The Federal Election Commission (FEC)

Threat to a Newly Emerging, "Digital" Democracy in our Republic

A Critical Review of Recent Hearings on "Internet Communications" –

A Federal agency looking for ways to regulate politics on the Internet

Background

The FEC recently held two days of hearings on "Internet Communications" to receive testimony and query those testifying on the Commission’s newly proposed rules to regulate certain aspects of political "speech" on the Internet under the statutory authority of the Bipartisan Campaign Reform Act of 2002 (BCRA). These propositions were posted in the Federal Register of April 4th. Written testimony had to be submitted by June 3rd. 815 responses were received. 21 of those submitting were invited to provide oral testimony in Washington over two days, on June 28th or 29th, 2005.

The stated reason for the hearings was that they were required by Court order of the Federal District Court of the District of Columbia as a result of their decision in the case of Christopher Shays and Martin Meehan, Plaintiffs v. FEC, Defendant. The Court agreed with Plaintiffs that FEC rules to implement the Bipartisan Campaign Reform Act erred in not including the Internet among venues for "public political advertising."

The rationale for holding the hearings at this time was challenged by one of the Republican commissioners, Vice Chairman Michael Toner, at the outset of the hearings. He both stated and wrote that:

"some…contend that…the Commission has no choice but to regulate online politics in some manner. I do not agree. The Commission is challenging the legal standing of the Shays plaintiffs…If the Commission prevails on appeal, the District Court’s ruling could be vacated and made null and void. Moreover, even if the Shays ruling is upheld, it would apply only in the District of Columbia and would not be a binding decision anywhere else in the United States…. If the Commission decides to regulate online political speech, it should do so only if a majority of Commissioners conclude independently… that the McCain-Feingold law requires the FEC to regulate the Internet."

The representative of the AFL-CIO at the hearings, Lawrence Gold, testified strongly in

support of Commission Toner’s position, stating that the FEC rulemaking is "voluntary," proceeding from "overwrought language in the Shays decision." Nevertheless, the hearings proceeded according to the following schedule.

The even divide of the FEC along party lines, which critics contend makes the body dysfunctional, was quite apparent in the differences in views towards Internet regulation between Democrat and Republican members. The Chairman of the FEC this year is a Democrat who clearly stated the position of himself and his Democratic colleagues among the Commissioners after citing some figures from the FEC database.

Note, as indicated above and in this sentence, that this review will put certain phrases in bold to help highlight key issues for the reader’s attention.

Hearings’ Schedule

Tuesday, June 28, 2005

9:30 – 9:45 a.m. Commissioners’ Opening Remarks

9:45 – 11:45 a.m. Panel 1

11:15 – 11:30 a.m. Break

11:30 a.m. – 1:00 Panel 2

1:00 – 2:30 p.m. Lunch Break

 

2:30 – 3:30 p.m. Panel 3

Wednesday, June 29, 2005

9:30 – 11:00 a.m. Panel 4

11:00 – 11:15 a.m. Break

11:15 a.m.–12:45 p.m.Panel 5

12:45 – 2:15 p.m. Lunch Break

2:15 – 3:45 p.m. Panel 6

FEC Proposed Rules

The FEC’s "Notice of Proposed Rulemaking" (NPRM) proposed several new rules that would govern political speech over the Internet and asked for comment on many questions of how to approach certain aspects of the concerns that the rules have been designed (or not yet designed) to address, as follows. The NPRM contained many more questions than outright proposals – a game of 20 Questions, anyone? The proposals are bulleted and in bold; questions on which "The Commission seeks comment" are numbered, not in any priority; rather, placed beneath the proposal to which they most pertain.

