Alibaba and the Forty Lobbyists, and the First Amendment

From a long opinion yesterday by Judge Eumi Lee (N.D. Cal.) in Alibaba Group Holding Ltd. v. U.S. Dep't of Defense:

On February 13, 2026, the United States Department of Defense ("Department") publicly designated Alibaba Group Holding Limited as a "Chinese military company" ("CMC"). On June 30, 2026, 10 U.S.C. § 4663 went into effect, barring the Department from contracting with any company who retained the same lobbyist as a CMC. Alibaba asserts that Section 4663 has caused lobbyists to withdraw from representing Alibaba for fear of losing other clients.

The court issued a preliminary injunction, concluding § 4663 likely violates the Free Speech Clause and the Petition Clause:

Alibaba is an e-commerce and cloud-computing company that provides products, technology, infrastructure, and services to consumers and businesses for civilian and commercial use. Alibaba provides U.S. companies and businesses with a platform to sell their products to consumers in China. Additionally, it provides commercial cloud services to companies, including U.S. companies, operating in China and other countries. Alibaba has developed open-source AI models, including Qwen, with a focus on "commercial applications that make it more efficient and secure for businesses to sell goods to consumers in China." Alibaba is publicly listed on both the New York Stock Exchange and Hong Kong Stock Exchange.

"Prior to being designated [a CMC], Alibaba had retained over two dozen lobbyists and multiple lobbying firms to represent its interests before Congress and the Executive Branch" [including] … "… the Executive Office of the President, the Federal Communication Commission [("FCC")], the Federal Trade Commission, the Consumer Products Safety Commission, the Department of the Treasury, and [other entities]" …. "They presented Alibaba's views on legislation, rules, regulations, executive orders, and other government policies of commercial interest to the company. Specifically, they advocated regarding export expansion, small business export promotion, technology policy, access to U.S. capital markets, e-commerce-related issues, consumer-protection laws, and intellectual property." …

The Court finds that First Amendment scrutiny applies because Section 4663 regulates speech. By restricting Alibaba's ability to retain lobbyists, Section 4663 functionally restricts its political speech. "Discussion of public issues" is "pure speech" that is at "the core of the protection afforded by the First Amendment[.]" The First Amendment also protects "[t]he right to petition," that is, "the right of the people to inform their representatives in government of their desires with respect to the passage or enforcement of laws[.]"Lobbying government officials is therefore an activity fully protected by the First Amendment. FTC v. Super. Ct. Trial Laws. Ass'n (1990) ("It is, of course, clear that the association's efforts to … lobby District officials to enact favorable legislation … were activities that were fully protected by the First Amendment.")….

Here, Section 4663 appears to be directed at defense contractors, but its consequences are on Alibaba's speech. "[A] government official cannot do indirectly what she is barred from doing directly" by "coerc[ing] a private party to punish or suppress disfavored speech on her behalf." NRA v. Vullo (2024)…. Section 4663's impact falls on the relationship between Alibaba and the third parties crucial to its speech rights. Thus, the Court finds that Section 4663 burdens Alibaba's speech….

Defendants observe that Alibaba is not completely banned from appearing before the federal government—it could hire more in-house lobbyists or find a firm that is willing to forgo defense contractor clients…. [But] Alibaba is unlikely to find a lobbyist willing to forgo any clients who might want to contract with the Department. {The statute applies to defense contractors who contract with "entities"—in other words, lobbying firms—who also contract with CMCs. Defense contractors would not risk their ability to enter into a contract with the federal government when there are plenty of capable lobbying firms available. The lobbying firm then must choose. One or more of its lobbyists can choose to represent Alibaba, but then the entire lobbying firm must forgo representing defense contractors. The only rational choice for a lobbying firm is to stop representing Alibaba.}

[Alibaba also] represents that it cannot hire the number of experienced in-house lobbyists needed to address the federal government for all its interests…. The reduction to Alibaba's speech is sufficient to demonstrate a colorable First Amendment claim….

