By Sheldon Rampton and John Stauber

In April, 1998, as the U.S. Justice Department's antitrust investigation of the Microsoft corporation began to evolve from a background nuisance into a serious challenge to the company's future, a large binder of confidential company documents found its way into the hands of The Los Angeles Times. Leaked by an anonymous whistleblower, the documents detailed a multimillion-dollar media campaign designed for Microsoft by Edelman Public Relations Worldwide, one of the world's largest PR firms. The plan aimed to head off new antitrust investigations being considered by attorney generals in eleven U.S. states. The Times described the Edelman plan as "a massive media campaign designed to influence state investigators by creating the appearance of a groundswell of public support for the company." It proposed to hire local PR firms as subcontractors in Arizona, California, Florida, Michigan, New York, North Carolina, Ohio, Pennsylvania, Texas, Virginia and Wisconsin. Freelance writers would be hired to write opinion pieces, which the local PR firms would then submit to local newspapers. "The elaborate plan...hinges on a number of unusual — and some say unethical — tactics," noted L.A. Times writers Greg Miller and Leslie Helm, "including the planting of articles, letters to the editor and opinion pieces to be commissioned by Microsoft's top media handlers but presented by local firms as spontaneous testimonials." In the words of the leaked documents, the goal was to generate "leveragable tools for the company's state-based lobbyists," positive press clippings that "state political consultants can use to bolster the case" for Microsoft.

With documents in hand, the reporters played a cat-and-mouse game with Microsoft spokesman Greg Shaw, who denied knowing about the plan until they informed him of the internal memos in their possession, in which Shaw's own name figured prominently. Presented with this reality, he smoothly adjusted his story, admitting that the Edelman plan existed but describing it as merely a proposal. "The idea that we'd hire people who wouldn't identify themselves as representing Microsoft is totally false," Shaw said. "Actually, the proposal we received is quite mundane."

After a few days of embarrassing editorials in the computer trade press, the Edelman plan was largely forgotten. A year later, it went unmentioned when several news stories discussed an "Open Letter to President Clinton from 240 Economists" that appeared in the form of full-page advertisements in the Washington Post and New York Times. The ads were paid for by a California-based nonprofit think tank named the Independent Institute, a conservative organization that had been a leading defender of Microsoft since it first came under fire from federal prosecutors. "Consumers did not ask for these antitrust actions — rival business firms did," the Open Letter stated. "Many of the proposed interventions will weaken successful U.S. firms and impede their competitiveness abroad....We urge antitrust authorities to abandon antitrust protectionism," stated the economists, who came from institutions as far apart and as prestigious as the University of California, Johns Hopkins, the University of Miami, American University, Loyola, Ohio State, Dartmouth, Northwestern, Columbia University, Stanford and Cornell.

Underneath the letter itself, a paragraph at the bottom of the newspaper ads advised readers that for more information they should read a new book titled "Winners, Losers and Microsoft: Competition and Antitrust in High Technology," published by the Independent Institute and authored by two of its research fellows, economists Stan Liebowitz and Stephen Margolis. The book was attracting favorable reviews from publications such as The Economist of London and Wired magazine. "Henceforth, any judges, economists, pundits or journalists who discuss Microsoft...without first dealing with the Liebowitz-Margolis critique should have their wrists soundly slapped," stated the Wall Street Journal.

Newsbytes magazine, a computer industry news service, noted that the Independent Institute's position "sounds like a brazenly partisan argument for Microsoft," but checked with a spokesman for the Independent Institute who said that Microsoft did not pay for either the Open Letter advertisements or the publication of "Winners, Losers and Microsoft." The spokesman acknowledged that Microsoft was a member of the Institute and "said membership dues for corporations start at approximately $1,000, but he would not comment on how much Microsoft has contributed to the institute over time," Newsbytes reported.

