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FEC Adopts New Rules Regulating Internet Communications

March 28, 2006

This week, the Federal Elections Commmission ("FEC") adopted long-awaited rules clarifying the application of campaign finance laws to the Internet. The new rules narrowly expand the definition of "public communication" to bring paid Internet ads within the scope of campaign finance laws. The FEC, however, explicitly decided to refrain from regulating other types of Internet activity, including e-mail and blogs. In fact, in adopting the rule, the FEC stated that "the vast majority of Internet communications are, and will remain, free from campaign finance regulation." Internet Communications, Final Rules and Justification for the Internet Communications Rulemaking, p. 5 (Mar. 24, 2006), http://www.fec.gov/agenda/2006/mtgdoc06-20.pdf (to be codified at 11 CFR pts. 100, 110 and 114) (approved by a 6-0 vote, Mar. 27, 2006) (hereafter "Final Rules").

In addition to regulating paid Internet ads, the new rules expressly exempt uncompensated Internet activities from the definitions of "contribution" and "expenditure" in federal campaign finance law. The FEC has also emphasized that the "media exemption" from campaign finance limits applies equally to online publications and traditional print media.

Background
In 2002, Congress passed the Bipartisan Campaign Reform Act ("BCRA") which, among other things, placed campaign finance restrictions on "public communications." The new federal statute defined a "public communication" as "a communication by means of any broadcast, cable, or satellite communication, newspaper, magazine, outdoor advertising facility, mass mailing, or telephone bank to the general public, or any other form of general public political advertising." 2 U.S.C. 431(22) (emphasis added). In its 2002 regulations implementing BCRA, the FEC specifically stated that Internet communications were not included within the definition of "public communications" and, therefore, not regulated. See 11 C.F.R. 100.26; 67 F.R. 49064 (July 29, 2003).

In 2004, the FEC’s regulations were challenged in federal district court as "thwart[ing] and undermin[ing] the language and congressional purposes" of BCRA. In Shays v. Federal Election Comm’n, 337 F.Supp 2d 28 (D.D.C. 2004), the court invalidated the FEC’s regulations. That decision was affirmed by the U.S. Court of Appeals. 414 F.3d 76 (D.C. Cir. 2005), reh’g en banc denied, No. 04-5352 (Oct. 21, 2005). In response, the FEC initiated the rulemaking process in April 2005, and the new rules adopted this week are aimed at implementing the federal district court’s decision.

Revised Definition of "Public Communication"
Congress defined "public communication" broadly, including "any other form of general public political advertising." 2. U.S.C. 431(22). In Shays, the federal district court concluded that such a broad definition could not exclude all Internet communications. Accordingly, with the new rule, the FEC set out to "identify those Internet communications that qualify as ‘general public political advertising,’ and thus would be encompassed within the definition of ‘public communication’" and subject to campaign finance laws. Final Rules, p. 16.

The new rules include within the definition of "public communication" only paid Internet advertising on another person’s website.

While no other form of Internet communications is included in the definition of "public communication," the placement of advertising on another person’s website [by an individual, political committee, labor organization or corporation] for a fee includes all potential forms of advertising, such as banner advertisements, streaming video, pop-up advertisements, and directed search results.
Final Rules, pp. 19-20. The FEC distinguished paid Internet ads from other types of Internet speech, such as blogs, that are generally free. Accordingly, by including paid ads on another person’s or group’s website within the definition of "public communication," the FEC has created a regulation applicable only where "the advertiser is paying for access to an established audience using a forum controlled by another person, rather than using a forum that he or she controls to establish his or her own audience." Id., p. 23.

The FEC arrived at the new rule after recognizing "the important purpose of BCRA in preventing actual and apparent corruption" and "the significant public policy considerations that encourage the promotion of the Internet as a unique forum for free or low-cost speech and open information exchange." Id. p. 16. Accordingly, "the rule is carefully tailored to avoid infringing on the free and low-cost uses of the Internet that enable individuals and groups to engage in political discussion and advocacy on equal footing with corporations, labor organizations, and political committees, without the need to raise large amounts of funds." Id., p. 20.

The FEC declined to adopt "an explicit exclusion focused on ‘blogging’" as "not only unnecessary but also potentially confusing to the extent that it implies that other forms of Internet communication, such as podcasting or e-mailing, might be regulated absent an explicit exclusion for each different form of Internet communication." Id. p. 27-28. For e-mail, the FEC noted that it "does not consider e-mail to be a form of ‘general public political advertising’ because there is virtually no cost associated with sending e-mail communications, even thousands of e-mails to thousands of recipients, and there is nothing in the record that suggests a payment is normally required to do so." Id. p. 30.

