By: Bradley McNeil, Ph.D. Student (McMaster University)
This blog post traces Microsoft’s lobbying strategies to valuable lessons that the company learned in its early antitrust battles in 1998. These early experiences taught Microsoft to position itself not as a source of friction for regulators, but as their aid. This blog post demonstrates Microsoft’s transition from an adversarial to a more amicable lobbying approach. This blog post also discusses Microsoft’s recent lobbying activities in Canada.
Microsoft Lobbying in the News: A Brief History
In 1994, Microsoft hired its first full-time Washington based lobbyist (Jack Krumholtz) to advocate for the company’s interests in software copyright and data-encrypting laws. Initially, Microsoft was reluctant to make its foray into the political scene. In December 1995, Microsoft CEO and co-founder Bill Gates remarked: “I’m sorry that we have to have a Washington presence. We thrived during our first 16 years without any of this.” However, Microsoft quickly changed its stance on the utility of lobbying when the US Justice Department filed an antitrust lawsuit against the corporation in 1998. The antitrust lawsuit filed against Microsoft was partly the result of successful lobbying by a coalition of Microsoft’s competitors that had “encouraged [Justice] to proceed promptly with an antitrust probe.” Microsoft competitors, Netscape and Java, argued that an antitrust case against Microsoft was necessary because the company was improperly maintaining a monopoly on the personal computer (PC) market by restricting users from removing Microsoft’s Internet Explorer to use alternative programs like Netscape. Responding to the lawsuit, Microsoft invested heavily in developing a government affairs presence. By 2000, the company had quickly become one of the most dominant government influencers along with companies like AT&T and Lockheed Martin.
The 1998 antitrust case initially went poorly for Microsoft. In the summer of 2000, the court ruled that Microsoft would have to be split up into two divisions, one to produce the operating system, and the other to produce software. However, Microsoft successfully appealed the court’s ruling and in September 2001, the court decided that Microsoft would not have to be broken up. Microsoft settled for a lesser antitrust penalty and, moving forward, the company would allow PC manufacturers to adopt non-Microsoft software. Microsoft learned two important lessons from their early antitrust battles that has come to define the company’s lobbying efforts. First, Netscape taught Microsoft that lobbying for regulatory action against industry competitors could payoff. Second, Microsoft learned that it is better to stay on the good side of regulators. During the appeal process, Microsoft’s relations with regulators was characterized as adversarial. According to Judge Thomas Penfeild Jackson who ruled on the 1998 antitrust case, Microsoft executives “proved time and time again, to be inaccurate, misleading, evasive and transparently false… Microsoft is a company with an institutional disdain for both the truth and for the rules of law that lesser entities must respect.”
Current Microsoft President, Brad Smith, manages to consistently maneuver “his company to an enviable position in a regulatory environment increasingly hostile to tech giants.” Regarding antitrust lobbying, the Wall Street Journal notes that Smith created a new Microsoft team of lawyers and lobbyist named “the Office of Strategic Relations” that pushes antitrust cases against competitors like Google in the US and Europe. Although Microsoft still uses lobbying as a tool to gain a competitive edge against competitors, under Smith’s leadership, Microsoft has been more amicable with regulators who are targeting the corporation’s industry competitors. For example, when Microsoft attempted to bring its “Netflix of gaming” service to the iPhone, Microsoft criticized the anti-competitive nature of Apples App Store for taking too large a cut of digital revenues. Distinct from Apples App Store, Smith noted that Microsoft would “operate by a set of open-market principles.” Smith comparison Microsoft’s open-market vision for gaming services to Apples restrictive, anti-competitive practices, served as a means to “seek regulatory approval in capitals around the world” for the Microsoft’s $70 billion acquisition of Activision Blizzard, the major gaming tech company.
Formed from its early battles with NetScape, Microsoft’s lobbying strategy has been more proactive than reactive. In the contemporary era of increased regulatory scrutiny of tech corporations, Microsoft has made moves to dissociate with newer tech companies facing regulation.
