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Square Pegs and Round Holes:
Applying the Campaign Finance Law to the Internet --
Risks to Free Expression and Democratic Values


October 1999

   Table of Contents

I. Introduction

II. Characteristics of the Internet

III. The Federal Election Campaign Act: the framework, assumptions, and goals of existing federal campaign finance law

IV. The FEC's Approach to Online Activities

V. Impact of the FEC's Rulings on Campaign-Related Speech and Activities

VI. Conclusion


The Center for Democracy and Technology is a non-profit, non-partisan public interest organization dedicated to developing and implementing public policies to protect and advance civil liberties and democratic values on the Internet This report was written principally by Matt Grossman, Deirde Mulligan and James X. Dempsey.


I. Introduction

As we enter upon the increasingly wired year 2000 presidential race, there is considerable uncertainty -- and some ominous initial signals -- over the application of the campaign finance laws to campaign-related speech and political activities on the Internet. So far, the Federal Election Commission (FEC) has failed to recognize the unique aspects of the Internet and therefore has failed to adopt a policy approach that maps the objectives of campaign finance restrictions onto this new medium in a manner consistent with the First Amendment.

The Internet is uniquely decentralized, global, abundant, inexpensive, interactive and user-controlled. The campaign finance laws were developed for the centralized, scarce, and expensive media of radio, television and print. The Internet supports a diverse range of content -- text, graphics, audio and video; chat rooms, moderated and unmoderated email lists, and "newsgroups;" and World Wide Web sites endlessly and seamlessly linked on a global basis -- much of it spontaneous and independent from campaign committees and the political parties. Initial efforts to apply the Federal Election Campaign Act (FECA) to these new and varied Internet communications have yielded troubling results, threatening to burden -- even silence -- the voice of average citizens in American political life.

The Internet fosters what the Supreme Court has called a "never-ending world-wide conversation." As such, the Court has held, expression on the Internet is entitled to the highest level of protection under the First Amendment. It would be worse than ironic if rules designed to deemphasize the unfair advantage of money, to broaden the diversity of groups that can have an impact on the election process and to "return our electoral process to the people" were applied to deter individuals from using the "electronic soapbox" of the Internet.

More recently, there has been a hint of change from the FEC, with bolder calls from some individual Commissioners for redefinition of the campaign finance law's application to the Internet. We support such calls, and we urge the Commission -- to the maximum extent possible within the terms and exceptions of FECA -- to recognize that a large portion of the political activity in cyberspace does not merit regulation. Ultimately, however, it will likely require a Congressional amendment to FECA to protect individual advocacy and remove any cloud from this most democratic, open and inexpensive of mass media.

About CDT

The Center for Democracy and Technology is a public interest organization dedicated to developing and implementing public policies that protect and enhance civil liberties and democratic values in the new digital media. We are not experts in campaign finance law and we have not taken a position on legislative proposals concerning campaign finance. However, we have made it one of our priorities to defend freedom of expression on the Internet. CDT staff were among the first to articulate the ways in which the architecture of the Internet serves core First Amendment values by increasing access to diverse information sources and minimizing the need for government content regulation. 1 ] CDT helped organize the Citizens Internet Empowerment Coalition, which challenged Congress' first attempt to control content on the Internet, the Communications Decency Act (CDA). We brought the Internet into the courtroom in Philadelphia, demonstrating its unique features to the three judge panel hearing the CDA case. Our user-controlled vision of the Internet proved central to the Supreme Court's landmark ruling in Reno v. ACLU, holding that the Internet was a unique medium entitled to the highest First Amendment protection.2 ] It is from that perspective that we have become concerned about the implications of the FEC's initial efforts to apply the campaign finance law to the Internet.

Overview

This paper briefly describes the unique architectural and economic characteristics of the Internet and explores their impact on political and campaign-related speech and activities (Part II). It then briefly discusses the framework, assumptions and goals of existing federal campaign finance law (Part III), and reviews the FEC's Advisory Opinions and other actions applying FECA to campaign-related activities online (Part IV). The paper analyzes the ways in which the Internet merits a different approach (Part V) and concludes that the mechanical approach of the early FEC actions, if not reversed, would undermine both the goals of campaign finance reform and the Internet's potential to strengthen the democratic process.


