic footprint, but its myriad business interests, from online transactions to shipping to financial operations to media production, and their unprecedented role connecting people (and their data) to the global marketplace. That breadth creates a huge number of policy issues for Amazon and its customers to worry about, sometimes for very different reasons.

As is standard practice for publicly traded corporations, Amazon outlined some of these policy issues in its 2017 annual report to the Securities and Exchange Commission. There it identified risks to its profits like government regulation, foreign trade rules, sales restrictions, “less Internet-friendly legal systems,” licensing requirements, limitations on moving money across borders and “laws and regulations regarding consumer and data protection.”

Regulation is a particular concern, the company’s report indicated, whether it deals with privacy, waste, energy, employment, health standards, technology access or “the commercial operation of unmanned aircraft systems.” And taxes are a big deal, too: Amazon’s SEC report says that federal, state and foreign laws require increasingly extensive reporting, and that the 2017 federal tax law “requires complex computations to be performed that were not previously required.” (Addressing one major policy issue that has dogged online retail, Amazon notes in the annual report that it supports “a federal law that would allow states to require sales tax collection by remote sellers under a nationwide system.”)

With all those issues on the table, Amazon has spent real money getting a seat at it. On the national level, Amazon founder and CEO Jeff Bezos made political contributions totaling more than $10 million in the 2017-2018 cycle, mostly to a single PAC that aimed to elect veterans to office. Amazon’s federal political action committee (PAC) dished out $1.8 million, more than twice as much as it spent in the previous two-year cycle. The most recent round included bet-hedging donations of $45,000 apiece to the Republican Senate Campaign Committee and the Democratic Congressional Campaign Committee.

Meanwhile, Amazon has spent more than $2.6 million over the past two years on federal lobbying across a dizzying array of issues, from net neutrality to music licensing, encryption to facial recognition technology, defense spending to employee healthcare—a list that had its lobbyists in touch with the House and Senate, Federal Trade Commission, Department of State, Federal Aviation Authority and an alphabet soup of other federal agencies.

That lobbying work was behind the scenes. Public-facing advocacy by Amazon is, on the other hand, rare. But in September, Amazon’s general counsel Andrew DeVore laid out to a Senate committee the company’s concerns about a possible federal data-privacy law. He noted that a European data privacy ruling “required us to divert significant resources to administrative and record-keeping tasks and away from inventing new features for customers and our core mission of providing better service, more selection, and lower prices.” A less self-serving translation of that sentiment would be that complying with regulation eats into Amazon’s profits.

The lessons of HQ1

New York is already home to a significant number of Amazon customers. What will change when HQ2 is up and running in Long Island City is that New York will also be home to a large number of Amazon workers. If the experience in Washington state—where the company has had up to 24,000 workers, according to published estimates—is any guide, it’s around employment and tax issues—as well as consumer privacy—that confrontations could occur.

At the state house in Olympia, Amazon has spent substantially on lobbying, racking up just over a million dollars in expenses across 2016 and 2017 combined—good for seventh biggest spender in Washington state over that period. On the political side, the company wrote checks totaling $314,000 to political committees and $127,000 to candidates at the state level since 2014.

While Washington state’s lobbying disclosure system doesn’t specify what issues a company’s paid representatives worked on, sources tell City Limits that, among other things, Amazon took interest in a legislative proposal to regulate non-compete agreements, and another that would have affected employee classification and the definition of independent contractors. Published reports indicate that Amazon also objected to a measure to require equal pay for women because it was worded in a way that allowed cities to impose even stricter rules.

A lobbyist familiar with the company’s approach, who asked not to be named to preserve his ability to deal with the firm, said Amazon did offer to come to the negotiating table to discuss proposals it didn’t like, but its goal was clearly to hollow legislation out until it would no longer have a meaningful impact on the company.

“I think at the state level their work has largely been behind the scenes,” says another observer in the Evergreen State, Shankar Narayan, the Technology and Liberty Project director at the American Civil Liberties Union’s Washington chapter. That work included “pushing back on stronger data privacy measures to try to water them down.” Says Narayan: “There was a bill on data privacy where the proposal got so watered down, and the bill ultimately didn’t move, which we partially attributed to them.”

In the city of Seattle, Amazon’s spending on direct lobbying has been fairly modest: only about $70,000 over the past two years. That places the company among the top 10 spenders in the Emerald City, but well behind, say, Comcast, which dished out $145,000. Amazon has been much more active in Seattle as a campaign donor, however, contributing more than a million dollars to PACs and candidates since 2013.

Some of the PAC spending reflects enlightened self-interest, like $25,000 backing a pre-kindergarten initiative, $25,000 pushing a proposition to fund more affordable housing, $50,000 to support a ballot measure on transit, and $50,000 to back an extra tax levy to support education.

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The biggest line items, however, have been related to direct corporate motives: $75,000 went to a PAC called “No Tax on Jobs” that fought against an employment tax, and Amazon contributed $885,000 since 2013 to the pro-business Civic Alliance for a Sound Economy. The Civic Alliance in turn spent $678,000 in Seattle’s 2017 election cycle to support Jenny Durkan, who was elected mayor, and to back a brewery owner who ran unsuccessfully against a labor leader and a housing activist for a Council seat.