For example, Microsoft pulled out of major industry associations such as TechNet and the Internet Association. Microsoft, a generation older than many of the social media tech giants such as Facebook and Twitter who are now facing regulatory pressure, is using its “protracted legacy because of its earlier policy battles.” For example, speaking on Google’s 2020, and Facebook’s 2022 antitrust battles, Smith pointed to Microsoft’s own antitrust battles during the 1990s and early 2000s to suggest that Google and Facebook would be better off adapting to regulation rather than attempting to change it. Smith noted that although Microsoft was confident it could beat their antitrust cases at the turn of the millennium, the company “failed to appreciate… the possibility or even probability that the law itself would change to adapt to this new world.” Smith’s suggestion that Google and Facebook learn to adapt to the new regulatory environment not only serves the discursive function of separating Microsoft from current regulatory battles – it also comes at a time when content moderation controversies involving social media sites stimulated debate concerning whether Section 230 of the Communications Decency Act should be reworked. In 2019, Smith argued that “Section 230 has a place and a time, but that time is now over.” Dissolving Section 230 would place social media platforms under immense regulatory pressure regarding content moderation.
Since 2021, Microsoft has lobbied in support of the United States Innovation and Competition Act of 2021. The Act anticipates the “risks that the Chinese state-capitalist autocracy poses to free market democracies.” As Senator Chris Coons notes, China’s growing technological power is tied to the State government, which has mostly financed China’s technological boom through the Chinese Communist Party’s 2015 strategic plan and industrial policy ‘Made in China 2025’. The US Innovation and Competition Act has been criticized for its application of cold war rhetoric. Arguing for the efficacy of the Act, Senator Chuck Schumer exclaimed, “Around the Globe, authoritarian governments small blood in the water… They believe that squabbling democracies like ours can’t come together and invest in national priorities the way a top-down centralized and authoritarian government can. They are rooting for us to fail so they can grab the mantle of global economic leadership and own the innovations.” The Innovation and Competition Act supports private industry granting subsidies for technological research and development by non-government corporations. Some, such as Sage Chandler, vice president of international trade at the Consumer Technology Association, note that while Senators have condemned China for its bad industrial policies which pull private tech companies into the economic orbit of the State, “rather ironically, we punish them [China] and then start to copy exactly what they’re doing in a number of ways.” Regardless, the passing of the Act has been hailed as a bipartisan success by tech companies operating principally in the US. Before the Act was passed, Microsoft lobbied about the competitiveness bill, asking the US Congress to resolve their differences and swiftly “send legislation to the president’s desk for his signature.” Microsoft notes that the Act supports scientific research on technological innovation in the areas of semiconductors, cybersecurity, and artificial intelligence. The Act was approved by the U.S. Senate in June 2021. The bill has been regarded by the New York Times as “the most expansive industrial policy legislation in U.S. history.”
Who Lobbies for Microsoft in Canada?
Although Chris Barry is the President of Microsoft Canada and is listed as the responsible officer on the Registry of Lobbyist website, his lobbying activities have never represented more than 20% of his duties. There are, however, several senior officers and employees whose lobbying activities represent 20% or more of their duties.
Marlene Floyd, Microsoft’s National Director of Corporate affairs, has been a member of the Liberal party for over 20 years. From 2013-2015, Floyd was the Director of Operations and Outreach in the House of Commons for the Office of the Leader of the Liberal Party of Canada, Justin Trudeau. From 2004-2002, Floyd served as a Policy Advisor at the Department of Industry, Office of the Minister. From 2001-2002, she was an assistant at the Department of Finance at the Office of the Minister. Lastly, for less than a year in 2000, Floyd was employed as a Summer Student at the Department of Finance at the Office of the Minister, Paul Martin (2000).
Christine Guyot, Microsoft Canada’s Director of Corporate Affairs has held two public offices. In 2015, Guyot served as an Information Officer with Elections Canada, Election Day Polling. From 2013-2014, she was a Parliamentary Intern at House of Commons for a Parliamentary Internship Programme.
Julia Vaux, a Director of Corporate Affairs for Microsoft Canda, has held several public offices between 2006 and 2015. From 2013 – 2015, Vaux was Chief of Staff to the Federal Minster of Health, Hon. Rona Ambrose with Health Canada, Minister’s Office. In 2011, she was a Press Secretary to the Hon. Stephen Harper at the Privy Council Office of the Prime Minister’s Office. She was Director of Communications to the Hon. Rob Nicholson of the Department of Justice at the Minister’s Office. Vaux was also Director of Communications to the Hon. Diane Finley of Citizenship and Immigration at the Minister’s Office. She was Director of Communications to the Hon. Diane Finley at Human Resources Development Canada (HRSDC) at the Minister’s Office. Between 2006-2008, Vaux was also Senior Communications Advisor the Hon. Stephen Harper of the Privy Council Office, Prime Minister’s Office.
