Commentary: It's Back To Charm School For Microsoft

If Washington lobbyists competed for a Chutzpah Award, this year's winner would surely be Team Microsoft. For more than a year, the software giant's hired guns have lobbied Congress to deny the Justice Dept.'s Antitrust Div. the fat budget hike needed to keep up with a flood of mergers and enforcement actions. Those are the same trustbusters who happen to be suing Microsoft Corp. for abusing its alleged monopoly power against smaller rivals.

Even on Capitol Hill, where politics is often a bare-knuckles game, some niceties are still observed. One is that corporations don't go after a regulator's budget when the regulator is going after them. It's unheard of, for example, for a pharmaceutical company to mount a budgetary vendetta against the Food & Drug Administration while it is being investigated for misleading claims about a drug's effectiveness.

As most lobbyists will attest, such heavy-handed tactics can backfire. Instead of intimidating Justice officials, Microsoft's behavior is likely to stiffen the resolve of antitrusters. And it has made Microsoft look as though it's trying to bully the opposition. "It's unseemly," says Wright H. Andrews Jr., a partner in the lobbying firm of Butera & Andrews and past president of the American League of Lobbyists. "It's also dumb. Microsoft will make more enemies out of this than friends."

TOUGH TACTICS. Ironically, the Redmond (Wash.) company set out three years ago to turn itself into a silky-smooth player in the capital influence game. Stung by the Feds' antitrust assault, Microsoft founder and Chairman William H. Gates III ditched his storied indifference to Washington. Almost overnight, Microsoft began making large campaign contributions to candidate and party coffers. It hired a battalion of well-connected lobbyists to woo lawmakers. And it enlisted anti-big-government interest groups in its crusade against Justice.

For the first half of this year, Microsoft and its execs contributed $621,000 to candidates and parties, vs. just $33,000 in the first half of 1995. In the 1998 elections, it came in 19th on the list of top contributors to political parties. In 1994, it didn't even make it onto the list of top 100 soft-money donors.

Microsoft has become a lobbying force to be reckoned with. It has 10 in-house reps--more than its rivals. Last year, Microsoft also had nine outside lobbying firms to spread the Gates-ian message of fabulously great software--unimpeded by the intrusive arm of Uncle Sam. Its stable of top talent includes Kerry Knott, former chief of staff to House Majority Leader Richard Armey (R-Tex.), and Haley Barbour, former Republican National Committee chairman and currently a political adviser to George W. Bush. Barbour's firm received $600,000 from Microsoft in 1998. Overall, Microsoft ranked No. 68 on the nonpartisan Center for Responsive Politics' list of lobbying spenders. It paid $3.7 million to lobbyists last year, up 76%.

Microsoft's crash course in Beltway culture has yielded some victories. The company was at the forefront of mostly successful battles to ease export curbs on encryption software and to limit corporate liability for Year 2000 computer glitches. And it has made considerable headway in turning public opinion against any breakup as a result of the antitrust suit. But its tough tactics against Justice shows the Colossus of Redmond still has much to learn.

Microsoft's goal was simple: Block the Administration's request for a 16% hike, to $114.3 million, in the Antitrust Division's fiscal 2000 budget. Its spear-carrier was Senator Slade Gorton (R-Wash.), who has collected $41,600 from Microsoft and company executives in the first half of this year alone. Microsoft also has enlisted anti-government groups, such as Washington-based Citizens for a Sound Economy (CSE). Microsoft acknowledges that it has contributed an undisclosed sum to CSE.

NO REGRETS. In September, representatives from CSE and a dozen other groups spent three days attending briefings at Microsoft on technology issues. A company spokesman says Justice's antitrust budget never came up.

But on Sept. 30--just two days after the Redmond conclave--a Microsoft lobbyist and a CSE staffer met with Representative Dan Miller (R-Fla.), who sits on the panel that oversees Justice's budget. They urged him to push hard for a minimal 6% increase in the Antitrust Division's funding in talks with the Senate, which had approved a figure closer to what President Clinton was seeking.

CSE officials say the group is on record supporting a smaller increase in Justice Dept. funding prior to the meeting in Redmond. However, CSE was unable to provide any documentation that funding concerns predated its association with Microsoft.

Predictably, Microsoft's maneuver fell flat. Congress ultimately approved a 12% hike, to $110 million. As for regrets from Redmond, forget it. A company spokesman says: "We're very happy with what we did. We were using [the budget debate] as an opportunity to raise our concerns with the way the Justice Dept. has handled our case."

Um, O.K. No one questions Microsoft's right to complain about rough handling from government lawyers. But back-door retaliation against a federal agency that has raised legitimate antitrust concerns only burnishes Microsoft's image as a ham-handed behemoth. That won't help its cause before the bar of justice--or in the court of public opinion.

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