Teresa Mosqueda, the labor leader who won that Council seat, found Amazon’s handling of the employment tax dispute troubling. The Seattle City Council, reacting to public concerns about the impact of the tech industry on the local housing market, in May 2018 passed 9-0 a $275 per year per worker tax on companies grossing more than $20 million to pay for increased homelessness services. Less than a month later, the Council repealed the tax by a 7-2 margin – with Mosqueda one of two no votes.

“What’s interesting is they don’t actually sort of engage in public policymaking and lobbying in the traditional sense,” Mosqueda says. “When a labor union or community group or small business has a desired policy change they set up an appointment, they come in, they have a conversation.” She says Amazon was far less straightforward, sending mixed signals and often choosing confrontation over collaboration. Her advice to New York and Virginia: “Get your policies in place now. Create policies that will protect every worker along the supply chain.”

Targeting dozens of bills in New York

“Amazon already has thousands of employees here and already has a presence in terms of city and state politics,” says Julie Samuels, executive director of TechNYC, a nonprofit that supports growth of the technology industry in the city. “Tech companies are absolutely thinking about policy in terms of city and state, as well as federal,” she adds. The question when it comes to Amazon is “does their increased presence in New York actually change their political objectives, and does it change their ability to get things done?”

So far, Amazon hasn’t been a big player on the local campaign finance scene. The company has donated about $11,000 since 2016 to candidates for state office. Separately, Jeff Bezos’s parents gave Gov. Cuomo $15,000 in 2015. (Unlike in Seattle or at the New York State level, New York City candidates are barred from accepting corporate donations, so the company could not have given directly here; over the past 18 years, individual Amazon employees have donated a trivial $12,000 to various city candidates.)

But the firm has committed real coin to influencing government policy. City lobbying records indicate that since 2015, Amazon has spent over $275,000 on lobbying city government—specifically, the Office of Management and Budget, the Department of Information Technology and Telecommunications, NYCHA and several City Councilmembers. The stated purpose in most of the lobbying records was procurement; namely, promoting “cloud computing in NYC government.”

One named lobbying target, Councilmember Ben Kallos of Manhattan, told City Limits: “Amazon noticed my questioning the city’s having multiple data centers for the purpose of redundancy when I thought the city would benefit from having a bank up in the cloud using minimal resources that could be spun up when needed, saving taxpayers millions. I believe I mentioned Amazon in the hearing. They met with me after. Nothing transpired thereafter.” The meeting did not create any goodwill on Kallos’ part when it comes to the Long Island City deal. “Their cash grab, land grab and private helicopter pad for Bezos made someone who is a technologist and Prime member turn suspect of them.”

Up in Albany, Amazon spent $220,000 on lobbying in 2018 alone. Its disclosure filings identify 44 pieces of legislation in which the company took an interest, although the disclosure system does not specify the company’s position on those proposals.

The targeted measures included “the mobile device and computer fair repair act” and the “electronic communications privacy act,” a ban on using biometric information for advertising campaigns, rules on notifying customers about security breaches and product recalls, restrictions on the use of voice recognition software, and policies related to sales taxes, texting while driving, drone use and the state budget. At least six of the bills listed in Amazon’s lobbying disclosure firms relate not to retail sales or online privacy but to credit reporting and monitoring.

Twelve of the bills identified in Amazon’s lobbying disclosures were authored by Sen. David Carlucci, a Democrat representing Rockland County and parts of Westchester County. He says he was never directly aware of Amazon’s interest in his legislation. “It wasn’t too overt,” he says. “I don’t recall ever meeting someone directly from Amazon.”

“I do recall, though, many of the tech companies being concerned about the legislation I was writing, particularly when it comes to the protection of our data,” Carlucci adds. “And I think we have a lot of work to do in New York State to protect consumer data, and we’re really woefully behind where these big companies like Amazon are.”

Charting new territory

If the experience of Amazon’s opponents in Washington offers a preview of the company’s tactics in places where it has political weight to throw around, the range of issues Amazon has already targeted in New York state gives a glimpse of where it will test city and state officials’ ability to strike that balance between innovation and the public interest.

Samuels says she does not expect Amazon’s presence in New York to cow local elected officials from pursuing more intense regulation of the tech industry: After all, substantial corporate lobbying campaigns have yet to hobble efforts to rein in Uber or AirBnB. And amid news of foreign manipulation of social media channels and massive breaches of personal data, public anxiety about tech seems high. Amazon likely sees the political writing on the wall.

“At the end of the day there are going to be national trends on privacy law. The biggest concern Amazon has is a patchwork solution,” Samuels says. Amazon would probably rather deal with a single privacy law than 50 different ones – and so would virtually all technology companies, especially the smaller ones that, unlike Bezos’ behemoth or other giants like Google, don’t have the resources to comply with a state-by-state regulation system if need be.

Indeed, the question isn’t so much whether there’ll be regulation of tech in New York and elsewhere, but rather how meaningful it will be. The episodes in Washington state indicate that Amazon can be a powerful opponent to laws that might impinge on its profits. Those measures might go on the books but they won’t touch the heart of its business, if the company can help it—and given the important role it will in the city’s economy, Amazon might be able to help itself quite a bit.

For Carlucci, the worrying thing is not Amazon’s looming larger physical presence in New York State but its growing global financial strength and deepening intrusion into the fabric of life everywhere. “That definitely becomes a concern because of how powerful this company is – not just because they’re in our backyard. They’re becoming more intimately involved in everything we do,” he says. “We have to be very aware of companies moving in a direction of having unparalleled power and in ways that just haven’t been quantifiable in the past.”