Monday 12 November 2018

Adrian Weckler: How multinational IT firms are influencing online safety, housing and taxation

Technology multinationals have ­transformed ­our economy but has their ­dominance gone too far? In a week when their inaction on child safety arose again, our technology editor ­uncovers ­extensive ­lobbying by global IT firms as they ­pursue their own, very self-serving, agendas

Meet and greet: Facebook's Mark Zuckerberg with Taoiseach Leo Varadkar in Silicon Valley last November
Meet and greet: Facebook's Mark Zuckerberg with Taoiseach Leo Varadkar in Silicon Valley last November
Facebook's Sheryl Sandberg
Enda Kenny
Twitter's Sinead McSweeney. Photo: Gerry Mooney
Lesley Smith from Amazon
Niamh Sweeney
Paddy Cosgrave, co-founder of the Web Summit. Photo: Frank Mc Grath
Adrian Weckler

Adrian Weckler

'Ireland needs an economic plan B."

These aren't the words of a Luddite or a European Commission tax official, but Paddy Cosgrave, founder of the Web Summit.

"The Central Bank, IMF and European Union's concerns for Ireland's over-reliance on a handful of tech companies cannot be overemphasised," says Cosgrave, who runs some of the world's biggest technology conferences and employs over 100 people in Dublin.

"But we have no plan B. A Fruit of the Loom moment could be just around the corner for Ireland. It's very, very worrying."

Facebook's Sheryl Sandberg
Facebook's Sheryl Sandberg

The figures around Ireland's dependence on multinational tech firms are certainly eye-opening. Between them, giants such as Apple, Google, Intel, Dell and Facebook now employ some 10pc of the country's workforce, a figure that puts tech ahead of farming for the first time.

Counting the indigenous businesses that supply the tech companies with services, the digital giants are now crucial for as much as a fifth of the 'real' Irish economy.

This penetration is continuing to grow as quickly as the tech firms' influence on our daily lives through what we see, hear and read.

But is Ireland becoming too dependent on foreign-based multinational tech firms which, in theory, could relocate to a cheaper base if they so decided?

Moreover, what power do they now exercise over the Irish policymaking process as government officials and industrial strategists scramble to keep them based in Ireland in a post tax-break era?

"Can you imagine if Ireland woke up one day to an Apple or an Amazon or a Google announcing a major office elsewhere in Europe?" says Cosgrave. "Those companies and our politicians could try and cover over reality, but Ireland has been down this road too many times. The writing would be on the wall. The lights wouldn't switch off overnight. Much like Fruit of the Loom, it would signify a slow decade of decline for all of Ireland. Let's hope it never happens, as right now Ireland only has Plan A, which is multinationals, multinationals, multinationals."

Paddy Cosgrave, co-founder of the Web Summit. Photo: Frank Mc Grath
Paddy Cosgrave, co-founder of the Web Summit. Photo: Frank Mc Grath

And with great power comes great influence.

Data from the Standards in Public Office Commission, together with some illuminating Freedom of Information results, give some idea as to what tech firms want and how they seek to get their agenda instilled. Google, for example, has lobbied figures within Government on 47 occasions in the last two years. It has pressed positions on everything from the regulation of child safety issues online to digital surveillance issues, copyright reform and how the Government should react to upcoming EU data protection legislation.

Some of these were in the form of routine meetings with department officials, usually at assistant secretary level. However, others were far more pointed, involving face-to-face meetings with ministers up to, and including, the sitting Taoiseach of the day.

One typical instance cites a 2016 meeting where the company achieved face time with (then) Taoiseach Enda Kenny "to brief Irish policymakers on Google's investment in Ireland and to encourage policies supportive of innovation".

A similar lobbying encounter, involving Amazon's public policy chief John Midgley, frames it in similar terms.

"Amazon provided the Taoiseach with an overview of the company's presence in Ireland and supply chain, and there was a general discussion on issues related to Ireland's international competitiveness and economic development," say official documents regarding a face-to-face meeting with Taoiseach Leo Varadkar late last year.

As Freedom of Information documents show, soft power is never far from the surface. In 2014, the powerful chief operating officer of Facebook, Sheryl Sandberg, held a meeting with then Taoiseach Enda Kenny in Davos, Switzerland. After the meeting, Sandberg wrote to Kenny, gently reminding him of the connection between "reasonable" policies and "future investment".

