Amazon Stumbles In Attempts to Play Politics

(Bloomberg) -- Inc. is a company that is accustomed to winning, but the $869 billion e-commerce giant has spent the last few weeks suffering through humbling defeats. On Oct. 25, the Pentagon announced it was awarding a $10 billion cloud computing contract to Microsoft Corp. Amazon had been seen as such a prohibitive favorite for the contract, called JEDI, that the Department of Defense was actually facing a lawsuit for setting up a process that only the company could win. Then Amazon’s preferred candidates failed to capture control of the Seattle City Council in local elections less than two weeks later, even after the company had spent $1.5 million on the campaign.

The setbacks are not directly connected, but they follow a familiar pattern. Amazon gets into an interaction with government officials with supreme confidence—critics invariably call it arrogance—only to snatch defeat from the jaws of victory. The results don’t reflect a lack of resources. Amazon spent $4 million on federal lobbying last quarter, the most it has ever spent in a single three-month span; last year it lobbied more government entities than any other tech company.

Amazon Chief Executive Officer Jeff Bezos hasn’t always made things easy for his policy team. President Donald Trump regularly singles out Bezos and Amazon for ridicule, a grudge that people within the company attribute to the president’s hostility to the Washington Post, which Bezos bought in 2013. Last summer Trump told Bloomberg News that Amazon may be in a “very antitrust situation.” Around the same time he directed James Mattis, then Secretary of Defense, to “screw Amazon” out of the JEDI contract, according to a book by Mattis’s former speechwriter. The company is planning to file a lawsuit challenging the decision, accusing the government of “unmistakable bias.” (The Pentagon has said its procurement process is insulated from politics.)

Amazon Stumbles In Attempts to Play Politics

The victories that Amazon does claim—better terms for tech on trade deals, job-creating deals to build fulfillment centers—draw less attention than its setbacks. There’s brewing dissatisfaction within the company's policy team, run by Jay Carney, a former Obama administration official, and his deputy, Brian Huseman, who was an attorney for the Federal Trade Commission when George W. Bush was president.

Both men declined to be interviewed on the record.  This account is based on interviews with over a dozen current and former Amazon employees and lobbyists, who requested anonymity to discuss internal matters. Most of them described an operation that has failed to set a coherent strategy, and failed to execute even when it does have a firm goal.

When Carney was hired to ramp up Amazon’s policy operations, it seemed like a plum assignment. Amazon was broadly popular with consumers, and the Obama administration looked favorably on the tech industry as a source of innovation and economic growth. Now enforcers are pondering bringing antitrust action against the company, and politicians are floating the idea that it should be broken up altogether. It’s a dangerous time to be in disarray.

Amazon decided to start getting serious about politics in the waning years of the Obama administration, with the goal of shaping policy on issues like state sales taxes and regulations impacting delivery drones. In March 2015 the company hired Carney, who had been President Obama’s press secretary. On the face of it, this was a logical decision. But from the early days of Carney’s tenure, people within the company were baffled by what some of them saw as a consistent series of missteps and miscalculations. In August 2015, the New York Times published a piece depicting Amazon as a brutal workplace. Carney published a response two months later, accusing the newspaper of cherry-picking anecdotes to support its narrative. Some people within Amazon felt the reply stirred up the claims just as they were fading, and just as Amazon was talking up its record as an employer in negotiations over sales taxes and the placement of fulfillment centers.

Bezos’s personal feud with Trump, then a long-shot candidate for the GOP presidential nomination, picked up around the same time. In a series of tweets in December 2015, Trump attacked Amazon, Bezos and the Washington Post, saying the newspaper’s negative coverage was somehow linked to Bezos’ efforts to minimize Amazon’s tax liabilities. Bezos responded with a tweeted video of a rocket ship—and an offer to save Trump a seat on a trip to space. He attached the hashtag #sendDonaldtospace. Just weeks before Trump’s election, Bezos added some less playful criticism, saying Trump “erodes our democracy around the edges” by threatening retribution against his critics.

Then Trump won, stunning Amazon’s policy team, along with the rest of the world. Before his inauguration, the president-elect invited Bezos to a tech summit at Trump Tower. The team worried it was a trap and weighed whether to skip it altogether, according to three people familiar with the matter. Amazon privately sussed out what other companies planned to do, the people said. Ultimately, Bezos attended along with a handful of other high-profile tech executives. He later called the meeting “very productive.”

Amazon Stumbles In Attempts to Play Politics

From then on Amazon’s policy toward Trump was to ignore his Twitter activity when possible while working to minimize further damage to the relationship. Huseman attended a conference on cyberbullying hosted by Melania Trump last year, and in May he presented Ivanka Trump with an internet freedom award from the Internet Association, one of Silicon Valley’s main trade groups. This didn’t stop the Twitter-based vitriol, but the situation didn’t look to be deteriorating, at least. Then this October, Carney said in an interview that in his interactions with Bush and Obama administration officials he “never doubted that they were patriots,” adding that he didn’t “feel that way now,” with Trump in office. 

Donald Trump Jr. tweeted a response: “Hey @amazon - So is it your companies official corporate position that the the thousands of Americans who work in the Trump Administration aren't ‘patriots’ because that's what your top spokesman (and former Obama hack) @JayCarney just said???”

Carney amended his comments in a tweet, saying he had “enormous faith in and respect for the countless patriots” in the U.S. government. But it only took a few days before he got into trouble again. During a World Series game on Oct. 29, Carney responded to a contested call on the field by calling the umpires “a bunch of overweight, diabetic, half-blind geriatrics.” He ended his tweet with a call to “Bring in the machines!!”—not exactly the public sentiment that a company already associated with job-killing automation would like its executives expressing.

