How Hatch forced Microsoft to play K Street's game

Damn you evil corporations.






Carney: How Hatch forced Microsoft to play K Street's game

June 24, 2012

"If you want to get involved in business," Sen. Orrin Hatch warned technology companies at a conference in 2000, "you should get involved in politics."

Hatch was referring to the shortcomings of then-software king Microsoft, which he had spent most of the previous decade harassing from his perch as Judiciary Committee chairman. The message was clear: If you become successful, you must hire lobbyists, you must start a political action committee, and you must donate to politicians. Otherwise Washington will make your life very difficult.

Hatch's crusade against Microsoft was a formative moment in the cozy relationship between K Street and Capitol Hill. That coziness has become a prime target of the Tea Party in recent years -- and so has Orrin Hatch, who faces a primary Tuesday against conservative challenger Dan Liljenquist.

Here's the Hatch-Microsoft story:

The Clinton administration brought antitrust charges against Microsoft after the Windows 95 operating system came preloaded with Microsoft's browser, Internet Explorer. Though the case was in the hands of the Federal Trade Commission and the courts, Hatch brought Microsoft CEO Bill Gates before his Senate Judiciary Committee in 1998, and gave him a good dressing down, ostensibly for being a monopolist.

But it grated on Hatch and other senators that Gates didn't want to want to play the Washington game. Former Microsoft employee Michael Kinsley, a liberal, wrote of Gates: "He didn't want anything special from the government, except the freedom to build and sell software. If the government would leave him alone, he would leave the government alone."

This was a mistake. One lobbyist fumed about Gates to author Gary Rivlin: "You look at a guy like Gates, who's been arrogant and cheap and incredibly naive about politics. He genuinely believed that because he was creating jobs or whatever, that'd be enough."

Gates was "cheap" because Microsoft spent only $2 million on lobbying in 1997, and its PAC contributed less than $50,000 during the 1996 election cycle.

"You can't say, 'We're better than that,' " a Microsoft lobbyist told me on Friday. "At some point, you get too big, and you can't just ignore Washington."

"You can sit there and say, 'We despise Washington and we don't want to have anything to do with them,' " the lobbyist said. "But guess what? We're going to have hearings about the [stuff] you do."

It's no shocker that lobbyists think companies should hire lobbyists. But so does Capitol Hill -- Orrin Hatch included.

In a 2000 speech to technology companies, Hatch called Microsoft "knuckle-headed and hard-nosed," according to Wired magazine. "I have given [Microsoft] advice, and they don't pay any attention to it." In that same speech, Hatch warned: "If you want to get involved in business, you should get involved in politics."

"The industry had an attitude that government should do what it needs to do but leave us alone," one Hill technology staffer complained to Business Week at the time. "Their hands-off approach to Washington will come back to haunt them."

After the Hatch hearings, Microsoft complied. Its PAC increased spending fivefold in each of the next two elections. In the 2010 elections, Microsoft's PAC contributed $2.3 million to House and Senate candidates. The PAC has contributed the maximum $10,000 to each of Hatch's last two campaigns.

Back before the antitrust case, Microsoft's tiny lobbying contingent sat in the company's local sales office in Chevy Chase. Since the Hatch hearings, Gates' company has poured more than $100 million into K Street's economy, hiring up members of congress and Capitol Hill staff, many of whom then became top fundraisers -- such as Republican Jack Abramoff and Democrat Steve Elmendorf.

Wal-Mart underwent this same shakedown last decade. Then the hedge funds caught the eye of Washington. Next on the menu is Apple. This is how Washington increases its power and its wealth.

And while companies may first come to Washington to play defense, they soon learn how to profit off big government. Today, Microsoft isn't asking to be left alone. The company supported Obama's stimulus, which subsidized computers and also "net neutrality" regulations, which would protect their current profit model.

Microsoft now plays ball in Washington, and Orrin Hatch's public flogging of Gates was a major reason. "It's been a year since I was in D.C.," Gates wrote the night before his Hatch hearing. "I think I'm going to be making this trip a lot more frequently from now on."

K Street can thank Hatch for the favor.

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