"When it came to the European data protection regulation, you and your staff really internalised our concerns and were able to present them in a reasonable way, which has had a positive impact," wrote Sandberg.

"We hope we can rely on you for your continued leadership on this regulation since we still have more work to do here. Along the same lines, I was pleased to hear that you are so involved in the OECD working group process on tax reform. These discussions will be very complicated and important, and we hope to be helpful to you identifying the implications with different options for future investment and growth in Europe. We are keen to collaborate with your office on this, just as we have on the DPR [data protection regulation]."

She went on to praise the Taoiseach on Ireland's policy of having a "collaborative" data protection commissioner, the entity that regulates Facebook in much of its online activity across Europe.

"It was helpful to hear how you are focused on finding a strong successor to Billy Hawkes, as data protection commissioner for Ireland. Billy will be a hard act to follow and we are hopeful that his successor will be someone who will establish a collaborative working relationship with companies like ours and be able to lead on the important issue of data protection compliance in Europe."

Kenny responded in kind, seemingly acknowledging the point Sandberg was trying to make.

"One of the key challenges going forward for companies such as yours, is data protection," he wrote. "I believe that it is of the utmost importance to work closely with our new data protection commissioner."

This exchange was read in some quarters as a not-so-subtle way of Facebook letting the Irish Government know what kind of data protection commissioner it preferred, a key issue for the tech giant in an era when the EU, led by Germany, was starting to push for tighter control over US web companies. Others argue that this sort of lobbying dialogue is perfectly legitimate for both the company pursuing it and the government listening. Facebook now employs 2,500 people in Dublin, goes the argument, and is a magnet for tech companies to continue coming to Dublin, where they employ people at higher-than-average wages.

Some bosses of tech multinationals in Ireland say that interaction with government officials is usually done at a more routine pace.

"Discussions are well received," says Aisling Keegan, vice president and general manager of Dell EMC in Ireland, a company which has experienced highs and lows in its operations here over the last 30 years

"There's a strong appetite for dialogue. We have various ministers in every couple of months when we have something to talk about or push. There's an acknowledgement of partnership. You have to make sure that the infrastructure we have is lending itself to a better working environment. I would say it's a very good relationship."

However, not every tech multinational firm here goes all in on lobbying. "We wouldn't necessarily have regular contact with government officials or ministers," said Sinead McSweeney, head of Twitter's Irish operations and its vice president for public policy in Europe.

"Lobbying is done to varying degrees. We find no great necessity. We have our business here which is regional across Europe. It's not entirely Ireland focused. That said, relations are healthy and professional with various regulatory bodies. There's a maturity in the way which our authorities do business here. They have a global mindset."

McSweeney said that trade bodies such as Ibec are often used to parlay issues of concern on an industry basis.

So does any of this lobbying or 'soft power' interaction pay off? The tech firms' influence may be detected in some recent legal and regulatory decisions. Ireland, for example, will adopt the lowest end of the age scale this May when EU countries formalise a child's digital age of consent as part new European data protection laws.

This was important to big tech companies such as Google and Facebook, for a variety of reasons. (To be fair, while tech companies lobbied for this age to be enshrined in law for their own purposes, so did entities such as the Children's Rights Alliance and Dr Niall Muldoon, the Ombudsman for Children, arguing that it was unrealistic to set an older age and that kids of 13 have a right to be able to find information themselves on issues such as mental health.)

The Government has also dragged its feet on the introduction of a (previously announced) new digital safety commissioner, something that may not be entirely welcome by tech giants operating in Ireland.

On issues such as data privacy, Ireland has historically been relatively lenient on companies found not to have adhered to current data protection law, with no more than a handful of prosecutions and minor fines pursued by the data protection commissioner here. The former data protection commissioner's ruling on Facebook - a clean bill of health amid controversy over some of its practices - still rankles in other European countries, which view social media platforms with more disdain. Indeed, it was disillusionment with the Irish agency's handling of Facebook issues that indirectly led to a trade crisis between the US and EU, when the European Court of Justice struck down the 'Safe Harbour' data agreement, a crucial transatlantic treaty.