  1. Should we regulate Internet political ads that may amount to "in-kind" contributions -- those placed for free or in exchange for something else?
  2. Should any payments be regulated for ad content-creation of Internet ads appearing on one’s own website that "promote, attack, support or oppose" (PASO) Federal candidates?
  3. If e-mail lists for are contributed in-kind or acquired via some non-cash transaction, should the political communications enabled by such lists also be regulated?
  4. Can Internet media be viewed as "periodical"(s) provided via "facilities," so that "public communications" over the Internet generally qualify for the media exemption under existing statute?
  5. What should be the breadth of coverage of the media exemption for the Internet?
    1. Should Internet "public communication" be subject to "coordinated communication" (CC) regulations (such as the "three-pronged, content-prong" tests specified on p.16973 of the Notice)?
    2. Should the Commission exempt from CC rules those political ads that require payments to vendors to create but that are placed on the payor’s own website?
    3. Should the FEC also exempt from CC rule ads that are place on websites of prohibited (corporate, labor) sources for free?
    4. Should the Commission require "Special Segregated Funds and non-connected political committees" to use Federal funds to pay for political communications over the Internet?
    5. Should "announcements" placed for a fee also be considered "general public political advertising" subject to regulation?
    6. Would payments to a blogger for political content on his website be essentially similar to "general public political advertising" that should be regulated?
    1. Should the FEC continue to define "generic campaign activity" as a "political

    communication" that is a "general public political advertisement," or should the definition be changed?

    1. Should disclaimers be required on all Internet political communications? On/for what? Are there alternative approaches?
    2. Should we require disclaimers on individuals’ political e-mail communications disseminated using an e-mail list that has been purchased.?
    3. Should we require bloggers to include disclaimers on payments for PASO ads or solicitations for contributions on their websites?
    1. Should the FEC continue to employ a 500 in number threshold for e-mails sent out, beyond which (>500), regulation would apply?
    2. Should the minimum cost threshold of $250 in existing rules apply, too?
    3. Should the Commission exempt from regulation all dissemination, distribution or republication of campaign materials on the Internet?
    1. Should we exempt paid political ads on corporate or labor sites that are restricted to members?
    1. How to allocate costs of political ads that PASO Federal candidates on political committees’ own websites [so that the entire cost of websites does not have to paid out of Federal ("hard") dollars]?

     

     

     

    Highlights of Hearings

    The previous section not only enables, at a glance, a picture of what the hearings were about (as the FEC Notice does not), it also provides an outline for organizing the testimony and Commissioners’ comments and questions during the hearings – a variety of remarks that are scattered throughout the tapes and transcripts of the proceedings. Thus, let us proceed to review these, proposal by proposal, even though there is some overlap among them and related questions.

    The FEC seems to assume that bloggers are easily identifiable targets of any potential regulation of Internet communications. Thus, it was no surprise that the testimony of five of them garnered a good deal of attention during the hearings. The five? --

    A major issue raised by the FEC in its Notice is the proper scope of the media exemption now enjoyed only by the owners and journalists of the institutional mainstream media (MSM). This means that MSM are exempt from FEC regulation. Krempasky focused his testimony on the question of scope, observing that: (1) media outlets are not easily identified; (2) MSM are not trusted -- even 45% of journalists do not trust their colleagues, a remarkable statistic (source?); and (3) the capacity of the "blogosphere", including the information and creativity harbored therein, far exceeds the capacity of even the largest, most sophisticated newsroom. He concluded that these features call for the broadest possible exemption.

    Reed Cox’ testimony seconded that of Krempasky without any qualification, so that the exemption he favors would be "blanket," not just "broadest." He observed: "There is no distinction between the soapbox and a broadcast station" on the Internet, where an individual or a group can establish a press, broadcast station or other medium. "Both speakers and listeners are empowered (so)…the media exemption should protect all," not just institutional media…The FEC has really done a disservice to those of us who are not members of the institutionalized press by what seems to be a media exemption that only touches the institutionalized press…My Center, for example, is also a media operation…Why are we not (also) exempt?" Regulation gives rise to "extra-ordinary transaction costs in the form of legal fees and legal time" that must be borne to effect First Amendment rights (my emphasis).

    Commissioner McDonald, a "good old boy" from the South, asked: "Can anybody claim the media exemption just because they have an opinion?...The issue is where to draw the line." Court cases have distinguished "reporter" from "non-reporter." There was a California case over "blogger privilege." Is there a scenario where the press exemption cannot or should not be claimed? Mr. Bauer provided a wishy-washy non-response to this line of questioning, so Commissioner McDonald continued to press his queries with Mr. Gold: "Are $20 million dollar political ads via an unregulated Internet a realistic prospect? How could the AFL-CIO do that?" Gold’s response: "We could purchase space on others’ sites but this implies that there is (also) an in-kind valuation problem."

