DC Lobby Shops Drop Alibaba and Tencent as Section 851 Hits

Section 851 of the FY 2025 National Defense Authorization Act takes effect Tuesday, June 30, and the practical consequence is that Washington's biggest lobbying firms have spent the last few weeks deciding which clients pay them more. According to Bloomberg, Alibaba terminated its engagement with Greenberg Traurig effective May 31, and Brownstein Hyatt Farber Schreck, Mercury Public Affairs and MO Strategies have all dropped the company. Tencent, which was added to the Pentagon's 1260H Chinese military companies list back in January 2025, has reportedly lost four lobbying firms.

The rule itself is narrow but consequential. The Defense Department is barred from contracting with any company whose registered lobbyists also represent an entity on the 1260H list, and the list got materially longer when the Pentagon added 65 new entities on June 8. For a firm with a meaningful defense practice, the calculation is straightforward, and as the reporting puts it, defense work pays more and carries less political risk.

Why this matters if you are not in DC: Alibaba and Tencent are two of the largest non-Western AI and cloud companies, and Washington is currently writing the rules that decide which chips they can buy, which models they can serve, and which clouds they can build on. The conventional channel for arguing those rules, hiring a K Street firm with relationships on the relevant committees, has just been closed for them in any case where that firm wants to keep Pentagon business. Bloomberg's framing is that the ability to shape US policy through conventional channels has, for Tencent at least, all but evaporated.

The honest caveat is that the reporting documents the disclosures but not the second order. We do not yet know how many of the 188 firms now designated had active DC engagements that are now being unwound, how parent and subsidiary structures get treated, or whether the affected companies will simply route influence through think tanks, trade associations and law firms that do not register. Take the specifics as reported, not settled.

The forward-looking piece is who picks up the work. Boutique shops without DoD portfolios are the obvious beneficiaries, as are law firms specializing in 1260H challenges, since a Federal Circuit route now looks more attractive than a legislative one. The interesting thing to watch over the next couple of weeks is the lobbying disclosure database itself.