This was on the front page of today's New York Times. It describes the
lengths Microsoft will go to prove its point.
kelly
September 18, 1999
'Unbiased' Ads for Microsoft Came at a Price
By JOEL BRINKLEY
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 side.
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 Microsoft.
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 interests."
Copyright 1999 The New York Times Company
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