    In direct response to urgings throughout the hearings that the Commission provide a much broader or blanket press exemption for Internet communications, Commissioner Mason reminded all in attendance that the FEC must have statutory authority for any regulation. "Our problem is that we must use the tools we have. The tool we have is the statute." With respect to the scope of the press exemption, the Commission’s authority arises from a statute that sets forth a definable class of entities constituting "media." "These things must be done through the facilities of a broadcasting station, newspaper or other periodical publication…" The key word is "facilities." Whether or not "everything" on the Internet qualifies for the exemption, therefore, is contingent on answering the question: "Is there any way that we could justify and say that the Internet itself qualifies as the facility of a periodical publication, such that any news story, editorial or commentary on the Internet would fall within the media exemption?" Cox replied: "You get there a long way by referring to periodical publication…Blogs tend to publish regularly….As for the rest…whatever you could do to expand the media exemption as far as it can extend, that would at least give people the clarity that they would not be subject to regulation by the Commission."

    The scope of the media or "press" exemption arose again and again throughout the hearings. The apparent opposition of the Democratic members of the FEC to a blanket exemption for the Internet led Mr. Cox to restate his position, somewhat defensively, saying "Inclusiveness is not a bad thing." But Mr. Gold was ambivalent. He expressed an apprehension that broadening the exemption implies "widening the number of organizations subject to government approval." Thus, he advocated broadening but "limit(ing) the broadening." Cox rejoinder was to state that, without a blanket rule, "there would be a problem" – the likelihood of having to go "case-by-case through the courts." Gold agreed that the press exemption should allow "smaller" publishers; however, "government approval of who qualifies is a high price of admission." The challenge, in his view "not insurmountable," was how to treat Internet facilities as a basis for exemption. Cox replied that the statutory authority could be viewed as enabling individuals or groups of individuals to be covered (exempted) "as long as they are engaging in periodic publication," which should be interpreted broadly.

    Commissioner McDonald asked Mark Jaskulski whether he could imagine someone in the Internet arena not being able to avail himself of the press exemption because he was not a journalist. Mark replied that there is no certification for journalists -- "nothing you have to do" to become one. The Chairman noted that, according to UNESCO, to define journalists is to regulate them, contrary to international law." Commissioner Toner said that he considers himself to be a journalist, one who could contribute to National Review online (unregulated) while the same article on his blog would be regulated. According to Duncan Black, "the press exemption applies to a narrow view of journalists (and) all faults attributed to bloggers are pervasive throughout MSM" (he went on to provide many examples). He is concerned that, without the press exemption, Internet media outlets would face more stringent oversight than media owned by major corporations. Consider the case of Joe Trippi. His personal website probably would not escape FEC scrutiny, in contrast to his MSM activities.

    Commissioner Smith asked Kristinn Taylor whether the press exemption should cover FreeRepublic. Taylor replied: "Yes, there is regular, independent reporting on the site." Toner suggested that the Commission should protect websites rather than blogs. Commissioner Weintraub responded: "I don’t want to regulate bloggers." Commissioner Smith remarked that the press exemption has also been extended to movies and books so, "clearly, there would be some leeway." He went on to observe how: (1) the existing press exemption "pertains to the rich," for if you have enough money, you can buy a press; and (2) all sorts of people are using the Internet "press" for political participation. So, he asked: "Why is the latter "not fulfilling the rule"? (statutory authority)? Jaskulski effectively seconded the implication of Smith’s question by urging a "blanket press exemption for bloggers." He qualified this, however, by observing that "there is no formal set of ethical guidelines or code of conduct for bloggers." This led Commission Mason to ask: "Does the government need to mandate ethical conduct?" "No way," Jaskulski replied; "The blogosphere should develop a code."

    The latter indicates an aspect of possible "self-policing" of the Internet as suggested by Matt Stoller in later testimony. Jaskulski’s fellow Panel 5 testifier, Kristinn Taylor of FreeRepublic.com, simply said: "Hands off the Internet!," -- no hedging; no qualification. Commissioner Mason replied by saying that press and individual volunteer exemptions combined would protect the FreeRepublic site. Karl Sandstrom’s testimony during the final Panel (#6) reminded fellow Commissioners (he was once one himself) of the "lesson of ACLU v. Reno, which provided extraordinary protection to the Internet." Nevertheless, he then proceeded to poo-poo the idea of "fitting under the press exemption (because?) It’s futile to create categories of bloggers." Commissioner Smith asked: So why not reference Internet facilities as a basis for the exemption? Sandstrom’s reply begged another major question that neither he nor others served to answer: "Broadening the coverage of the exemption implies "problems" with respect to MSM. What problems?

