Campaign Finance Reform: Regulating Political Communications on the Internet

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The Federal Election Campaign Act (FECA) regulates “federal election activity,” which is
defined to include a “public communication” (i.e., a broadcast, cable, satellite, newspaper,
magazine, outdoor advertising facility, mass mailing, or telephone bank communication made to
the general public) or “any other form of general public political advertising.” In 2006, in
response to a federal district court decision, the FEC promulgated regulations amending the
definition of “public communication” to include paid Internet advertisements placed on another
individual or entity’s website. As a result, a key element of online political activity—paid
political advertising—is subject to federal campaign finance law and regulations.
During the 110^th Congress, the regulation of political communications on the Internet has not
been the subject of major legislative action. H.R. 894 (Price, NC) would extend “stand by your
ad” disclaimer requirements to Internet communications, among others. H.R. 5699 (Hensarling)
would exempt from treatment as a contribution or expenditure any uncompensated Internet
services by individuals and certain corporations. This report will be updated in the event of major
legislative, regulatory, or legal developments.

The Federal Election Campaign Act (FECA), as amended by the Bipartisan Campaign Reform ¹
Act of 2002 (BCRA), regulates “federal election activity,” which is defined to include (1) voter
registration drives in the last 120 days of a federal election; (2) voter identification, get-out-the
vote drives (GOTV), and generic activity in connection with an election in which a federal
candidate is on the ballot; (3) “public communications” that refer to a clearly identified federal
candidate and promote, support, attack, or oppose that candidate (regardless of whether the
communications expressly advocate a vote for or against a candidate); and (4) services by a state
or local party employee who spends at least 25% of paid time per month on activities in ²
connection with a federal election. FECA further defines “public communications” as broadcast,
cable, satellite, newspaper, magazine, outdoor advertising facility, mass mailing, or telephone
bank communications made to the general public, “or any other form of general public political ³
advertising.” As a result, candidate and party committees can only use regulated federal funds to
pay for such “federal election activity.” Regulated federal funds, also known as “hard money,” are
funds that are subject to FECA’s contribution limitations, source restrictions, and reporting ⁴
requirements.
Shortly after enactment of the BCRA amendments to FECA in 2002, the FEC promulgated
regulations that exempted Internet communications from federal campaign finance regulation ⁵
altogether by excluding such communications from the definition of “public communication.” In
response, the two primary sponsors of BCRA in the House of Representatives, Representatives
Shays and Meehan, filed suit in U.S. district court against the FEC. In seeking to invalidate the
regulations, the plaintiffs argued, inter alia, that by not regulating Internet activities, the FEC was
opening a new avenue for circumvention of federal campaign finance law, contrary to Congress’s ⁶
intent in enacting BCRA. In 2004, in Shays v. FEC, the U.S. District Court for the District of

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Columbia agreed with the BCRA sponsors and generally overturned the FEC’s initial regulations
governing political communications on the Internet.
The Shays court held that excluding all Internet communications from the FEC rule defining
“public communication,” at 11 CFR § 100.26, was inconsistent with Congress’s use of the phrase,
“or any other form of general public political advertising,” in the BCRA definition of “public
communication.” Further, the court found that the FEC had failed to provide legislative history ⁷
that would persuade the court to ignore the plain meaning of the statute. While not all Internet
communications fall within the phrase, “any other form of general public political advertising,” ⁸
the court observed that “some clearly do.” However, the court left it to the FEC to determine ⁹
precisely what constitutes “general public political advertising” in the context of the Internet.
Furthermore, while the court specifically upheld the definition of “generic campaign activity” as a
“public communication,” it found that the FEC’s 2002 Notice of Proposed Rulemaking (NPRM)
failed to provide adequate notice to the public, under the Administrative Procedure Act (APA),
that the FEC might establish such a definition. As the court noted, it could not “fathom how an ¹⁰
interested party ‘could have anticipated the final rulemaking from the draft rule.’”
The Shays court also found that the FEC rule exempting Internet communications from the
definition of “public communications” meant that no matter how closely such communications
are coordinated with political parties or candidate campaigns, they cannot be considered ¹¹
“coordinated communications” and hence, subject to FECA regulation. As the court observed, it
has long been a tenet of campaign finance law that, in order to prevent circumvention of
regulation, FECA treats expenditures that are made “in cooperation, consultation, or concert, with ¹²
or at the suggestion of a candidate” as a contribution to such candidate. According to the court,
the exclusion of Internet communications from coordinated communications contrasts with prior ¹³
FEC rules and was contrary to Congress’s intent in enacting the statute. The court remanded the ¹⁴
case for further action consistent with its decision.
In response to the district court’s decision in Shays v. FEC, in April 2005, the FEC published an
NPRM seeking comment on its proposal to amend the definition of “public communication” to ¹⁵
conform to the ruling. In its NPRM, the FEC requested comments on proposed rules to include
paid Internet advertisements in the definition of “public communication.” In addition, the FEC
sought comment on the related definition of “generic campaign activity,” on proposed changes to

