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  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.4

  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, Brinkley wrote, 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.’ ”5“5

  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.”6

  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.”7

  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.”8 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.”9

  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 ‘Protrust. ’ ”10 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.”11 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 exposé 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.12

  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.13 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.”14

  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. Here are a few other examples of the process at work:• After Nigeria’s military dictatorship executed playwright Ken Saro-Wiwa in 1995, the dictatorship and Shell Oil Company faced international condemnation. Nigeria’s security forces had massacred villages and terrorized the indigenous Ogoni tribespeople in order to quell protests against the company’s natural gas drilling operations. Saro-Wiwa, an Ogoni leader, had denounced Shell for waging an “ecological war” against his people. Nigeria responded by ordering multipage, glossy color advertisements in black-owned U.S. newspapers and inviting newspaper editors on expense-paid “fact-finding tours” of Ogoniland. Minority newspapers in the United States are chronically strapped for cash, and the combination of windfall revenue and guided tours succeeded in blunting criticisms. In fact, several newspapers editorialized that it was “racist” to criticize Nigeria’s dismal track record on human rights.

  • In the fall of 1997, Georgetown University’s Credit Research Center issued a study which concluded that many debtors are using bankruptcy as an excuse to wriggle out of their obligations to creditors. Lobbyists for banks and credit card companies seized on the study as they lobbied Congress for changes in federal law that would make it harder for consumers to file for bankruptcy relief. Former U.S. Treasury Secretary Lloyd Bentsen cited the study in a Washington Times opinion column, offering Georgetown’s academic imprimatur as evidence of the need for “bankruptcy reform.” What Bentsen failed to mention was that the Credit Research Center is funded in its entirety by credit card companies, banks, retailers, and others in the credit industry. The study itself was produced with a $100,000 grant from Visa USA and MasterCard International, Inc. Bentsen also failed to mention that he himself had been hired to work as a credit-industry lobbyist.15

  • In Oxford, England, the Social Issues Research Centre (SIRC) calls itself an “independent, non-profit organization founded to conduct research on social issues.” It has issued a call to establish a British “code of practice” governing what reporters should be allowed to write about issues of science and public safety. Designed to put a stop to “irresponsible health scares,” the code stipulates that “scientific stories should be factually accurate. Breaches of the Code of Practice should be referred to the Press Complaints Commission.” Such a code is necessary, SIRC suggests, because of the public’s “riskfactorphobia,” a term it has coined to describe a condition of excessive sensitivity to health concerns related to genetically engineered foods and foodborne illnesses. SIRC has also published popular reports in the British press about the pleasures of pub-hopping. When the British Medical Journal took a close look at the organization, however, it found that SIRC shares the same offices, directors, and leading personnel as a PR firm called MCM Research that claims to apply “social science” to solving the problems of its clients, who include prominent names in the liquor and restaurant industries. “Do your PR initiatives sometimes look too much like PR initiatives?” asked MCM’s website in a straightforward boast of its ability to deceive the public. “MCM conducts social/psychological research on the positive aspects of your business,” the website continued. “The results do not read like PR literature, or like market research data. Our reports are credible, interesting and entertaining in their own right. This is why they capture the imagination of the media and your customers.”16

  • Corporate sponsors have formed “partnerships” with a number of leading nonprofit organizations in which they pay for the right to use the organizations’ names and logos in advertisements. Bristol-Myers Squibb, for example, paid $600,000 to the American Heart Association for the right to display the AHA’s name and logo in ads for its cholesterol-lowering drug Pravachol. The American Cancer Society reeled in $1 million from SmithKline Beecham for the right to use its logo in ads for Beecham’s NicoDerm CQ and Nicorette anti-smoking aids. A Johnson & Johnson subsidiary countered by shelling out $2.5 million for similar rights from the American Lung Association in its ads for Nicotrol, a rival nicotine patch. In 1999 manufacturers spent $630 million on these and similar kinds of sponsorship deals, some unseemly, such as a deal between the Eskimo Pie Corporation and the American Diabetes Association, which was designed to create the impression that Eskimo’s “Sugar Freedom” line of frozen desserts was endorsed by the American Diabetes Association, when in fact the desserts contain high levels of both total and saturated fat—a risky dietary choice for diabetics, who have a propensity for obesity and heart disease. Although the nonprofit organizations involved in these deals deny that the use of their names and logos constitutes an endorsement, the corporate sponsors have no such illusions. “PR pros view those third-party endorsements as invaluable ways to build goodwill among consumers for a client’s product line,” notes O’Dwyer’s PR Services Report. For propriety’s sake, however, a bit of discretion is necessary. “Don’t use the word ‘endorse’ when speaking to executives from non-profits about their relationships with the private sector,” O’Dwyer’s advised. “The preferred non-profit vernacular is: recommended, sponsorship, approved, or partnership.”17

  • An organization called “Consumer Alert” frequently pops up in news stories about product safety issues. What the reporters almost never mention is that Consumer Alert is funded by corporations and that its positions are usually diametrically opposed to the positions taken by independent consumer groups such as Consumers Union. For example, Consumer Alert opposes flame-resistance standards for clothing fabrics issued by the Consumer Product Safety Commission, and defends products such as the diet drug dexfenfluramine (Redux), which was taken off the market because of its association with heart valve damage. In contrast with Consumers Union, which is funded primarily by member subscriptions, Consumer Alert is funded by the industries whose products it defends—companies including Anheuser-Busch, Pfizer Pharmaceuticals, Philip Morris, Allstate Insurance Fund, American Cyanamid, Elanco, Eli Lilly, Exxon, Monsanto, Upjohn, Chemical Manufacturers Association, Ciba-Geigy, the Beer Institute, Coors, and Chevron USA. 18

  • In late 1993, a group called Mothers Opposing Pollution (MOP)
appeared, calling itself “the largest women’s environmental group in Australia with thousands of supporters across the country. . . . The group comprises mainly mothers and other women concerned with the welfare and rights of Australian women.” MOP’s cause: a campaign against plastic milk bottles, centering on the issues of waste disposal, the carcinogenic risks of milk in contact with plastic, and reduction in the quality of milk as a result of exposure to light. “The message to the consumer is never buy milk in plastic containers,” said spokesperson Alana Maloney. Membership in MOP was free, which prompted some people to wonder how the group could afford to carry out expensive publicity in support of its cause. Although MOP claimed branches across Australia, Alana Maloney seemed to be its only spokesperson. Searches of basic public records, such as voting rolls, could find no such person. MOP’s letterhead listed three addresses in different cities, each of which turned out to be a post office box. Finally, in February 1995, an Australian newspaper discovered that “Mrs. Alana Maloney” was in fact Janet Rundle, who heads a public relations company called J. R. and Associates. Rundle is also a business partner of Trevor Munnery, who owns his own PR firm called Unlimited Public Relations, which works for the Association of Liquidpaperboard Carton Manufacturers (ALC)—the makers of paper milk cartons. In the wake of these public revelations, MOP sank from public view and has since disappeared. 19