II. Characteristics of the Internet

In evaluating the First Amendment standards applicable to any medium of communication, the Supreme Court has long recognized that "differences in the characteristics of new media justify differences in the First Amendment standards applied to them."3 ] In its landmark decision in Reno v. ACLU, the Supreme Court found that the Internet is a unique medium, distinct from broadcast, print, and cable. The Court described the speech outlets of the Internet as "vast democratic fora" and a "new marketplace of ideas," which "provides relatively unlimited, low-cost capacity for communication of all kinds," the growth of which "has been and continues to be phenomenal."4 ] The Court recognized that it is the very breadth and variety of speech over the Internet that gives the Internet its extraordinary communicative power:

This dynamic, multifaceted category of communication includes not only traditional print and news services, but also audio, video, and still images, as well as interactive, real-time dialogue. Through the use of chat rooms, any person with a phone line can become a town crier with a voice that resonates farther than it could from any soapbox. Through the use of Web pages, mail exploders, and newsgroups, the same individual can become a pamphleteer. As the District Court found, "the content on the Internet is as diverse as human thought."5 ]

As the district court in ACLU v. Reno had concluded:

[I]f the goal of our First Amendment jurisprudence is the individual dignity and choice that arises from putting the decision as to what views shall be voiced largely into the hands of each of us, then we should be especially vigilant in preventing content-based regulation of a medium that every minute allows individual citizens actually to make those decisions. Any content-based regulation of the Internet, no matter how benign the purpose, could burn the global village to roast the pig.6 ]

III. The Federal Election Campaign Act: the framework, assumptions, and goals of existing federal campaign finance law


IV. The FEC's Approach to Online Activities

How well has the FEC done in applying the substance and goals of FECA to the Internet? So far, the results has been disappointing, if not alarming.

The FEC has clearly established that disseminating information about federal elections through the Internet can be subject to regulation under the Federal Election Campaign Act.21 ] In 1995, the FEC ruled that a Web site distributing information, run by an independent, "virtual PAC" is a form of "general public political advertising."22 ] The FEC has found that an individual may have to report to the government in order to create a Web page expressing support for a candidate, that hyperlinks may constitute political contributions, and that providing free Web sites to all candidates is a prohibited corporate contribution.

V. Impact of the FEC's Rulings on Campaign-related speech and activities

There is growing dissatisfaction with the FEC's approach to the Internet. Former FEC Commissioner Trevor Potter said that the FEC has "wandered" into the area of Internet campaign regulation without any clear method or set of principles.37 ] Instead of evaluating the particulars of this new medium for political speech, the FEC has tried to force the Internet into the paradigm of broadcasting. Looking beyond the particulars of the agency's advisory opinions and enforcement actions to date, it is clear that the Commission's actions may chill political speech and activities on the Internet. As attorney Joseph Sandler recently put it, "If a single voter, raising no funds from others, spending a few hundred dollars of his own funds, can thus be pulled into the maze of regulations that now constitutes the campaign finance regime, it seems clear that this regime may pose significant obstacles to widespread, grass-roots use of the Internet for political communication."38 ]


VI. Conclusion

The blanket application to the Internet of campaign finance restrictions designed with other media in mind poses substantial risks to the burgeoning online political expression and activity. In the areas of greatest promise, campaign finance laws are the most restrictive and troubling. The concern is not that the large national parties or organized interests will suffer, but that the smaller organizations and individuals that the Internet promises to empower will instead be silenced, thereby discouraging grassroots efforts of the very type that campaign finance laws were intended to enable and encourage.

The First Amendment freedom to associate and to speak should be encouraged in the world of the Internet. Opening the political dialogue to grassroots efforts with no official organization is the essence of the Internet's democratic potential. The FEC has instead started down the path of restriction. By permitting only well-established organizations who strictly adhere to FEC standards the right to be involved in the electoral debate, its decisions would move us further away from the goal of equalizing political influence. The ensuing decrease in online political discussion will also prevent an improvement in the quality of debate..