    Thus, again, the issue of the media exemption comes down here, as with regard to other key aspects of proposed FEC regulation of Internet political communication, to a question of "Where do you draw the line?" Not only is there a great possibility of arbitrariness in the drawing, as noted earlier, but there is the issue of the cost and feasibility of regulation.

    Zuniga emphasized that online Internet technology is very different from that used to produce offline media. The differences have major implications. Unlike MSM, the ‘Web and ‘Net exhibit…

    The FEC itself, in paragraph A, p.16970 of its NPRM, notes that "the Internet has

    unique characteristics that distinguish it from traditional media" and cites several technological and economic differences. These include:

    kinds...," communications that are less "invasive."

    Boulet, testifying in Panel 5, provided another slant on these differentials, emphasizing the low cost of Internet communications relative to the high cost of regulating them. This perspective is similar to that of cost-benefit analysis in that it suggests a benefit/cost ratio for judging the efficacy of FEC regulation. Boulet specifically questioned whether focusing on e-mails and the copying, forwarding and republication of campaign materials represented the "best use of regulatory resources." He claimed that it is not worthwhile to buy e-mail lists; it is better to develop your own. E-mail boxes are far more "private" than "postal." This implies an element of self-regulation, a feature that the FEC might try to build upon – a view supportive of the "self-policing" possibility suggested in the testimony of Matt Stoller in Panel 2.

    As if to claim an Internet exceptionalism that might put it beyond the pale of the Commission, Larry Noble of the Center for Responsive Politics, one of the leaders in the push to reform campaign finance law, began by stating that "The Internet is beyond the FEC’s knowledge and scope. New rules, if not carefully constructed, would have a chilling effect on Internet political speech." But he then went on to express the great fear of the Democratic members of the Commission and of CFR advocates generally – that of "opening up a new loophole" through which big money can "corrupt" political campaigns. Noble continued: "The Internet will attract increasing amounts of big money." Thus, he concluded his testimony by providing a strong, prima facie case for what others called "prophylactic regulation" – rulemaking grounded in a fear of what might happen rather than evidence of harms actually experienced (emphasis in bold mine).

    This fear was underscored by the Chairman’s reference to a report on CNN.com: Jupiter Research projects that expenditures on Internet advertising would rise 27% to $10.7 billion in 2005. Research based on the FEC’s own records show $25 million of ‘Web or Internet use expenditures showing up just on Schedule B. Among 527’s, we came up with $2.2 million of disclosured disbursements. For example: "The biggest spender in this area, Progress for America, shows $900,000 for e-mail list services; over $150,000 for website services, and over $213,000 for Internet banner ads."

    The money involved in coordinated political communications appears to be the Commission’s focal concern. According to Gold’s testimony, it is exemption of the Internet from rules regarding coordinated communications (CC) that opens the door for abuse. "The Act (BCRA) is about regulating money, not speech." The Chair than asked whether it would be sufficient for the Commission to reword the CC segment of their regulations to say: "For the purposes of this section, public communications shall include communications over the Internet." Gold: "Yes… The Commission would not have to do anything else."

    Also recall the motivating ("anxiety-inducing") fear of the Commission, underscored through a hypothetical example. Here again, Gold’s response went immediately to the point: "The question here is not triggered by use of the Internet. Corporate and labor expenditures are already restricted by law," adding that a "hypothetical…is not a comfortable platform on which to build a regulatory position." To which the Chair replied: "But the question is very important (since) the hypothetical is not covered by regulation."

