Pros and Cons of Legalizing Lobbying

by Charumati Haran


What does Walmart have in common with the Indian film Guru?

Not so long ago, Walmart made a disclosure in the US Senate that caused tremors in the Indian Parliament: Walmart had spent $25 million over four years in order to lobby American lawmakers and gain access to overseas markets, including India. Our Parliament was disrupted when the opposition demanded to know if Walmart had lobbied in India or paid bribes here. While lobbying is legal in the US, it remains illegal in India. As of now, a retired judge will be appointed to conduct a probe into these allegations.

Lobbying essentially means trying to influence the decisions made by a government official or influencing the making of legislative policy. This benefits the concerned parties and safeguards their interests. It may also be done on behalf of a client by a professional lobbying firm. Prominent examples include Patton Boggs, Cohen Group and BGR Group. An interesting fact is that these have all been hired by major Indian firms to represent their interests abroad.

This conflict of ideas about lobbying could also be seen in the Indian film Guru.  

Lobbying is legal in many countries besides US, such as Brussels, Slovenia and  Australia. In these countries, lobbying is regulated with various rules and policies. The fact that lobbying is legal in the US has often been criticized, despite the provision that lobbying activity must be disclosed by firms.  

Lobbying can take various forms. It is not only done by firms, but also industry bodies, individuals, special-interest groups and other government officials. Good lobbyists require useful connections in law-making bodies and excellent communication skills. Lobbying could involve any of the following:

• Filing legal suits and petitions;
• Advocating a cause to parliamentarians and legislators through meetings, emails, etc.;
• Using PR and advertising methods to pressure public officials through public opinion;
• Persuasion, giving of gifts and cash; or
• Exchange of favours such as soliciting donations to causes, granting awards, etc.;

However, before one can dismiss lobbying as a totally political activity, we must first consider its economic implications, in particular, in the context of the most famous economic tenet: the free market.

Free market philosophy advocates a market without any government interference. It suggests that the market finds a natural equilibrium based on demand and supply. There is no excess demand or shortage and the price is fixed. This outcome is considered efficient. However, this is an image of a perfectly competitive market, where other factors and assumptions are also in play, such as the assumption that there is perfect knowledge about prices on both customers’ and sellers’ side. In the real world, perfect markets don’t exist, as there is a lack of knowledge and also because government interference exists in the form of taxes and subsidies.

Lobbying can be seen as an interference in the market because it influences the outcome. For instance, the firm with the most money to spend on lobbying can ensure decisions in its favour. Other firms, even though they are equally efficient, may not be able to spend as much on lobbying and so will not be as successful.

This is one of the major critiques of lobbying, that it makes law-making ‘a rich man’s game.’ Critics argue that lobbying amounts to moulding the laws to one’s own agenda, which makes it unfair to others. They contend that issues which are promoted by rich parties would get preference over others in the lobbying process.

Some think that lobbying could bring too much money into politics. Lobbying is also seen akin to corruption, since private interests can overtake public interest. Lobbying is usually an activity with a lot of obscurity as it is hard to judge personal interactions, where most of the influencing happens. It is also suggested that lobbying becomes an activity that excludes common citizens from the lawmaking process because it is an insider activity, where only those with connections succeed.

In India, businessmen, advocates, bureaucrats, etc. may discuss issues with government officials, but companies are not allowed to spend money on lobbying. There are various bodies and interest groups that regularly air their concerns with lawmakers.These can include all large, small, political, not-for-profit, social movements, industry confederations, and labour unions, supporting a wide variety of causes. One of the areas where illegal lobbying is a concern is in the clashes between businessmen and rural folk, such as land acquisition for building dams or factories. However, lobbying can relate to a wide variety of issues: pro-environment, pro-reservation and pro-subsidies.

Considering the wide scope of lobbying, it is also argued that lobbying is an important way for people and groups to voice their interests and concerns. This is somewhat analogous to hiring a lawyer to argue one’s case in court. Some argue that lobbying is needed so that various parties get to counter the lobbying efforts of other groups. It is also considered more democratic for groups affected by government decisions to try and influence them. It is often suggested that lobbying is necessary to give a voice to minorities.

Additionally, some argue that lobbying serves as a bridge between companies and the government, making their interactions smoother. Experts and lobbyists bring forward new perspectives and valuable knowledge about conflicting interests, which both, helps lawmakers, and improves competitiveness. There are also some cases (such as health insurance companies lobbying against tobacco companies) in which many people would think lobbying is justified. Finally, supporters of lobbying sometimes argue that corruption and bribery are distinct from lobbying, requiring special procedural safeguards, rather than the elimination of lobbying altogether.

There is no doubt that if lobbying is to be made legal there should be a lot of regulation and strict enforcement of all related laws. Some famous lobbying scandals involved the lobbyists informing their clients of false threats and then overbilling the clients to work against the alleged threat. A very famous case is the Jack Abramoff Indian lobbying scandal. Thus, effective regulations will encourage transparency and accountability in the lobbying process, while allowing lobbying to have a substantive contribution to public knowledge and debate. Some of the regulations on lobbying that can be considered are:

• Regular detailed public disclosure of the money spent on lobbying;
• Allowing the existence of “watchdog” groups that monitor lobbying activity;
• Excluding former lobbyists from holding important positions in the government;
• Making it compulsory for lobbyists to register with the government; and
• Formulating specific acts governing lobbying, and featuring a code of ethics.

The gains of making lobbying legal will probably vary depending on the state of the economy and the political situation in a state. However, it is difficult to ensure that loopholes in laws will not be exploited. Considering this and all the arguments both for and against lobbying, it is no wonder that there is no consensus on whether or not lobbying should be made legal in India.

References

"27 Indian Companies Hired Lobbying Firms in US, Records Show." NDTVProfit.com. Press Trust of India, 12 Dec. 2012. Web. 23 Feb. 2013. <http://profit.ndtv.com/news/corporates/article-27-indian-companies-hired-lobbying-firms-in-us-records-show-314641>.

"Lobbying in the United States." Wikipedia. Wikimedia Foundation, 22 Feb. 2013. Web. 23 Feb. 2013. <http://en.wikipedia.org/wiki/Lobbying_in_the_United_States>.

Memmott, Mark. "Wal-Mart's Lobbying In U.S. To Be Probed By Indian Government." NPR. NPR, 12 Dec. 2012. Web. 23 Feb. 2013. <http://www.npr.org/blogs/thetwo-way/2012/12/12/167055345/wal-marts-lobbying-in-u-s-to-be-probed-by-indian-government>.

Pasricha, Anjana. "Walmart Caught In Lobbying Controversy in India." Voice of America, 14 Dec. 2012. Web. 23 Feb. 2013. <http://www.voanews.com/content/walmart-caught-in-lobbying-controversy-in-india/1564790.html>.

Saleem, Shaikh Zoaib. "Lobbying Is Really Advocacy: R V Kanoria." Business Standard: News & Analysis on Economy, Business and Markets. Business Standard, 16 Dec. 2012. Web. 23 Feb. 2013. <http://www.business-standard.com/article/beyond-business/lobbying-is-really-advocacy-r-v-kanoria-112121600064_1.html>.