In September 1999, however, a second group of leaked internal documents found its way into the hands of another reporter, this time Joel Brinkley of The New York Times, who reported that Microsoft was the largest single outside donor to the Independent Institute. During the 1999 fiscal year, Microsoft had provided 20 percent of the institute's operating budget. In addition to helping pay for publication of "Winners, Losers and Microsoft," the software company had paid for the newspaper ads in which the Open Letter appeared. Brinkley's documents included a bill from Independent Institute President David Theroux to Microsoft attorney John Kelly, in the amount of $153,868.67 — the full price of running the full-page ads, plus $5,966 in airfares and expenses for Theroux and a colleague to appear at a press conference timed to coincide with the ads' release.

"Theroux has long acknowledged Microsoft is a dues-paying member of his institute," Brinkley reported. "But he has insisted all along that Microsoft is 'just one of 2,000 members' and as such pays _ 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 Microsoft had nothing to do with the newspaper advertisements. The ads, he said in the interview, 'were paid for out of our general funds.' "

The documents leaked to The New York Times put the lie to these claims, but Theroux was unfazed, attacking Brinkley's story as a "smear campaign" based on "purloined" documents. "It appears that some people in the computer industry may now be stooping to any and all tactics that might be used to discredit the Independent Institute and our powerful new book," he responded. "Mr. Brinkley credits as his source, 'a Microsoft adversary associated with the computer industry who refused to be identified.' ...Bottom line: Do Brinkley's charges make our book and the Open Letter any less credible or accurate? Absolutely not."

The Independent Institute calls itself a "non-partisan, scholarly, public policy research and educational organization ... that sponsors peer-reviewed, scientific studies on a wide range of economic and social issues." That its defense of Microsoft was company-financed is irrelevant, Theroux claimed, because "the academic process we use is independent of sources of revenue." There is some truth to these claims. It would be a little too facile to portray the Independent Institute as a mere mouthpiece for the company. As Theroux pointed out when its funding sources were uncovered, the institute was on record opposing antitrust laws since 1990, long before Microsoft came under federal scrutiny. And while professors Liebowitz and Margolis have worked on occasion as paid consultants to Microsoft, the positions they espouse in "Winners, Losers and Microsoft" were likewise developed years before the company became a target of government investigations.

Yet it is also ridiculous to pretend that the Independent Institute is truly independent. Microsoft had an obvious motive for helping the institute amplify its voice through major advertising, and it is precisely for this reason that the amount of its funding remained confidential until it was leaked to a newspaper reporter. David Callahan, a writer who has researched the relationship between corporate funders and conservative think tanks, notes that Microsoft's relationship with the Independent Institute is "perfectly legal given current tax laws," but adds, "At the same time, something is clearly wrong with this situation.... It is naïve to imagine that conservative think tanks aren't extremely beholden to their funders in the business world or to the corporate leaders on their boards. This is simply the way that the power of the purse works. Just as politicians can't ignore the demands of major donors if they want to survive, neither can institutions ignore their benefactors."

Potemkin Pundits

During the reign of Catherine the Great in Russia, one of her closest advisers was field marshal Grigori Potemkin, who used numerous wiles on her behalf. When Catherine toured the countryside with foreign dignitaries, Potemkin arranged to have fake villages built in advance of her visits so as to create an illusion of prosperity. Since that time, the term "Potemkin village" has become a metaphor for things that look elaborate and impressive but in actual fact lack substance.

Microsoft's financing of the Independent Institute is a modern-day public relations strategy that amounts to Potemkin punditry — the manipulation of public opinion by financing and publicizing views congenial to the public policy goals of their sponsors. When the Edelman plan was first exposed in The Los Angeles Times, PR industry trade publications interviewed public relations practitioners around the country who saw nothing remarkable or particularly disturbing about the campaign. "Based on what I've seen it's a fairly typical PR plan. It's what we do," the manager of a major PR firm said to Inside PR.