Carney issued another public apology on Twitter. He also sent an email to his staff entitled “self criticism,” in which he acknowledged belligerent tweets about baseball games weren’t appropriate. “I know that whatever I say in a public forum can affect this org and the company, regardless of the topic,” Carney wrote. He never sent a similar mea culpa about the comments about Trump. 

Carney doesn’t take an active role in day-to-day operations of the policy team, delegating that authority to Huseman, according to people familiar with the company. On paper Huseman is an ideal fit for the job. He’s a lawyer with longstanding political ties to the GOP. As an Amazon loyalist with more than seven years at the company, he also seems to embody its hard-working, bordering-on-burnout ethos. 

Amazon’s policy shop is faring better than Google or Facebook Inc. at a difficult time in Washington, according to a lobbyist who has worked with the company and requested anonymity because he wasn’t authorized to speak publicly. “Amazon confronts basically the perfect storm for lobbying – growing by leaps and bounds, competitors in every sector, and having to face the full force of tech-lash,” he said, noting that Huseman’s team has more than doubled in size over the past three years. “Sure, there have been some tough losses, but they’ve managed to maintain a good reputation, save for the President and the hard-left.”

Amazon Stumbles In Attempts to Play Politics

Others familiar with Huseman’s team take a less charitable view. He’s earned a reputation as a micro-manager who picks favorites and exerts tight control over the policy office. While Huseman is meticulous about planning, he's often reluctant to set clear priorities and has sidelined well-respected subordinates, according to multiple people who have worked for the office, who requested anonymity in order to avoid retaliation from Amazon. Many employees believe he values loyalists over employees with dissenting views, two people familiar with the operation say. 

Huseman has also constantly reorganized roles, sometimes with seeming disregard for people’s relationships or areas of expertise, according to current and former members of his team. Several key members have left for other parts of the company. In 2017, Amazon hired Blair Anderson, who had worked at the Department of Transportation. Transportation is an area of vital interest to Amazon, yet Anderson left the team to be the director of public policy for Amazon Web Services this year. Kate Viar, an experienced lobbyist, left the public policy team to work for Amazon Web Services, which is outside of Huseman's supervision, people familiar with the matter said. 

In a statement, Carney responded to criticism of Huseman with a statement describing him as a "highly-strategic manager who has both hired and promoted senior leaders across his team who are all exceptionally talented and wonderfully collegial."

Even the office holiday party reflected Huseman’s fixation on controlling the little things. As in past years, the theme this year is Ugly Christmas Sweaters. “You are welcome to wear festive gear during the day, but please make sure you save the sweaters for the evening,” Huseman’s assistant wrote in an email to the staff. He also exhorted people not to wait until the last minute to shop for clothing, because stores sell out of the ugliest holiday wear. 

Amazon has gotten some of what it wants from government. The company helped influence music licensing rules that benefit streaming services like Amazon Music. Food stamps can now be spent on grocery delivery services like Amazon Fresh. And despite Trump’s animosity toward Bezos, the president’s signature tax bill was a boon for the e-commerce giant. Amazon also managed to avoid a regulatory challenge to its $13 billion acquisition of Whole Foods.

With Whole Foods, Amazon benefited by avoiding a fight. On the other hand, the company’s leadership seemed unprepared when it was dragged into a fight in New York, where its proposal to build a large corporate campus, dubbed HQ2, became national political news. As opposition mounted, neither Carney nor Huseman emerged to offer a full-throated defense. Huseman faced withering criticism during testimony in front of the city council, and several people at the company lamented that he came off as wooden and unconvincing at a moment of opportunity to shift the narrative.

It’s common for Amazon’s leadership to ask people involved in unsuccessful programs to write post mortems known as “Cause of Error,” explaining what went wrong. No such memo was circulated after the company abandoned its plans for New York, according to four people familiar with the matter. They said it was widely believed the reason was that any such analysis would inevitably blame Huseman and the company’s leadership team. People close to Amazon’s leadership offer a different explanation: its abandonment of its plans for New York wasn’t actually a defeat, since the decision came from the company, and not local officials.

Amazon also officially objects to the idea that losing the JEDI contract was somehow its fault, with a spokesman saying the procurement process was tainted. (Carney and Huseman were less involved in JEDI, because Amazon Web Services, the division soliciting the contract, has its own team pitching the Pentagon.)

Most recently, the company’s star-crossed approach to public policy was illustrated in local elections in Seattle, where the company had been facing a bruising fight over taxes. Huseman hired Guy Palumbo, a former state senator and a friend of Andy Jassy, the head of AWS, to head its effort to seed the city council with friendlier faces. Palumbo had run only two state elections—both his own—with a success rate of 50%. He had been reprimanded by the Democratic Party as a state senator, and sponsored popular Amazon-friendly cloud legislation. Being a state senator in Washington is a part-time gig, and Palumbo’s other job was running a dog kennel, which he still owns.

Under Palumbo and Huseman’s leadership, Amazon decided to flood the election with cash, hoping to win a five-seat majority of council votes. The company only needed to pick up one new seat. Palumbo made a show of backing Egan Orion, who was running against incumbent Kshma Sawant, a self-proclaimed socialist. Sawant mobilized her supporters on the back of Amazon’s opposition. Less than a day after Palumbo tweeted his support for Orion, Sawant attended a candidate forum hosted by Amazon and asked the company’s workers to vote for her instead.

On election night, Orion seemed to be set to win, and Palumbo was captured by news cameras at the candidate’s victory party. Palumbo then left for vacation in Florida before the absentee ballots had been counted.

Sawant’s victory arrived in the mail. It was a devastating blow to both the company and its preferred candidate. The following week, Orion said he might have won, if only Amazon hadn’t ruined things for him with its money.

©2019 Bloomberg L.P.

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