Complex Rules and the Choice of Enforcement Model

January 8, 2015
posted by Bob Bauer

Larry Lessig’s PAC has run into regulatory difficulties, apparently botching compliance with disclaimer requirements, and the Center for Competitive Politics decided to make an example of him by filing a complaint with the FEC. Example of what?  That those advocating for regulated politics should sample the fare they are urging on others and experience the same indigestion. In the Wall Street Journal, Scott Blackburn of the CCP has suggested that the moral of the tale was the need for more “sensible” campaign finance laws.

A law can be “sensible” in several ways— well structured for its intended purpose, or limited in volume and complexity. Mr. Blackburn has the second meaning in mind: fewer rules and a diminished chance of mishaps like the one Mayday has experienced.

But  it is fair to say that any significant regulatory project is hard to carry off without a measure of complexity. The charge of the campaign finance laws is to prevent corruption and its appearance, and if the rules to do this work are to have an effect, they will be written reasonably comprehensively. The result will be a fair degree of “complexity”. Often the intricacy arises from the requirements of constructing constitutional rules. The Commission solicitation rules are an example: they are convoluted because a ban on solicitations is a restriction on speech, and exceptions had to be incorporated into the rules to meet First Amendment requirements.

It is also the experience that regulations rarely satisfy expectations, and when they don’t, more rules are added.  Case in point: McCain-Feingold, which greatly complicated the law in order to rectify its shortcomings. So the law breeds rules, and the rules are subject to interpretation,  and the results are disappointing (to some), all of this bringing about more law and more complexity.  Of course, the goal would be to break out of this cycle and to resist at least this pressure for complexity.

But there will remain the other reasons why the a fairly elaborate rulebook will pose a challenge for compliance. So is that the choice—modest, stripped-down law, exposing political actors to less risk, or reform on the grander scale that can be implemented only with the vast rulemakings and a bureaucracy to match?  There is much to be said for modest objectives that can be effectively realized, offering those who are regulated manageable compliance obligations.

Yet, even allowing for a measure of unavoidable complexity, the choice does not have to be one between a feeble legal regime and one that is oppressive—between one that can be disregarded and other that can be navigated only with the aid of expensive lawyers.  What may be helpful is a more realistic vision of appropriate enforcement alternatives.

For years, editorialists and others have looked for campaign finance legal enforcement to mirror regulatory programs elsewhere—for the FEC to work more like the SEC, and for the success of the enforcement to be judged in part on the size of fines and, as required, readiness to make criminal referrals.  It has been widely assumed that all effective regulatory enforcement must run roughly this way or it cannot be not serious. This may be a serious mistake.

It is very unlikely that involved, often extended legal proceeding leading to major fines serve much useful purpose.  To be sure, we are speaking here of penalties for ordinary-course infractions, not major offenses against clear rules, such as laundering contributions through straw donors.  It is generally the “everyday” legal cost that those who complain about the complexity of the law have in mind.  Forms are not filed, information is not collected for reporting purposes, contributions are not properly “designated” for the correct election, disclaimers are omitted from solicitations or don’t conform to the rules: all this sort of thing.  The FEC already has programs in place for managing certain of these types of  routine or lower-level violations through alternative dispute resolution or “administrative fines”, but the approach there—to resolve compliance issues quickly, efficiently and at acceptable cost—could be usefully put in practice more broadly.

And it is not only monetary penalties fines that so aggravate those who have to work through way through the FEC enforcement process. The enforcement proceeding itself is a cost, the legal costs first and foremost, but also the toll taken by pending “enforcement” and the threat of reputational and political damage.   Legal trouble can always involve harm to reputation and the expense of defending it, but it has seemed different to critics of campaign finance law that a charge involves political activity—a charge not infrequently brought by an adversary.

A reformed enforcement regime that addressed these concerns—to treat political regulation as different in this respect from others—might have certain organizing principles:

Lower Level Infractions

These are violations that involve “technical” problems–e.g. the correct choice of reporting schedules or the wording of disclaimers—or do not involve a significant amount of spending. For these violations—

–No fines would be assessed if the problem is remedied and it is a first-time offense;

–The issue is remedied by an Office of Compliance, not the Office of General Counsel, within 30 days (often it helps to keep the lawyers out of the small stuff, or they might make it bigger);

–The FEC does not issue any findings or press releases.

Higher-Level Infractions

–Fines for more serious infractions are pegged to the nature of the violation and not so much to the amount spent: a $500,000 reporting violation resulting from the inadvertent omission of a media buy is not as significant as  $100,000  in excessive contributions.

–The Office of Compliance reviews the facts first and determines whether they indicate the need for more formal legal enforcement; or whether on undisputed facts, the respondent will agree that the infraction occurred and a fine will be paid. This determination is to be made within 30 days.

–The fines would be paid under a published schedule that identifies the statutory and regulatory provisions that be considered “higher-level”, that graduates penalties according to respondent history (first-time infraction etc.), and that specifies the range of penalties.

These are, roughly sketched out, one of a number of possible adjustments in the enforcement model.

So back to Larry Lessig and his PAC:  the Mayday mistakes are embarrassing, but the problem they illustrate may not be entirely or even primarily complexity.  It may be the wrong enforcement model—and expectation—for dealing with regulatory infractions committed while conducting political activity.

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