One leading PR practitioner — Robert Dilenschneider of the Dilenschneider Group — did criticize the Microsoft plan, calling it "a synthetic campaign." The strategy was ethically wrong, he said, and dangerous to Microsoft's own interests besides. "The media got wind of it, and they made the story the sleaze alley of the computer industry," Dilenschneider said. "It has made Bill Gates, the richest, mightiest person in the world, look a little bit like the Wizard of Oz; a little bit of smoke and mirrors, no substance." But Dilenschneider's critique was in the minority.

"Media plans are routine in PR although they don't sound too good when they hit print," said Jack O'Dwyer's Newsletter, another leading PR trade publication, which went on to offer some advice that Microsoft might want to use to avoid getting caught in the future: "PR pros we asked about this said: 'Don't put anything in writing you don't want to be on page one of your newspaper.'... 'Talking points' on the subject matter should have been distributed but no media relations methodology. Then, if the points became public, the press could only report on the length and breadth of Microsoft's arguments."

As Microsoft and its defenders pointed out, in fact, its corporate rivals were also aggressively spinning the public debate, using a similar "media relations methodology." Netscape, Oracle and Sun Microsystems pushed their side of the antitrust case by launching the "Project to Promote Competition and Innovation in the Digital Age" (ProComp). Netscape hired former U.S. Supreme Court nominee Robert Bork as a spokesman, a casting decision that Hollywood might term "playing against type." Bork is the author of "The Antitrust Paradox," a 1978 book sharply critical of government antitrust rules. "Bork cannot easily be dismissed as a knee-jerk critic of big, successful companies," noted the National Journal. "His reputation as Mr. Anti-antitrust goes back a long time; when he was a Yale law professor, his students nicknamed his course on the topic 'Pro-trust.' " Once in the employ of Netscape, however, Bork issued a 7,000-word position paper and opinion pieces for major newspapers, explaining that federal prosecutors were "simply stopping Microsoft from using its operating system as a club to bludgeon competition into the dust." The anti-Microsoft coalition also hired former presidential candidate Bob Dole, now with the high-powered Washington lobbying firm of Verner, Liipfert, Bernhard, McPherson & Hand. Senator Orrin G. Hatch (R-Utah), a recipient of $17,500 in campaign contributions from Netscape, Sun and America Online, added further conservative firepower to the anti-Microsoft armada, as did the Progress and Freedom Foundation (PFF), a think tank with links to former House Speaker Newt Gingrich. PFF's major financial donors included Netscape, Oracle and Sun, along with other Microsoft adversaries, including Gateway 2000, IBM, Hewlett Packard, America Online and CompuServe.

Even the expose of the Independent Institute that appeared in The New York Times turns out to have been orchestrated by the Oracle company. In order to get the goods on Microsoft's funding of the institute, Oracle had hired a detective firm to go "dumpster diving" through Microsoft's garbage and had used the Washington PR firm of Chlopak, Leonard, Schechter & Associates to circulate the incriminating documents.

None of these tactics are in any way unique to the computer industry. "This kind of plan is ... part of the standard arsenal of companies in the cable and TV industry and in other industries where there's government regulation," one source told PC Week magazine after reviewing the Edelman PR proposal. Computer industry columnist David Coursey went further. "If you think Microsoft is political bad news, compare computing/software generally to the telecommunications, broadcast and cable industries," he wrote. "Their political efforts make Microsoft look like the proverbial 98-pound weakling."

Grigori Potemkin, if he were alive today, would probably be amazed at the number and sophistication of the political facades that have been erected in today's media landscape.

— Sheldon Rampton and John Stauber of the Center for Media and Democracy are the authors of "Mad Cow U.S.A.: Could the Nightmare Happen Here?" (1997) and "Toxic Sludge Is Good For You: Lies, Damn Lies and the Public Relations Industry" (1995)

This article was adapted from the book "Trust Us, We're Experts: How Industry Manipulates Science And Gambles With Your Future" by Sheldon Rampton and John Stauber. Copyright © 2001 by The Center for Media and Democracy. Reprinted with permission.

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