    Gold’s testimony was also important, not only as representing the views of one (organized labor) among the "prohibited" class of organizations (corporations being the other), but as practically the only one among those who testified in person before the FEC to focus on the practicality or feasibility of trying to regulate the Internet, no matter how soundly based in law some regulations might be. He asked: What costs are included in FEC statistics? How are in-kind contributions valued? -- Dollars estimated for the Internet media may be "disproportionate" (relatively low) to their actual value. What expenditures and really relevant here? To what extent should a union or any other organization be subjected to requirements for burdensome allocation, disaggregation and accounting procedures? What are the costs of trying to regulate the Internet, and what are the costs to those regulated? This concern was shared by Jim Boulet in a subsequent panel.

    FEC staff Attorney Norton posited the situation of a website for campaign materials established by a wealthy individual for widespread political communication. This "loophole" is also unregulated. It is "coordination," however, not the other features of such a communication that would trigger FEC action if someone complained about it. The unstated question in this example is: Did the individual coordinate his efforts with a candidate or political committee?

    To help answer this question, the FEC has formulated a "three-pronged test for determining whether a communication has been "coordinated"…a communication must:

    1. Be an electioneering communication, as defined in 11 CFR 100.29;
    2. be a public communication that disseminates, distributes or republishes, in whole or in part, campaign materials prepared by a Federal candidate, the candidate’s authorized committee, or their agents;
    3. be a public communication that expressly advocates the election or defeat of a clearly identified candidate for Federal office (often referred to in short hand as a "PASO" communication); or
    4. be a public communication that refers to a political party or a clearly identified candidate for Federal office, is publicly distributed or disseminated within 120 days of an election for Federal office, and is directed to voters within the jurisdiction of the clearly identified candidate…"

    The problem with this "test" should be immediately evident to anyone: It makes no reference, nor do answers to its questions provide evidence, as to actual "coordination" between anyone who so communicates with others over the Internet and a political committee of a Federal candidate or party supporting such candidate. Application of the "test" simply yields superficial indications that there might, possibly be coordination going on. These indications are far from conclusive evidence. The latter would be hard to come by. If applied, any one "prong" would tend to "chill" political intercourse over the Internet. The test does not allow for the fact that, independently of any "political committee," individuals and groups of individuals favoring a candidate may be sufficiently inspired to transmit, publish or republish "PASO" or "electioneering" communications and/or "campaign materials" of all sorts.

    The FEC Chair seemed to recognize that there is a problem here in that uncoordinated "express advocacy" would be regulated. Potentially, it even would be subject to more regulation in that those exercising their First Amendment rights to political communications over the Internet would need to keep track of the costs of their "express communications." Thus, we proposed in our rulemaking, reported the Chairman, that the FEC would apply an "individual volunteer activity allowance" to non-coordinated activity as well, so that "one need not be a volunteer for a campaign but working totally independently." He then asked for comment from panelists. Bauer responded: "I support protection of uncoordinated individual expression." Remember: The latter does not refer to communications with other individuals but to (lack of) those with political candidates, their committees or other regulated political committees.

    Notwithstanding the likelihood that most Internet political communications are not "coordinated," the FEC seems determined to regulate paid political ads over the ‘Net. As more than one Commissioner remarked, accenting the "fear" noted earlier: There is a possibility of a large loophole if we omit paid ads, including their production costs, from regulation. The testimony of Trevor Potter, a former Commissioner, on the draft rule regarding this, however, was cautionary:

    "The draft rule is unclear…it’s also unclear with regard to own vs. paid costs. (And, here echoing concerns expressed earlier by Gold): We must be clear about how we are accounting for costs….Payments to 3rd parties move away from individual activities to be sheltered."

    Commissioner Toner then chimed in to reiterate another recurring concern of the hearings: How to handle "in-kind" contributions, expenditures or transactions? For example, what if space is given? Potter reminded the Commission that their regulations already cover in-kind contributions. There are two questions here: (1) whether to count "space" if it is provided only by an incorporated entity, and (2) whether a website is in the business of selling advertising. In-kind contributions are implicated in both cases.

    Commissioner Weintraub believes there is a problem with Sandstrom’s recommendation (reported earlier): It may be too specific, so that the Commission may have to revisit the regulation every time a new Internet medium arises. More generally, the comments in this area suggest that FEC regulation of Internet political communications threatens to become a regulatory morass, with new rules leading to charges of abuse that then feed the levy of more rules (&c).