The Internet offers a chance to reduce the role of more expensive communication and advertising media -- television, radio, and direct mail -- and move to a platform accessible to those with less funding. Many of the goals cited by election law reformers are independently advanced by Internet communication. Application of existing campaign finance rules to the Internet would have the undesirable effect of maintaining the inequality of influence in elections afforded by the cost of traditional media, and limiting individuals' ability to use the Internet. Laws designed with television advertising in mind, when applied to the Internet, may actually thwart individuals' and groups' efforts to engage in the type of discourse election reformers sought to promote.

Premised on the limited capacity of the airwaves to carry information and the expense of communicating through mass media, existing election law limits contributions. When applied to the Internet, an abundant media with an unlimited capacity for information and participation, these same restrictions have perverse results. Rather than raising the relative voice of the less well-funded and third-party candidates, the campaign finance limitations may greatly decrease their effectiveness, visibility and prevalence in this emerging medium.

Registration requirements triggered by contributions, designed to shed light on the influence of donors on elected officials, may on the Web force individuals engaged in the online equivalent of pamphleteering or posting a sign in their front yard to identify themselves to the federal government and the public at large. Rather than encouraging the participation of individual citizens, such disclosure requirements may chill the increasingly privacy-wary public from expressing their opinions -- as independent as they may be.

There are growing signs of uneasiness about the impact of FECA from within the FEC itself. Commissioner David Mason has asked the FEC general counsel to investigate whether some forms of Internet communication are "more akin to the provision of information only upon request" than to general public political advertising. 57 ]

FEC Commissioner Karl Sandstrom recently wrote, "In regulating the Internet, we should seek to unleash its promise. Only such regulation as is absolutely necessary to achieve the core purposes of the [FECA] law is merited."58 ] The course charted by the FEC to date, if followed, may have the effect of chilling the competitive marketplace of ideas on which our First Amendment jurisprudence is premised and which many believe the Internet has the potential to realize.

Therefore, the Commission should account for the specific characteristics of this vibrant new communications medium and exempt much of what occurs there from regulation under the campaign finance law.

Therefore, the Commission should account for the specific characteristics of this vibrant new communications medium and exempt much of what occurs there from regulation under the campaign finance law. The Commission, of course, is limited in what it can do by the language of FECA -- the Commission cannot ignore or rewrite the statute. However, it seems that there is ample room within the terms and exceptions of the Act to allow much greater use of the Internet for election-related purposes by individuals and informal groups not affiliated with candidates or the political committees:

Ultimately, however, it is likely that the FECA will have to be amended to take into account the unique aspects of the Internet. In addition to addressing the foregoing, Congress should reexamine the disclosure/labeling rules as they apply to the Internet, especially in light of the Supreme Court's decision in McIntyre v. Ohio Elections Commission.

We do not advocate creating a regulation-free zone on the Internet. Fundraising and contributions through the Internet would still be regulated. Candidate and committee expenditures for Internet-based activity would still be counted. Our analysis focuses on the individual and the informal organization having little or no connection with a campaign. That is where the democratizing potential of the Internet is most dramatic -- and should be most unrestricted.






Footnotes

1 Jerry Berman and Daniel J. Weitzner, Abundance and User Control: Renewing the Democratic Heart of the First Amendment in the Age of Interactive Media, 104 Yale L. J. 1619 (1995).

2 Reno v. ACLU, 521 U.S. 844 (1997).

3 FCC v. League of Women Voters, 468 U.S. 364, 377 (1984), quoting Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 386 (1969).

4 Reno v. ACLU, 521 U.S. 844, at 870, 886 (1997). The Supreme Court based its decision on the District Court's detailed findings of fact, which remain perhaps the best statement of the relevant characteristics of the Internet for purposes of First Amendment analysis. The District Court opinion is online at http://www.ciec.org/decision_PA/decision_text.html. The Supreme Court's opinion is online at http://www.ciec.org/SC_appeal/decision.shtml.

5 Id., 521 U.S. at 870.

6 ACLU v. Reno, 929 F. Supp. 824, 881-82 (E.D. Pa. 1996) (Dalzell, J.) (citations and internal quotations omitted), aff'd, 521 U.S. 844 (1997).

7 See generally, Rash, Wayne, Politics on the Nets (1997); Graeme Browning, Electronic Democracy: Using the Internet to Influence American Politics (1996); Oram, Jon, "Will the Real Candidate Please Stand Up?: Political Parody on the Internet," 5 Journal of Intellectual Property Law, 467, 476-481 (1998); Levine, Peter, paper presented at the George Washington University conference on "Online Politics and Democratic Values," March 29, 1999.

