How Big Tech Won Big Against Regulation in California This Year

As public sentiment toward Big Tech sours in Silicon Valley and across the country, the industry nevertheless had a banner year dodging regulation in the California Legislature.

Of some 60 bills to rein in the industry, fewer than 20 passed, many watered down, said David Harris, a Chancellor’s Public Scholar at UC Berkeley who studies tech regulation. Among the casualties: Gov. Gavin Newsom vetoed a bill to throw up guardrails against the light-speed expansion of artificial intelligence technology, and he brokered a deal between lawmakers and Google to kill legislation that would have made the search giant pay the struggling news media for using their journalism.

AB 2930, to impose limits on automated-decision-making software, and AB 3172, to boost potential penalties on social media companies for harm to children, were both opposed by tech lobby groups and never made it to Newsom’s desk. It’s an impressive record in a state notorious among business advocates for its heavy regulatory hand.

“The tech industry has for decades enjoyed dramatically less regulation than any other large industry even close to its size,” Harris said.

Californians have begun to chafe at the industry’s influence. A recent poll by the Bay Area News Group and Joint Venture Silicon Valley revealed that a hefty majority of surveyed voters believe the tech industry is too powerful and has lost its moral compass. APew Research poll revealed in April that nearly 80% of Americans think social media firms have too much political influence. And a 2023 California-wide UC Berkeley survey found that nearly three-quarters of respondents want the state government to protect the public from AI harm.

But the tech sector remains important for Californians, said Allie Caccamo, spokeswoman for the Virginia-based tech industry lobby group Chamber of Progress.

“California relies on revenue from the tech industry,” Caccamo noted. “It provides funding for schools and hospitals and a social safety net.”

The tech industry and the businesses it supports made up 30% of the state’s economy in 2022, sending $56 billion in taxes — mostly income and corporate levies — into state coffers, the California Chamber of Commerce reported in June.

“It’s wonderful they represent such a huge part of the tax bill,” said San Jose State University political science professor emeritus Larry Gerston. “On the other hand, it’s frightening.”

Experts chalked up tech’s victories in Sacramento to Silicon Valley’s lobbying, political donations and state tax contributions, lawmakers’ tech investments and a governor with presidential ambitions who, in the words of Sonoma State political science professor David McCuan, “is also a tech bro.”

Newsom — who in 2009 launched his bid for governor at Facebook’s former headquarters in Palo Alto, and who co-authored the tech-hyping 2013 book Citizenville — sees leadership on AI as a way to boost his political fortunes, “and he’s also struggling with the budget,” McCuan said. “Tech he sees as a savior.”

In May, Newsom announced a $27.6 billion state budget deficit, but summer delivered an unexpected bounty of corporate tax revenue, much of it likely coming from eye-popping gains at Santa Clara’s NVIDIA, whose powerful processing chips are powering the AI boom, CalMatters reported.

Cal State East Bay media studies lecturer Nolan Higdon said Newsom “is going to need tech behind him” if he makes a future presidential run.

The governor said the deal on news bills would “rebuild a robust and dynamic California press corps,” and in his veto message said the proposed AI regulation would have risked “curtailing the very innovation that fuels advancement in favor of the public good.”

That argument “rings hollow,” said Alex Hanna, research director at the independent Distributed AI Research Institute in Oakland, who added that “we’re not really learning anything from the social media era. If you let AI go unfettered, there’s going to be pretty terrible cases of people getting hurt.”

But it isn’t just the governor. Hanna noted that many state legislators have substantial stock holdings in major tech firms. About 30% of state legislators reported stock holdings last year, with Apple the top company — investments ranging from $524,016 to $5.2 million — and Google parent Alphabet the third most popular investment, with holdings from $182,008 and $1.7 million, CalMatters reported in June. A Los Angeles Times analysis however found many lawmakers’ votes don’t align with their investments.

This year and last, political contributions in California from the tech industry, at $290 million, have dwarfed those from farming — $124 million — and construction’s $122 million, and significantly outstripped the $216 million in donations from the oil and gas, energy and mining sector, according to political-finance research non-profit OpenSecrets, which breaks down the tech industry’s lobbying into two sectors, internet and electronics-manufacturing.

The internet industry — which includes Google and Meta — typically spends less money than other sectors on lobbying in California, with its $57 million this year putting it eighth in spending, far behind the nearly $200 million spent by the pharmaceutical and health lobby. However, the electronics industry, including Apple, Oracle, Intel, HP and Cisco, usually comes second in lobbying spending, with $125 million this year, according to OpenSecrets.

In 2021, in the run-up to the gubernatorial election in 2022, the internet sector was the fifth-biggest spender on Newsom’s campaign, giving $326,000, OpenSecrets reported.

Caccamo of the Chamber of Progress noted that Big Tech, despite its deep pockets, does not always win.

“A lot of bills have been enacted that we opposed,” Caccamo said, citing as examples SB 976 to bar social media companies from providing “addictive feeds” to minors without parental consent, and AB 2839, prohibiting distribution of digitally altered election materials.

Passage of those bills, along with AB 2655, to force internet companies to block or label deceptive election-related content, and AB 2355, requiring political campaigns to disclose AI use in advertising, showed Newsom and state lawmakers applying a heavier regulatory hand to protect children and elections from tech-related harms.

San Jose State’s Gerston believes legislators and Newsom are proceeding with caution on the new AI technology, as is typical with other emerging issues, but will ultimately agree on substantive regulations.

“It just takes a while to find that consensus,” Gerston said. “They’re as confused as the rest of us.”

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