    "Generic campaign activity" (GCA) is now defined by the FEC as "a public communication that promotes or opposes a political party and does not promote or oppose a clearly defined Federal candidate or a non-Federal candidate." The FEC requested comments on this definition in their notice. The definition is a narrow construction of the original statutory language. BCRA defines "generic campaign activity" to mean "campaign activity that promotes a political party and does not promote a candidate or non-federal candidate" (2 U.S.C. 431(21)).

    There are two problems with these definitions. First, it is puzzling that neither of them

    include "party-building"activities. Most of the latter have come to be treated as "Federal election activity" subject to regulation because they are presumably "connected" to elections that feature candidates for Federal office. "Type 2" of the latter cross references "generic campaign activity" so that this category becomes a sub-category of "Federal election activity." This categorization is mistaken, as many of the Type 1 and Type 2 activities undertaken by sub-national political party committees have, at the times when they are undertaken, little or no connection to Federal elections. They are primarily localized and oriented to state and local elections. The lack of an appropriate, localized definition or effective focus upon "party building" activity in this definitional morass is, at best, problematic, and at worst, harmful to political parties as many commentators observed when campaign finance reform was being debated before passage of the BCRA.

    Second, both definitions inappropriately make reference to "non-federal" candidates. This reference implicitly allows the FEC to have some discretionary oversight on state and local electoral political activities that are not properly within the Federal agency’s purview, as over certain "party-building" activities noted above, because of the vague phrase "in connection with." The definition of "generic campaign activity" is thus unsatisfactory, but the Commission would have to ask Congress to revisit the BCRA to obtain any basis for redefinition that could make any substantial difference.

    The FEC already has a set of rules requiring disclaimers or disclosures if "public communications" contain PASO content or solicit political contributions. Thus, the question of to what extent such rules should be applied to Internet communications was on the table for the hearings, primarily via two major questions: Should disclaimers be required for…

      1. paid political advertisements on the Internet; and/or for…
      2. content for which bloggers or website owners have been paid?

    With regard to the latter, Jaskulski stated that there would have to be a disclaimer on every page of a blog if there had been payments to the blogger. "People would want or need to know." Boulet, however, "totally disagrees." So Commissioner Smith asked: "If English First was paid, you wouldn’t need a disclaimer." Boulet: "No." Michael Bassik said to focus on paid Internet ads but he also stated that "the consequence of a new rule would be zero. 99% of banner ads already carried disclaimers…No soft money has been spent online. The danger of corruption is hypothetical. The Internet has put political advertising power into the hands of every citizen."

    Another question that arose here as with other aspects of Internet political advertising is that of defining a dollar threshold for regulation. Bassik testified that, yes, there should be a spending threshold and that it should be set at $5,000, "the minimum to run a bannered campaign." "Disclaimer precedent," moreover, should be followed to require disclaimers "only when there is room for them" (sometimes there isn’t as, e.g., in the small 95 word limit Google ads).

    Karl Sandstrom, a former FEC Commissioner, pointed out that there is a distinction to be made between "advertising" and "sponsorship." Those familiar with public radio (PBS, PRI) recognize the difference but also sense its subtlety. The increasing number of notices from "business sponsors" of public radio sometimes seem scarcely different from advertisements. So, should paid sponsorships of Internet sites be exempt.

    Commissioner Mason questioned Black on the testimony he had provided on the disclosure issue jointly with Zuniga and Stoller, where they had stated: "It should make no difference whether a blogger is compensated for editorial comment or advertising." What about payments for support rather than ads? Black responded that disclosure requirements should be on party or candidate making payments, not on bloggers when no-one else in the media is required to make such disclosures. But Mason pressed on: "Why shouldn’t a supportive article or commentary require a disclaimer, as being similar to an ad?" Black also pressed on: "There is a question of discrimination…here if the same person were required to disclose on a blog but not on other media where the same or similar message is being presented." This recalls Commissioner Toner’s very similar observation noted earlier.

    Commissioner Mason then proceeded to point out that the proposed rules implied discrimination, anyway. Any public communication put out by a political committee via a non-Internet medium should have a disclaimer, but if it is put out over the Internet, a disclaimer is only required if it is a paid political ad on someone else’s site. For non-political committees, disclaimers are required only for unsolicited e-mails containing express advocacy messages or political fund-raising solicitations to over 500 recipients using purchased e-mail lists. "Is there an alternative basis for (requiring) disclaimers?"