It is important to note that this new definition of "public communication" is significant only for the entities already regulated under BCRA. "State, district and local political party committees and organizations, as well as State and local candidates must use only Federal funds to pay for any ‘public communication’ that promotes, supports, attacks or opposes ("PAOs") a clearly identified candidate for Federal office." Id. p. 11 (citing 2 U.S.C. 431(20)(A)(iii) and 441i(b) and (f))(footnote excluded)). The amended definition of "public communication," therefore, does not expand or otherwise change the types of entities regulated under BCRA.

As the FEC points out, however, the amended definition of "public communication" does implicate other campaign finance regulations.

  • The definition of "generic campaign activity" includes "a public communication" and, therefore, now includes paid Internet advertisements subject to the new definition. 11 C.F.R. 100.25. However, the FEC did not otherwise amend the definition of "generic campaign activity."
  • A "coordinated communication" or a "party coordinated communication" must be a "public communication" and, therefore, now includes all paid Internet advertisements. See 11 C.F.R. 109.21(c) and 11 C.F.R. 109.37(a)(2).
  • The new definition of "public communication" affects the scope of the disclaimer requirements – that is, the source identification requirement. See 11 C.F.R. 110.11(a). Accordingly, "any ‘public communication’ that includes the content specified in 11 C.F.R. 110.11(a)" must contain the required disclaimer.

Exempting Uncompensated Internet Activity
Recognizing that the "Internet has changed the way in which individuals engage in political activity by expanding the opportunities for them to participate in campaigns and grassroots activities at little or no cost from remote locations," the FEC also has issued new rules exempting certain Internet activities from the definitions of "contribution" and "expenditure." Final Rules, p. 55; see 2 U.S.C. 431(8)(B)(i) and (ii); 11 C.F.R. 100.74-100.76 and 100.135-11.136. Under these rules, "any individual or group of individuals who, without compensation, uses Internet equipment and services for the purpose of influencing a Federal election does not make a contribution or expenditure and does not incur any reporting responsibilities as a result of that activity." Id. p. 57. To qualify under the exemption, the services must be uncompensated, but the FEC concluded that it does not matter if the services are known to the candidate.

The new rules exempt all of the following types of Internet activities: e-mailing (including forwarding), linking (including providing a link or hyperlink to a candidate’s, authorized committee’s or party committee’s website), distributing banner messages, blogging, hosting an Internet site, and "any other form of communication distributed over the Internet." Id. p. 64. The catch-all definition was explicitly added "to ensure that future advances in technology will be encompassed within the [] rules." Id.

Clarification of the "Media Exemption"
In a provision commonly known as the "media exemption," BCRA exempts from the definition of federally regulated campaign "expenditure" the costs associated with "any news story, commentary, or editorial distributed through the facilities of any broadcasting station, newspaper, magazine, or other periodical publication, unless such facilities are owned or controlled by any political party, political committee, or candidate." 2 U.S.C. 431(9)(B)(i); 11 C.F.R. 100.73 and 100.132. The new rules clarify that the media exemption "applies to media entities that cover or carry news stories, commentary and editorials on the Internet…." Final Rules, p. 75. By adding "website" and "any Internet or electronic publication" to the list of media in the exemption, the FEC "recognizes that the media exemption is available to media entities that cover or carry news stories, commentaries, or editorials solely on the Internet, as well as to media entities that cover or carry news stories, commentaries, and editorials solely in traditional media or in both traditional media and on the Internet." Id., pp. 75-76. To support the clarification, the FEC acknowledges the expanded role of the Internet and "concludes that bloggers and others who communicate on the Internet are entitled to the press exemption in the same way as traditional media entities." Id. p. 82.

Conclusion
The FEC’s rules are being heralded as a victory for free-speech and Internet communications. Indeed, as the FEC recognized, the new definition of "public communication" does not affect the "vast majority of Internet communications." Final Rules, p. 5. Furthermore, the FEC’s moves to explicitly clarify that the "media exemption" applies to Internet publications and to exclude uncompensated Internet activity from "contributions" and "expenditures" recognize the significance of the Internet in politics. The new rules will also ensure that the wide range of Internet speech will continue to play an ever-expanding role in political campaigns – both for candidate campaigns and issue referendums. While Congressional legislation that would explicitly exempt all Internet communications from the definition of "public communication" is still pending, for now, at least, the FEC has issued the last word on campaign finance regulations and the Internet. Campaign finance law and the low governing the use of the Internet, both standing alone and together, remain complex and dynamic.

For more information about campaign finance and media law issues, please contact Mike Wittenwyler at 608-284-2616 or wittenwyler@gklaw.com, or Jennifer L. Peterson at 608-284-2649 or jlpeterson@gklaw.com.

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