8 Oram, Jon, "Will the Real Candidate Please Stand Up?: Political Parody on the Internet," 5 Journal of Intellectual Property Law 467, 476-481 (1998); Foley, Edward, "Public Debate and Campaign Finance," Connecticut Law Review (1998).

9 See the FEC's summary at http://www.fec.gov/pages/citnlist.htm.

10 An "independent expenditure" is one made "without cooperation or consultation with any candidate, or any authorized committee or agent of such candidate, and which is not made in concert with, or at the request or suggestion of any candidate, or any authorized committee or agent of such candidate." 2 U.S.C.431(17). See generally 11 C.F.R. 109.1.

11 Corporations and labor organizations may establish PACs which are able to raise voluntary contributions from a restricted class of individuals and use them to support federal candidates and political committees. See the Campaign Guide for Corporations and Labor Organizations, available in PDF form at http://www.fec.gov/pages/citnlist.htm.

12 2 U.S.C. 441d, 11 CFR 110.11.

13 McCain, John, "McCain Wins Agreement in Senate to Fight Influence of Special Interests," http://mccain.senate.gov/cfrwin.htm.

14 Shays, Christopher and Marty Meehan, Testimony before the House Administration Committee on HR 417, June 29, 1999 http://www.house.gov/shays/reform/629test5.htm.

15 Oram, Jon, "Will the Real Candidate Please Stand Up?: Political Parody on the Internet," Journal of Intellectual Property Law, Spring 1998.

16 Mission Statement, http://www.commoncause.org.

17 "Making Washington Work for You and Not the Special Interests," Sen. Feingold Web site position paper, http://www.senate.gov/~feingold/issuearea/govreform.html#cfr.

18 Dworkin, Ronald, "The Curse of American Politics," N.Y. Review of Books, October 17, 1996.

19 Shays, Christopher and Marty Meehan, Testimony before the House Administration Committee on HR 417, June 29, 1999 http://www.house.gov/shays/reform/629test5.htm.

20 http://www.politicsonline.com/coverage/newsweek/index.html

21 See Advisory Opinions 1997-16, 1996-16, 1995-35, 1995-33, and 1995-9. "Because the general availability of access to the Internet, the Commission has concluded that communication via a Web site would be considered a form of communication to the general public." Advisory Opinion 1998-22, p. 3.

22 Federal Election Commission, Advisory Opinion 1995-9. The Commission ruled that the PAC (NewtWatch) activities of distributing communications and soliciting contributions through a World Wide Web site were "general public political advertising" under 11 C.F.R. 110.11.

23 Federal Election Commission, Advisory Opinion 1998-22, November 20, 1998. The FECA defines "expenditure" as "any purchase, payment, distribution, loan, advance, deposit, or gift of money or anything of value, made by any person for the purpose of influencing any election for federal office." 2 U.S.C. 431(9).

24 The draft Advisory Opinion was prepared in response to a letter from the Presidential campaign of George W. Bush posing a series of largely hypothetical questions about Internet activity. Commissioner Karl Sandstrom subsequently circulated an alternative draft, based on his objection to using the Advisory Opinion process to establish rules of general applicability in the absence of concrete facts. Commissioner Sandstrom has made clear his view that much Internet-related activity should not be regulated.

25 Federal Election Commission, Draft Advisory Opinion 1999-17.

26 Id. at p. 5 discussion 11 CFR 100.7b)(4).The draft goes on to distinguish the same activity conducted with corporate equipment, stating that if the "use went beyond occasional, isolated or incidental," the campaign would have to reimburse the corporation or it would be considered a prohibited corporate contribution.

27 In discussing independence, the draft states that, "The fact the Committee may have no editorial input in the content of a web site would be a factor in determining whether or not a web site is truly independent of a campaign or its control (for example, if the contents change without notice to or without the permission of the Committee)."

28 FEC, General Counsel's Report, Matter under Revision 4340 (Feb. 9, 1998). See Sandler, Joseph and Neil Reiff, "Is the Campaign Finance Regime Ready for the Internet?," paper presented at the George Washington University conference on "Online Politics and Democratic Values," March 29, 1999.