The court then concluded that the law was subject to strict scrutiny:

"Content-based regulations are subject to the most exacting scrutiny because 'the government has no power to restrict expression because of its message, its ideas, its subject matter, or its content.'" In examining a statute, courts must also examine "restrictions distinguishing among different speakers, allowing speech by some but not others." "Speech restrictions based on the identity of the speaker are all too often simply a means to control content." Thus, identity-based regulations may "demand strict scrutiny when they reflect the Government's preference for the substance of what the favored speakers have to say (or aversion to what the disfavored speakers have to say)." …

{Section 4663 is not a content-based restriction…. Section 4663 operates based solely on whether a CMC is involved. What the CMC (or non-CMC) plans to say does not affect whether Section 4663 applies.} [But] Section 4663 is a speaker-based restriction on speech—it is only applicable if a CMC seeks to retain a lobbyist. As a speaker-based restriction on political speech, Section 4663 is subject to strict scrutiny.

Defendants assert that Section 4663 should be considered under intermediate scrutiny, because Alibaba's "differential treatment" is justified by its "special characteristic[ ]," namely the potential involvement of a foreign adversary. Defendants again rely on TikTok, where the Supreme Court applied intermediate scrutiny despite finding that the divestiture statute was a speaker-based restriction, because the differential treatment was due to a content-neutral reason, namely TikTok's susceptibility to foreign control.

While Section 4663 also involves a foreign adversary, TikTok is distinguishable because political speech was not at issue. Id. ("emphasiz[ing] the inherent narrowness" of its holding and observing that "[a] law targeting any other speaker would by necessity entail a distinct inquiry and separate considerations"). Here, Defendants provide no authority to suggest that differential treatment with respect to political speech may be considered under intermediate scrutiny. Citizens United v. FEC (2010) states the opposite: "Laws that burden political speech are 'subject to strict scrutiny,'" and "the First Amendment generally prohibits the suppression of political speech based on the speaker's identity." The Court thus applies strict scrutiny in determining whether Section 4663 violates the First Amendment.

{The Court recognizes that this is a close question. But for the context of political speech—specifically the ability and right to petition the government—Defendants' argument that intermediate scrutiny should apply would likely prevail, because Section 4663 is otherwise a content-neutral statute. As in TikTok, Section 4663 singles out a particular group of speakers, but not because of the content of their speech. Instead, the treatment is based on a particular characteristic of the speaker, i.e., their status as a CMC.} …

And the court held that the law failed strict scrutiny, because it was not narrowly tailored to the government interests in "(1) … prevent[ing] CMCs 'from accessing sensitive military information through their relationships with lobbyists,' and (2) … ensur[ing] that CMCs 'cannot subtly influence any of [the Department's] decisions related to national security by influencing a lobbyist'":

[T]he government cannot impose a restriction on speech based solely on "mere conjecture." Rather, it must "point to record evidence or legislative findings demonstrating the need to address a special problem."

Here, Defendants fail to meet their burden. Defendants provide only one exhibit in support of their opposition: the joint explanatory statement submitted as part of the legislative record for the Act. The statement provides an overview of Section 4663 and then "direct[s] the Comptroller General of the United States to submit a report to the congressional defense committees, not later than one year after the enactment of this Act, on the national security risks posed by consulting firms who simultaneously contract with the Department of Defense and the Chinese government or its proxies or affiliates."

Of note, the Comptroller General is directed to study consulting firms, not lobbyists. The statement does not express any findings by the Comptroller General or Congress about the risks posed by lobbyists retained by CMCs. At the preliminary injunction hearing, Defendants were unable to confirm whether a report by the Comptroller General had been submitted to Congress by December 23, 2025, one year after the Act's enactment; nor did Defendants provide a copy of the report. Other than the statement, Defendants do not provide any evidence of the national security risks or other compelling government interests….

[Moreover, d]efendants do not offer any evidence demonstrating that alternative [and less speech-restrictive] means were contemplated, much less rejected for being insufficient…. Meanwhile, Alibaba submits evidence that less alternative restrictions may exist. With respect to CMCs, Nebraska has required lobbyists representing entities on the 1260H List to file an acknowledgment that they are representing a foreign adversary. The Supreme Court "has upheld registration and disclosure requirements on lobbyists" as a "less restrictive alternative to more comprehensive regulations of speech." Defendants present no reason why a disclosure requirement, like Nebraska's, would be inadequate for the federal government.

Instead, Defendants summarily conclude that Alibaba's proposed disclosure requirement would not suffice because "there would still be access and the potential for influence." This speculation is insufficient to support a restriction on the First Amendment….

Carter G. Phillips, Christopher A. Eiswerth, Jennifer J. Clark, and Sheila Anil Gogate Armbrust (Sidley Austin LLP) represent Alibaba.