    Sandstrom responded that the disclaimer should be on a site controlled by the candidate issuing the ad. "Regulation of the blogger is useless – no advance in public policy… Exempt the blogger from the definition of political committee." Commissioner Mason then noted that the "500 criterion" for e-mail was taken over from the direct mail context and so it is "too little" in the Internet context. The required disclaimer should be based on exceeding a spending threshold, not on exceeding a number of e-mails sent.

    Bearse testified that "general public political advertising" on an Internet website or blog should be required to carry a disclaimer or disclosure if there is any source ("disbursement") involved other than the website’s or blog’s own author, or some monetary or other transactional ("expenditure") basis upon which political advertising has been provided. The issues involved here are less those of campaign finance regulation than of intellectual honesty, journalistic integrity and accountability in the "marketplace of ideas" that the Internet political arena is supposed to represent.

    Karl Sandstrom recommended that regulations should be written to exempt postings on websites and e-mails from the FEC definitions of contributions and expenditures. This might leave a loophole but one unlikely to generate much if any "corruption."

    Bassick reiterated the position of himself and others that one "shouldn’t require individuals online to follow FEC regulations." But then the recurring question of applicable thresholds for regulation arose again. If the Commission were to regulate only expenditures and contributions above a certain monetary threshold, what should it be? – the long-standing individual threshold of $200? Bassick said "No; that’s quite a bit low. $5,000 would be realistic." Others came to suggest or agree to this figure, too, so it is likely to be the one that the Commission will use.

    Atty. Gold testified that an additional rule with regard to corporate or labor organization use would be "gratuitous and unnecessary" In response to a question from Commissioner Smith, Bauer noted that time constraints for use of corporate or labor Internet facilities are arbitrary.

    Gold’s testimony as to the difficulty of such allocation or accounting procedures was most telling. As an economist, Bearse suggested using the "marginal" (extra, incremental or additional) costs of preparing and sending "PASO" political communications via political committees Internet systems. As a practical matter, these are likely to be low and fall below reasonable monetary thresholds.

    Conclusion: The Danger Redux

    Regulatory agencies have an incentive to regulate. It is often staff attorneys that lead the way, to a degree that causes cynics to refer to many new laws and regulations as "lawyers full-employment acts." Questions and remarks of the FEC General Counsel (GC) are indicative in this regard, and worrisome to those concerned about the possibility ("danger") of Commission overreaching in its response to the Shays Court.

    GC Norton asked a question of Sandstrom that suggests broadening the scope of Internet regulation even before waiting for the answer:

    "Does the proposed rule (regarding paid ads) leave major problems untouched? (for) Political party committees are spending increasing amounts of money to reach voters via the Internet, including purchases of e-mail addresses, websites, and solicitation of contributions. These activities should be governed by election laws."

    Sandstrom’s response is pertinent, especially coming from a former Commissioner:

    "I don’t understand how the sponsors (of the BCRA) and the FEC have come to the position they’ve come to. State and local party committees can no more spend millions of dollars of soft money on the Internet than they can on TV."

    Then the GC turned to Mssrs. Bassick and Black, asking:

    "Are all of these arguments (including lack of any record of abuse from the last election and changing technology)… for not taking on any issues other than what we must tackle in light of the Shays’ decision?"

    The two responses were nearly opposite. Bassick, consistent with his earlier testimony, said: "Don’t go too far." Black stated that a narrow focus "leaves a whole nest of areas out there…perhaps for a future date." Which of these views do you, the reader, suspect might be more influential?

    Additional interactions between the GC and FEC staff and Panel 6 brought forth important contrasts between the "money" and "value" considerations in FEC’s CFR regulation. Recall that the Commission has the authority to impute money values to "in-kind" contributions and other political transactions where there is no, or no acceptable, financial accounting. The drift towards money values as paramount is troubling in light of First Amendment and other democratic "values" that came to occupy more of the background than the foreground of the hearings by their conclusion. The interchange with Sandstrom was indicative:

    FEC Staff Director: "How would the proposed rules affect OMB Watch?"

    Sandstrom: Effects valued at zero. We are a 501 (c)(3).

    GC: No value; for example, no dollar cost for developing content?