Latterly, Ireland has taken a staunch stance alongside Microsoft in that company's judicial battle with US authorities seeking to recover emails from Microsoft servers in Ireland. On the merits of the case, which Ireland supports via an 'amicus' brief, the state's position is widely seen as righteous. But was that Ireland's motivation in jumping on board so quickly?

Critics fear that even as the power and importance of the tech sector here grows, there is nothing like the regulation that the farming, retail, banking or hospitality sectors face.

That may mean Airbnb (which lobbied government and city officials over 40 times in the last two years) taking over large parts of Dublin's available housing availability or a creeping 'gig economy' mentality in conventional industries.

Even Ireland's trade unions, once the guardians of work practices for ordinary families, have stepped out of the way of technology firms with minimal union membership sought. (Political parties back this up, with none of Ireland's parties actively pursuing union recognition or participation in Ireland's tech giants.)

When it comes to lobbying, there are some basic skills involved. It helps to have someone who knows how the system works. It's even better if you have someone on board who used to work in government, preferably at a high political level.

For example, Google has Ryan Meade, a former special advisor to Environment and Local Government Minister John Gormley between 2007 and 2011. Meade, who is currently the web giant's public policy director in place of Anne Rooney (who is on maternity leave), has extensive political contacts and experience.

In a similar vein, Facebook's lobbying lead in Ireland is Niamh Sweeney, a former special adviser to Tánaiste and Minister for Foreign Affairs, Eamon Gilmore.

Lobbying isn't always done directly by a company executive. Facebook, for instance, has used Dublin law firm Mason Hayes and Curran to lobby then Minister for Justice Frances Fitzgerald (and department assistant secretary Peter Mullan) on the reform of interception laws.

While Irish transparency and Freedom of Information laws limit the quantitative nature of lobbying efforts here, US disclosures give some idea of how much tech giants spend on the activity when they have to show receipts.

Figures this month show that Google spent around €14m last year lobbying the US government on issues such as how regulations would affect how ads appear on services such as YouTube.

Similarly, Amazon spent €11m on efforts for more favourable conditions around online sales taxes and cloud computing, a sector it dominates through Amazon Web Services. (In Ireland, Amazon representatives similarly lobbied Government ministers here on the importance of industry-friendly conditions for cloud computing firms.)

Meanwhile, Facebook pumped almost €10m into making legislators and regulators see its side of the story amid the 'fake news' controversy that continues to engulf the world.

Most of these companies will regard the money as well spent. Some will point to results for other lobbying efforts, such as the massive windfall that tech giants won from the US government's one-off tax repatriation rate of 15pc, far below the standard US corporate tax rate.

But is it all becoming a little one-sided where Ireland is concerned? Or is the undoubted employment and skills boost that we get a fair exchange for evermore pervasive influence in our public governance and daily lives?

"The five largest companies in the world now generate so much tax revenue for Ireland that even our own Central Bank has warned repeatedly of our over-reliance on these companies," says Paddy Cosgrave.

"There have been rumours in Silicon Valley and Brussels that some of the biggest tech companies are considering major offices elsewhere in Europe. I think a big part of Leo Varadkar's trip to Silicon Valley (last November) was to seek assurances about the future of these companies in Ireland. But unfortunately none of the big tech companies were prepared to give specific assurances."

Cosgrave is one of the most senior Irish tech figures yet to voice serious concern over Ireland's future industrial strategy and the basis on which it hopes to retain its most valuable employers. He is not alone. Several indigenous entrepreneurs are starting to voice similar criticism.

However, senior bosses of the tech multinationals in question dispute that their presence in Ireland is more fragile now than before, or that a change in tax law has changed their attitude.

Moving facilities to other countries from Ireland isn't under way, they insist.

"I haven't seen any evidence of that happening," says Twitter vice president Sinead McSweeney.

"All of the big companies continue to grow here. I haven't seen any about-face or signs of companies starting to move functions away. The tax thing is a narrative without much evidence of companies switching because of it. Because we live in a global market, obviously things can change with geopolitical shifts. But there are genuinely lots of reasons why companies choose Dublin, not just as a location but as a headquarters. When there's such a cluster of companies running functions from one location, with the diverse, rich talent pool that this brings, that's a factor that's not going to change overnight."

