Saturday October 16, 1999
Antitrust experts bash MS lobbying
Lisa M. Bowman, ZDNet

Microsoft Corp. wants to slice the budget of the agency that's been a thorn in its side since the early 1990s.

The company, and some non-profit groups associated with it, have been asking lawmakers to approve the lowest possible year 2000 budget for the U.S. Department of Justice, which brought a sweeping antitrust suit against the software maker last year. The two settled an earlier suit.

Details of the efforts were first reported Friday in the Washington Post, which said that the groups have asked Congress to vote for the House-allocated budget of $105.2 million for fiscal year 2000, which is lower than the $114.3 million the Clinton administration is seeking. The Senate has allocated $112.3 million. All of the spending proposals are higher than the DOJ's 1999 budget.

Microsoft's (Nasdaq:MSFT) lobbying actions have raised the eyebrows of several antitrust experts and industry watchers.

"It's definitely a hardball tactic," said attorney Warren Grimes, a professor at the Southwestern University School of Law in Los Angeles who once worked for the Federal Trade Commission.

He said it's typical for a company to rigorously fight charges against it, or to lobby Congress on specific issues. "What's unusual is that they're taking the additional step of challenging the agency's budget," Grimes said. "That bothers me."

However, Grimes acknowledged that Microsoft is within its rights to try to influence the lawmakers. "They certainly have a First Amendment right to do that," Grimes said. "There's nothing illegal or even unethical about it." But he said it's dangerous to send a message that if the DOJ goes after a big company, its budget will be affected.

MS: Oversight needed
A Microsoft spokesman downplayed the company's efforts, saying that it simply was asking for more oversight of the DOJ. "It's not really about a specific dollar figure," Microsoft spokesman Rick Miller said. "We have serious concerns about how they handled the case."

Miller accused the agency of being too quick to consider the charges of overzealous competitors and of sending staff abroad to encourage foreign governments to take up cases against the company.

The DOJ and Microsoft are embroiled in a heated antitrust case in Washington D.C., which is in the hands of Federal Judge Thomas Penfield Jackson.

A spokeswoman for the DOJ hoped Microsoft's efforts would have little effect on the agency. "We think the Justice Department's budget should be based on the needs of law enforcement, not based on a single interest," DOJ spokeswoman Gina Talamona.

Backlash possible
The move could cause backlash against the company as it tries to repair its image following a series of foibles related to the case. Before the suit was filed, Ballmer told a reporter "to heck with Janet Reno" when asked about the issue. Then the company planned a media blitz disguised as a spontaneous grass roots campaign featuring such tactics as "independent" letters to editor from people funded by the company.

In the courtroom itself, Microsoft has been embarrassed by a less than spectacular showing of Bill Gates' deposition and the discovery that it had doctored a videotape shown to the judge. Finally, just last month the company acknowledged it had paid for a series of ads from the Independent Institute - after denying that it funded the ads.

Ken Wasch, president of the Software & Information Industry Association, a software trade association that counts Microsoft as a member, thinks those gaffes, coupled with the anti-DOJ lobbying efforts, could negatively affect Microsoft if the case reaches a remedy stage.

"I think this tactic is outrageous," Wasch said of the lobbying move. "This defiance has a price." For example, he said the DOJ could urge the judge to consider structural remedies - such as breaking up the company - because the company hasn't shown good faith in other dealings.

Tempest in a teapot? But others doubt lobbying will influence the suit.

"I'm quite sure it won't have any impact on the case at all," said Solveig Singleton, a lawyer with the CATO Institute, a libertarian think tank. Instead, she said it may cause Congress to reconsider the issue of regulation in an industry that moves as fast as high tech.

Still, she ventured that Microsoft has nothing to lose, as its bitter court battle enters the final stage. "Generally, when you're regulated by an agency, you need to get along with it," Singleton said. "In the case of Microsoft and the DOJ, it's hard to see how they could be on worse terms."