    Sandstrom: "Content has extreme value because it informs the public, but you shouldn’t try to put a dollar value on that…What’s important is the battle of ideas, not dollar value."

    GC: "What if you had production costs? Where would you put that?"

    Sandstrom: "I don’t need to put it anywhere, under my proposal…because production costs would be valued at zero, too."

    GC: "I am trying to imagine a situation where you would have any expenditures to report."

    Sandstrom: "For most bloggers, there would be no expenditures."

    GC: Which bloggers or websites would have (regulatable) expenditures?

    Sandstrom: "None."

    Bearse’s written testimony and response to Commissioners questions pointed out that FEC rulemaking ignores the primary "value" consideration from the standpoint of individuals’ political participation – the value of their time. The FEC has followed the BCRA, an Act that is supposed to reduce the dominance of money in politics, by paying attention only to money and none to the value of political volunteers’ time. This exclusive focus is also apparent in the far greater attention paid to political advertising than volunteers’ activities.

    To further highlight what is at stake, this review turns the readers’ attention back to "individuals." This final focus not only helps to underline the dangers of FEC rulemaking on Internet political communications but also to point out what the FEC hearings did not do.

    The Commission seemingly "protesteth too much" with regard to protecting "individual" political participation, volunteerism and communication over the Internet. The FEC General Counsel (GC) asked a key question that no one attempted to answer during the hearings: "When does an individual carry his individual identity into associations?" This question underlines the danger of the Commission’s substantial foray into regulation of political speech over the Internet. The GC’s question translates into another that he raised (and the fact that the GC raised it helps to underline the danger): "Where does one draw the line in the definition of a "political committee?" One of the Commissioners remarked that "If any group to elect a candidate is similar to a political committee, why are their political communications not an expenditure and the group not regulated as a political committee." Bauer remarked that CFR devalues group associations and the right of assembly. "These should be protected."

    In this context, the "individual" is almost apocryphal; he or she so quickly and readily becomes associated with some Internet grouping. Robert Bauer remarked that the FEC seemed to reflect a "narrow view of individual interest…Individuals have an interest in unimpeded public space where they are able to connect with politics in a full and diverse form." He wondered whether the Commission could divide Internet space into unregulated/regulated. Individuals have an interest in the former, too.

    As Michael Krempasky, blogger at www.RedState.com remarked: "The success of the Internet lies in aggregating human beings for a purpose…the power of millions of voices via the Internet overwhelms even large amounts of money." If the FEC cannot resist the temptation to view Internet groupings as political committees, then the ‘Net as a site of open, free, unconstrained politics is dead. Thus, it is amazing to this reviewer that there was hardly any attempt to address the challenge put by the FEC’s GC. There was no proposal to modify the definition of "political committee" among the Commission’s proposals. Arguably, this definitional issue is far more important than the proposed regulations that the hearing did discuss; i.e., the item not covered is more important than all that was. It represents an elephant in the kitchen of the FEC’s proposed regulation of the Internet.

    As Staff Counsel representing the Center for Democracy and Technology (CDT), John Morris read a summary statement of his organization’s testimony. CDT’s concern is that:

    "in trying to extend to the Internet rules that apply in the offline world, the rules threaten to chill the remarkable explosion of online citizen political participation in the political process."

    Thus the central issue in FEC rulemaking on Internet communications, Morris emphasized, is that the political speech of individuals not be impeded; that is, "not be burdened by campaign finance laws" [even though strong arguments have been made by many others that First Amendment rights have already been violated by CFR, so why should CFR treatment of political speech over the Internet be any different?] CDT strongly recommends and offers "(1) A set of "principles" to guide FEC rulemaking on Internet communications and (2) a number of approaches to creating a clear and simple exclusion for individuals’ online speech." The first, most basic guideline is that any new rules should "only apply to candidates, political parties and other core targets of the law." The second is that the Commission should "create a significant monetary threshold below which individuals’ online activities are wholly exempt from regulation." [Final question to you readers: Does this mean that First Amendment rights can be compromised by money?]

     

    Peter Bearse, Ph.D., author of WE, THE PE0PLE: A Conservative Populism (Alpha Publishing, Inc., 2004), local political activist and International Consulting Economist recently in Iraq. July 22, 2005