29 Federal Election Commission, Counsel's Report, Matter Under Review 4340.

30 Sandler, Joseph and Neil Reiff, "Is the Campaign Finance Regime Ready for the Internet?," paper presented at the George Washington University conference on "Online Politics and Democratic Values," March 29, 1999; Federal Election Commission, Matter Under Review 4340, Agreement.

31 Federal Election Commission, Advisory Opinion 1999-7, April 22, 1999.

32 Federal Election Commission, Draft Advisory Opinion 1999-17, at 9.

33 To fit into the "news story exemption" one must be a "press entity" "acting as a press entity in performing the media activity."

34 Federal Election Commission, Advisory Opinion 1996-2, April 25, 1996.

35 Federal Election Commission, Advisory Opinion 1996-16, May 23, 1996.

36 Federal Election Commission, Advisory Opinion 1997-16, September 19, 1997.

37 Potter, Trevor, paper presented at the George Washington University conference on "Online Politics and Democratic Values," March 29, 1999.

38 Sandler, Joseph and Neil Reiff, "Is the Campaign Finance Regime Ready for the Internet?," paper presented at the George Washington University conference on "Online Politics and Democratic Values," March 29, 1999.

39 McIntyre vs. Ohio Elections Commission, 514 U.S. 334(1995); Carr, George, "Application of U.S. Supreme Court Doctrine to Anonymity in the Networld," Cleveland State Law Review, 1996

40 Heinicke, Malcolm, "Political Reformers Guide to McIntyre and Source Disclosure Laws for Political Advertising," Stanford Law and Policy Review, Summer 1997.

41 Oram, Jon, "Will the Real Candidate Please Stand Up?: Political Parody on the Internet," Journal of Intellectual Property Law, Spring 1998.

42 Federal Election Commission Matter Under Review 4895, letter from Bush campaign, http://www.gwbush.com.

43 Letter from Zach Exley to the Federal Election Commission, http://www.gwbush.com.

44 Nielsen, Vigo, "Contribution and Expenditure Limitation and Reporting Requirements by PACs," Corporate Political Activities 1998: Complying with Campaign Finance, Lobbying, and Ethics Laws, Practicing Law Institute, September 1998.

45 Federal Election Commission, Advisory Opinion 1998-22, November 20, 1998.

46 Sandler, Joseph and Neil Reiff, "Is the Campaign Finance Regime Ready for the Internet?," paper presented at the George Washington University conference on "Online Politics and Democratic Values," March 29, 1999.

47 Rash, Wayne, Politics on the Nets, W.H. Freeman: New York, NY, 1997.

48 Oram, Jon, "Will the Real Candidate Please Stand Up?: Political Parody on the Internet," Journal of Intellectual Property Law, Spring 1998.

49 Stone, Pamela, "Electronic Ballot Boxes: Legal Obstacles to Voting over the Internet," McGeorge Law Review, Summer, 1998.

50 Rash, Wayne, Politics on the Nets, W.H. Freeman: New York, NY, 1997.

51 Potter, Trevor, "The Internet and Federal Election Law," Wiley, Rein & Fielding, March 29,1999; Carr, George, "Application of U.S. Supreme Court Doctrine to Anonymity in the Networld," Cleveland State Law Review, 1996

52 Smith, Bradley, "Campaign Finance Regulation: Faulty Assumptions and Undemocratic Consequences," Cato Institute Policy Analysis No. 238, September 13, 1995.

53 Rodger, Will, "Feds Block Compuserve Campaign Help," USATODAY.com, July 28, 1999, http://www.usatoday.com/life/cyber/tech/ctf717.htm.

54 Carr, George, "Application of U.S. Supreme Court Doctrine to Anonymity in the Networld," Cleveland State Law Review, 1996.

55 McIntyre vs. Ohio Elections Commission, 514 U.S. 334(1995).

56 Sandler, Joseph and Neil Reiff, "Is the Campaign Finance Regime Ready for the Internet?," paper presented at the George Washington University conference on "Online Politics and Democratic Values," March 29, 1999.

57 Mason, David, "Memorandum to the Commissioners," April 16, 1999.

58 Karl Sandstrom, "... And the Internet," Washington Post, Sept. 5, 1999.