Fun_People Archive
18 Sep
Microsoft Ads

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From: Peter Langston <psl>
Date: Sat, 18 Sep 99 20:16:13 -0700
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Subject: Microsoft Ads

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September 18, 1999

'Unbiased' Ads for Microsoft Came at a Price


WASHINGTON -- Newspaper advertisements that a California institute presented
as independent views supporting Microsoft Corp.'s position in its antitrust
trial were actually paid for by Microsoft, the institute conceded Friday.

The full-page newspaper ads, published in The New York Times and The
Washington Post by the Independent Institute last June, were in the form of
a letter signed by 240 academic experts. They prompted news stories and
courtroom discussion during the trial.

The academics were not told that Microsoft was paying for the ads, and at
least one now says he would not have signed if he had known the source of
the financing.

Greg Shaw, a public relations manager for Microsoft, confirmed Friday night
that the company had paid for the ads. "We thought this was an important,
substantive letter, and we were interested in contributing to making it
visible," he said. "In our view, the letter speaks for itself."

During the yearlong public relations war that has been fought in parallel
with the antitrust trial, a dozen or more institutes and lobbying
organizations have weighed in with advertisements, reports, news conferences
or books that offer strong opinions on one side of the case or the other.

Many of the organizations have acknowledged that they were financed by
Microsoft, or by its rivals. But the Independent Institute made an
extraordinary effort to portray itself as beholden to no one. The institute,
based in Oakland, Calif., has written papers and offered opinions on a broad
range of political, social, business and foreign policy issues over the 14
years of its existence. Throughout the trial, it has often taken Microsoft's

According to its literature, the institute "adheres to the highest standards
of independent scholarly inquiry." Its president, David Theroux, describes
himself as a scrupulously disinterested academic and adds: "We are not doing
contract work. We're independent. Our intention is to do work that holds up
to any type of scrutiny."

But internal institute documents show that Microsoft has secretly served as
the institute's largest outside financial benefactor in the last year. The
documents were provided to The New York Times by a Microsoft adversary
associated with the computer industry who refused to be further identified.

Microsoft has mounted an elaborate public relations campaign as part of its
trial strategy, to influence public opinion and, perhaps, the trial judge.
Much of it is open and above board, but Friday's admission by the institute
suggests that an important part is intended to be secret.

On June 2, the day the antitrust trial resumed for its final month of
testimony after a three-month break, the institute ran full-page ads in The
New York Times and The Washington Post signed by 240 academics who were said
to support the view that antitrust prosecution was harmful to consumers --
a key argument Microsoft was making in court.  Complemented by a heavily
promoted news conference in Washington, the effort received enough attention
that David Boies, the government's lead lawyer in the antitrust suit,
referred to it in court on June 3.

Last month, the institute published a book titled "Winners, Losers and
Microsoft: Competition and Antitrust in High Technology." The book argued
that Microsoft had succeeded in dominating the software industry principally
because it makes superior products -- another often-voiced theme of
Microsoft's trial defense. The company's economic witness at the trial,
Richard Schmalensee, an economist at the Massachusetts Institute of
Technology, cited the book as a source for an important assertion in his
direct testimony.

Theroux has long acknowledged that Microsoft is a dues-paying member of his
institute, a point that is usually made in news articles about the
institute. But he has insisted all along that Microsoft is "just one of
2,000 members" and as such pays a membership fee of roughly $10,000 a year
-- an inconsequential part of the organization's overall budget that gives
the company no special standing. All Microsoft gets for that, he said, is
"free copies of our publications, discounted tickets to our events."

He has also maintained that Microsoft had nothing to do with the newspaper
advertisements. The ads, he said in the interview, "were paid for out of
our general funds."

His letter to economists soliciting participation made no mention of

But, in fact, among the institute's internal documents is a bill Theroux
sent to John Kelly, a policy counsel for Microsoft, for the full costs of
the ads, plus his travel expenses from San Francisco to Washington for the
news conference, totaling $153,868.67. Included was a $5,966 bill for
airline tickets for himself and a colleague.  Unfortunately, he wrote Kelly,
"the airlines were heavily booked" and "we had to fly first class to D.C.
and business class on the return."

Asked Friday evening about that bill, Theroux acknowledged that Microsoft
had paid for the ads but said it made no difference. "The academic process
we use is independent of sources of revenue."

At least one academic who signed the ad disagreed.

"He should have told us," Simon Hakim, an economist at Temple University,
said Friday when told of the financing. "I would not have participated if
I had known. It's not right to use people as a vehicle for special

On the other hand, Stan Liebowitz, a professor of economics at the
University of Texas at Dallas who was one of the authors of the "Winners,
Losers and Microsoft" book, said that he, too, had been unaware of the
Microsoft payments, but added, "it doesn't matter to me."

Also among the institute's internal documents was an accounting of 337
contributions the institute received for the fiscal year that ended June
30. Theroux said those donations accounted for 60 percent or 70 percent of
the institute's overall budget.

The accounting sheets show that Microsoft contributed significantly more
than $10,000 last year -- $203,217, in all, the most from any outside
individual or organization and about 20 percent of the total outside
contributions for the period. (Not counted in that tally was $304,725 that
Theroux contributed to his own foundation.)

Copyright 1999 The New York Times Company

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