Posted: 8/17/07

     It was too much to hope that once the FEC had completed its rulemaking and had, to general relief, passed lightly on Internet regulation, the critics would give up the fight for more extensive controls.  This week, we have seen still more instances where the Internet “loophole” is the subject of anguished commentary or of an appeal for increased agency activism.

     The New York Times ran a story about the (Fred) Thompson Presidential exploratory efforts, now growing a little tedious in its gestation.  Susan Saulny, "A Campaign Undeclared, Not Invisible" New York Times (Aug. 15, 2007).  One question has been whether Thompson is offending against the letter or spirit of the FEC “testing the waters” (TTW) regulation.  The question under this rule is whether he is really, really unsure about running or is mounting a stealth campaign.  Only so much is at stake: his committee is reporting to the IRS, though not to the FEC, and the differences between the two disclosure regimes is not in material respects very significant.  His goal is simply to hold off, for political reasons, admitting that he is a candidate, and perhaps also to keep Law and Order reruns free of legal contention.

      The Times treats the issue as one of interest principally because of the (non)-candidate’s use of the Internet.  Web communications are the means of reaching large numbers of potential voters when traditional broadcast and cablecast options pose an elevated risk under the TTW rules.  It makes sense for the TTW candidate to proceed through this medium.  It is not, however, a daring day-time raid on the law; it does not qualify as an innovation of unsurpassed ingenuity.

      Yet some interviewed by the Times see matters differently.  This is explained by the fact that, very troubling still to a number of observers, the Internet is less regulated than other media within the jurisdiction of the FEC.  On each possible occasion, accusing fingers point at the Net as it is charged, in overstated fashion, with functioning as a major “loophole” in the campaign finance laws. 

      The Times story carries comments from reform circles that perhaps the TTW rules need to be amended, the implication being that the amendment should narrow or close off this Internet “loophole.”  An FEC spokesman helpfully advises the Times readers that the FEC does not see the Internet as deserving any special treatment: if more regulation is necessary, then more regulation is possible.

      Days later, Citizens for Responsibility and Ethics in Washington (CREW) put out word that it had had some success with a complaint filed against two 527s established in 2004 to attack the Senate candidacy of Barack Obama.  One of the 527s funded paid media but also maintained web sites; the other funded the development of a site, but operating on the thinnest of budgets ($19,000), it does not appear to have gotten off the ground.  The FEC found that the first involved with paid media was a political committee and it settled with the organization on that basis, extracting a fine of $3,000 and a requirement that it file reports with the FEC for the period that it was operating as political committee but not reporting as one.  No settlement was reached with the site-only committee: no further action was taken, and no penalty was paid. 

      In this second case, the FEC’s reasoning was not set out in much detail.  But the absence of any real activity, and particularly the expenditure of monies only on site development and maintenance, were reasons cited by the FEC General Counsel’s for recommending that the agency abandon any further enforcement action.

      Yet CREW, arguing for the significance of the case, singles out its application to Internet politics.  CREW  would have it stand for the proposition that an organization maintaining a web site focused on a federal candidate may be subject to “political committee” status, along with all of the associated obligations to register and to report, and to observe funding restrictions.  This is CREW’s position:

This decision is legally significant because it is the first time that the FEC has determined that a 527 that operated a web site that distributed information critical of a federal candidate's record could be required to register  as a political committee. In other words, this decision could be read as requiring any organization that raises  funds specifically to establish and operate a web site to disseminate information critical of a federal candidate's  record to register as a political committee and raise money within the prohibitions and limitations of FECA.

      CREW opens with the suggestion that the key here is that the organization operating the site is a 527.  It then, in the following sentence, changes course, and finds that the rule of liability applies to “any organization that raises funds specifically to establish and operate a web site to disseminate information critical of a federal candidate’s record.”  In short, the issue is not the type of organization, but the type of activity: the use of the Internet.

      This urge to bring the Internet under control can be expected to continue.  And this is not because Internet politics is causing all sorts of trouble for an election law now having to struggle harder to fight off corruption.  Apparently, what is at work is an unwillingness to accept that this space should not be regulated like all others. 

      Or as the FEC spokesman told the Times: “There’s nothing about the Internet that would make it be treated differently.” 

Bob Bauer