Bloomberg News

Google Follows Microsoft Playbook in Boosting Lobbying Spending

October 21, 2011

Oct. 21 (Bloomberg) -- Google Inc., the subject of a Federal Trade Commission investigation, is following Microsoft Corp. in ratcheting up its lobbying.

Google spent $5.9 million from Jan. 1 to Sept. 30, a 51 percent increase over the $3.9 million spent during the same period a year earlier, according to reports filed yesterday with the House and Senate.

Mountain View, California-based Google has doubled its lobbying spending in the last two years and this year began an expansion of its political action committee, which is used to give donations to candidates. Both of these developments come as the owner of the world’s most popular search engine faces scrutiny from both federal regulators and U.S. lawmakers.

The actions are similar to those taken by Redmond, Washington-based Microsoft, one of Google’s biggest competitors, after it faced a Justice Department antitrust suit and congressional hearings in the 1990s.

“When scrutiny arrived, Microsoft chose to ramp up its lobbying presence and let the professionals handle its concerns,” said Rogan Kersh, associate dean of New York University’s Wagner School, who tracks lobbying. “That’s the blueprint that Google is successfully following.”

Pitching Google’s View

The lobbying expenditures are part of an effort to give Congress and the Obama administration Google’s view on an array of issues, said Samantha Smith, a company spokeswoman.

“We want to help policy makers understand our business and the work we do to keep the Internet open, to encourage innovation and to create economic opportunity,” she said in a statement. “Lobbying is a part of that process.”

Google first registered to lobby in Washington in June 2007 and spent $2.9 million in the first nine months of 2009. Microsoft spent $5 million during the same period that year and has remained at about that level, spending $5.2 million during the first nine months of 2010 and $5.5 million this year.

“We see this transition happen in every sector,” Kersh said. There’s “an initial resistance to lobbying followed by a recognition that whatever your business model, you have to have an active lobbying presence, both to stave off regulation and to gain benefits from government.”

Google’s lobbying team now includes Richard Gephardt, a former House Democratic leader; Kyle Simmons, former chief of staff to Senate Republican leader Mitch McConnell; and Charles Black Jr., the former Republican presidential adviser who now is chairman of the Washington-based Prime Policy Group lobbying firm. All were hired in June.

Hiring Spree

The company’s hiring spree “shows how concerned they are with regulatory matters,” said Benjamin Schachter, an Internet analyst at Macquarie Capital in New York. “They’ve grown up and realized they have to have their voice heard so they’re not backed into a corner.”

An enhanced lobbying presence won’t affect the investigation at the FTC, whose probes have been resistant to political pressure, said William Blumenthal, the agency’s former general counsel.

“It is extraordinarily rare when you’d see political intervention have a significant effect on the outcome of the investigation,” said Blumenthal, chairman of the U.S. antitrust group at Clifford Chance LLP in Washington.

Microsoft Probe

An increased lobbying presence didn’t shield Microsoft from the Justice Department’s antitrust probe of the company. The government pressured Microsoft into accepting a nine-year consent decree to stop using its monopoly Windows operating system for personal computers to quash competition. The decree expired in May.

In line with Microsoft’s past spending pattern, Google also increased the amount of money it spends on politics. Its PAC, which began in 2006, raised $570,115 from employees during the first six months of 2011, 12 times greater than the $47,769 raised during the same period in 2009, Federal Election Commission records show. Microsoft’s PAC took in $546,784 from January to June, slightly more than the $534,530 raised two years earlier.

Microsoft experienced a similar fundraising jump in 1998, the year the Justice Department filed its antitrust suit. Its PAC took in $534,050 that year, compared with $46,000 two years earlier, FEC reports show.

Antitrust Allegations

The FTC earlier this year began investigating whether Google has violated antitrust laws by unfairly ranking search results to favor its own businesses and increasing rivals’ ad rates, a person familiar with the probe said.

The agency also is examining if Google is using its control of the Android mobile operating system to discourage smart-phone makers from using rivals’ applications and services, said the person, who wasn’t authorized to comment.

Last month, Google Chairman Eric Schmidt testified before a Senate Judiciary antitrust subcommittee hearing that his search engine doesn’t discriminate against competitors.

The Justice Department Antitrust Division is reviewing Google’s proposed $12.5 billion acquisition of Motorola Mobility Holdings Inc. and its $400 million purchase of Internet- advertising company Admeld Inc.

--With assistance from Sara Forden in Washington. Editors: Jeanne Cummings, Jim Rubin.

To contact the reporters on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net; Jeff Bliss in Washington at jbliss@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.


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