This view - that Ireland pulls its weight for multinational companies aside from any taxation or regulatory advantages it may benefit from here - is echoed by a number of other senior multinational tech bosses here.

"Michael Dell has said the commitment to Ireland remains," said Dell EMC vice president Aisling Keegan. "Every global function that exists in Dell, from a jobs perspective, is in Ireland. It's the largest footprint we have in Emea [Europe, Middle East, Africa]. You have to look at the capabilities we've built up here. We have functional expertise which we just don't have in other countries, supporting both global and European customers."

This, she says, includes advanced facilities for next-generation 'internet of things' technology, enterprise research centres and even a Dell bank.

"If anything, the commitment is stronger now than it ever was. That's the importance we put on Ireland from a jobs perspective. We're hiring at the moment."

Ireland's biggest tech employer, Apple, makes the same point. While it has been at the forefront of world headlines over the 2016 €13bn tax ruling imposed by the European Commission, senior company executives - up to and including Tim Cook - still insist that Ireland remains a critical part of Apple's business planning.

Senior managers there point to its iMac factory in Hollyhill, Cork, which is Apple's only self-owned manufacturing facility around the world and a mainstay since the firm's original iteration here in 1980. "It's often the team from this facility that is called upon to help out in other parts of the world," said one senior Apple manager. "You have to understand that manufacturing skills are very scarce and specialised. What we have collected at this base is invaluable."

This theme - the concentration of skilled, older managers with years of critical experience - is a common one throughout Apple and a number of other large tech companies based in Ireland.

However, while all of these companies extol the virtues of their workforces, none deny that a large reason they first came to Ireland was associated with a fiscal advantage through tax.

Arguably, the European Commission's €13bn tax ruling against Apple in Ireland brought that era to a shuddering halt. There are no double Irish with Dutch sandwiches on the menu for them anymore. So what is it that they will continue to press Irish policy makers for? It's a question that Ireland may soon need to ask a little more vigorously.

Who lobbies for big tech?

Company: Google

Lobbyists and PR advisors: Ryan Meade, former special advisor to Environment and Local Government Minister (John Gormley, 2007-2011); PR by MKC including Ciarán Conlon, former special adviser to Minister Richard Bruton at the Department of Jobs, Enterprise and Innovation (2011-2016) and former director of election strategy, Fine Gael (2010-2011)

Lobbying count: 47*

Topics it lobbies on: EU privacy law, digital surveillance regulation, online safety rules, copyright reform

Company: Facebook

Copy of 51Former journalist.jpg
Niamh Sweeney

Lobbyists and PR advisors: Niamh Sweeney (above), former special adviser to Tánaiste and Minister for Foreign Affairs, Eamon Gilmore (2012-2014)

Lobbying count: 19*

Topics it lobbies on: Tax, surveillance law, data privacy, digital age of consent, copyright

Company: Microsoft

Lobbyists and PR advisors: Rebecca Radloff, head of legal; PR by Q4PR with partners Martin Mackin (former Fianna Fáil general secretary and senator) and Jackie Gallagher (former special advisor to Taoiseach Bertie Ahern)

Lobbying count: 20*

Topics it lobbies on: Surveillance law, data protection, EU digital privacy, transatlantic email warrant case, "our investments and jobs in Ireland"

Company: Amazon

Lesley Smith from Amazon

Lobbyists and PR advisors: Lesley Smith (above), public policy director; John Midgley, AWS public policy

Lobbying count: 8*

Topics it lobbies on: Cloud computing services, energy infrastructure, EU taxation, "general economic issues"

Company: Apple

Lobbyists and PR advisors: Gary Davis, head of privacy, former deputy commissioner for data protection, former official in Department of An Taoiseach

Lobbying count: 2*

Topics it lobbies on: EU digital privacy, health policy

Company: Twitter

Management: Sinead McSweeney, VP public policy Europe, former PR for An Garda Síochána, former special advisor to Justice Minister Michael McDowell (2002-2004)

Lobbying count: n/a

Topics it lobbies on: n/a

*Figures from Standards In Public Office Commission 2016-2017

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