Microsoft has five active consultants. Kelly Hutchinson and Julia Mills of the Compass Rose Group. As well as Elly Alboim, Patrick Kennedy, and Alicia Adams of the Earnscliffe Strategy Group. Of these consultants, only Patrick Kennedy has held public offices. From 2004 to 2008, Kennedy was Chief of Staff at the House of Commons for the Office of the Speaker. From 2003-2004, he was a Policy Analyst at Canada Revenue Agency, Policy and legislation. Earnscliffe Strategies’ website notes that Kennedy served at the “heart of the machinations of Parliament during two of Canada’s minority governments.” To date, Kennedy has only logged one communication report on the registry of lobbyist website which indicates that Kennedy met with Justion To, Deputy Director of Policy and Policy Advisor Prime Minster Office on the subject matter of Industry.
What Does Microsoft Lobby About in Canada?
In Canada, Microsoft has lobbied to apply regulatory pressure on competitors regarding Bill C-18. Bill C-18, known as the Online News Act, would have social media companies pay the news media industry for news. Microsoft stated its support for the “Canadian effort to make big tech pay for news.” Microsoft’s comments came in February of 2021 when Canada was first considering taking a course of regulatory action similar to that of Australia’s News media bargaining code. When Google threatened to pull its search engine from Australia because the country’s media bargaining proposal was unworkable, Microsoft was quick endorse Australia’s proposal and offered its own Bing search engine as an alternative.
When Microsoft’s President, Brad Smith, was hired in 2001, he persuaded Microsoft’s top executives that “it was time to make peace as a company.” Smith argued that Microsoft would not be successful if it continued to treat regulators as adversaries as it had during the recent antitrust trials. Microsoft’s amicable approach to regulators has meant that the company prefers to support the aims of regulators rather than being a source of friction for governments. For example, at the beginning of 2022, Microsoft has lobbied Natural Resources Canada (NRCan) about climate. Then in September 2022, Microsoft announced a strategic partnership with Ontario Power Generation (OPG) “aimed at tackling climate change and driving sustainable growth across Ontario.” Microsoft’s announcement of the partnership note that the move would “serve as a model for other companies… to encourage use of clean hydro and nuclear power.” The partnership also noted that OPG’s use of Microsoft’s cloud platform Azure would help OPG modernize its applications and reduce its carbon footprint. The OPG-Microsoft partnership illustrates how Microsoft manages to associate its business developments with the causes of regulators.
Microsoft also lobbies about immigration policy in Canada. In 2019, Microsoft lobbied about “Immigration policy and programs as they relate to attracting high skilled global talent to Canada.” In January of 2019 the federal government granted Microsoft an exemption from labour market impact assessment (LMIA), that would allow Microsoft to bring foreign workers to Canada without having to first search for Canadians who could fill the positions. Microsoft continues to lobby about immigration policies to bring highly skilled global talent to Canada.
In addition to the aforementioned issues, Microsoft Canada also currently lobbies about the following subject matters: Broadcasting, Budget, climate, consumer issues, Defence, economic development, education, employment and training, energy, environment, government procurement, immigration, industry, infrastructure, intellectual property, internal trade.
What Government Institutions does Microsoft lobby in Canada?
Microsoft has lobbied many government institutions in Canada. Below is a list of government institutions that Microsoft has lobbied in 2022. This list was created using information from the Lobbying Registry:
- Canada Border Services Agency (CBSA)
- Canadian Heritage (PCH)
- Canadian Radio-television and Telecommunications Commission (CRTC)
- Communications Security Establishment Canada (CSEC)
- Competition Tribunal (CT)
- Elections Canada
- Employment and Social Development Canada (ESDC)
- Environment and Climate Change Canada (ECCC)
- Finance Canada (FIN)
- Global Affairs Canada (GAC)
- Health Canada (HC)
- House of Commons
- Immigration, Refugees and Citizenship Canada (IRCC)
- Infrastructure Canada (INFC)
- Innovation, Science and Economic Development Canada (ISED)
- Justice Canada (JC)
- National Defence (DND)
- Natural Resources Canada (NRCan)
- Parks Canada (PC)
- Prime Minister’s Office (PMO)
- Privy Council Office (PCO)
- Public Safety Canada (PS)
- Public Services and Procurement Canada (PSPC)
- Royal Canadian Mounted Police (RCMP)
- Senate of Canada
- Service Canada (ServCan)
- Shared Services Canada (SSC)
- Transport Canada (TC)
- Treasury Board Of Canada Secretariat (TBS)
- Women and Gender Equality (WAGE)