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disclaimer regulations, and on proposed exceptions to the definitions of “contribution” and
“expenditure” for certain Internet activities and communications that would qualify as individual
volunteer activity or that would qualify for the “press exemption.” According to the FEC, the
proposed rules were intended to ensure that political committees properly finance and disclose
their Internet communications, without impeding individual citizens from using the Internet to
speak freely regarding candidates and elections (e.g., blogging).
The comment period closed and a public hearing was held in June 2005, and in anticipation of
congressional action, the FEC delayed consideration of the Internet regulations. However, with
congressional action being uncertain, in March 2006, the FEC voted unanimously to approve the
new regulations. In so doing, the commissioners cited the 2004 Shays v. FEC federal district court
decision as requiring them to take such action.
Generally, the Internet regulations reflect an attempt by the FEC to leave blogs, created and
wholly maintained by individuals, free of FECA regulation, so long as such services are not
performed for a fee. As stated in its NPRM:
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The regulations apply only when money is exchanged for Internet-related campaign
advertisements. Accordingly, the funds expended for such advertisements are subject to the
limitations, source restrictions, and reporting requirements of FECA.
Key aspects of the FEC regulations include the following:
• Regulation of paid Internet ads as “public communications”—The definition of
“public communication” includes paid Internet ads placed on another individual
or entity’s website as a form of “general public political advertising,” with no
dollar threshold required; the advertiser, not the website operator, is considered to
be making the public communication. Accordingly, the fees for such ads are
subject to FECA contribution limits, source restrictions, and disclosure ¹⁷
requirements.
• Disclaimer requirements—Disclaimers (statements of attribution) are required on
all political committee websites available to the public. As “public

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communications,” paid Internet ads must contain disclaimers if they expressly
advocate the election or defeat of a clearly identified federal candidate or solicit
contributions. Disclaimers are not required on e-mails from individuals or groups
unless they are political committees, in which case disclaimers are required if
more than 500 substantially similar, unsolicited e-mails are sent within a 30-day ¹⁸
period.
• Disclosure of fees paid by candidates to bloggers—Payments to bloggers from
candidates are required to be disclosed only on candidate disclosure statements; ¹⁹
no such disclaimers are required on blog sites.
• Coordinated communications—Internet advertisements made for the purpose of
influencing a federal election, placed on the website of another person or entity
for a fee—and coordinated with a candidate or party committee—are considered
“coordinated communications” and as such, constitute in-kind contributions to
the candidate or committee. Accordingly, the fees for such ads are subject to ²⁰
FECA contribution limits, source restrictions, and disclosure requirements.
• Media exemption—Under the definition of “contribution,” the general exemption
from FECA coverage of news stories, commentaries, and editorials distributed
through broadcasters, newspapers, and periodicals applies to such ²¹
communications that are distributed over the Internet.
• Exceptions for individual or volunteer activity on the Internet—Under the
definitions of “contribution” and “expenditure,” an uncompensated individual or
group of individuals using Internet equipment and services in order to influence a
federal election, whether or not such services were known by or coordinated with ²²
a campaign, are excluded from FECA regulation.
During Congress’s consideration of BCRA in 2001 and 2002, the subject of communications over
the Internet was not addressed, but it was discussed during debate on a previous version of what ^th
became BCRA during House consideration of H.R. 417 (Shays-Meehan) in the 106 Congress.
An amendment was offered to that bill by Representative DeLay to exempt communications over ²³
the Internet from regulation under FECA, but was defeated by a vote of 160-268.
During the 109^th Congress, several bills were proposed to exempt all communications over the
Internet from the BCRA definition of “public communication,” and therefore, regulation under
FECA. These proposals included H.R. 1606 (Hensarling), the Online Freedom of Speech Act,
which was considered by the House under suspension of the rules but, on a 225-182 vote, failed

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to receive the two-thirds necessary for passage. The bill was brought up again and ordered
reported favorably by the House Administration Committee on March 9, 2006, setting up
consideration by the House, but the vote was postponed pending FEC regulatory action. Also ^th
during the 109 Congress, in response to concerns that the Online Freedom of Speech Act could
open the door to FECA circumvention (for example, by allowing corporations and unions to
finance advertisements), two additional bills were offered: H.R. 4194 (Shays-Meehan) would
have excluded Internet communications from FECA regulation, but regulated communications
placed on a website for a fee and those made by most corporations and unions, by any political
committee, and by state and local parties; and H.R. 4900 (Allen-Bass) would have exempted from
FECA regulation most individual online communications and advertisements below a dollar
threshold. In the wake of the new FEC regulations approved on March 27, 2006, however, House
floor action was postponed indefinitely.

During the 110^th Congress, the regulation of political communications on the Internet has not
been the subject of major legislative action. H.R. 894 (Price, NC) would extend “stand by your
ad” disclaimer requirements to Internet communications, among others. It was referred to the
Committee on House Administration.
H.R. 5699 (Hensarling) would exempt from treatment as a contribution or expenditure any
uncompensated Internet services by individuals and corporations that are wholly owned by
individuals engaging primarily in Internet activities, which do not derive a substantial portion of
revenue from sources other than income from Internet activities, except payment for (1) a public
communication (other than a nominal fee), (2) the purchase or rental of an email address list
made at the direction of a political committee, or (3) an email address list that is transferred to a
political committee. H.R. 5699 would also exempt blogs and other Internet and electronic
publications from treatment as an expenditure by including such communications in the general
media exemption applicable to broadcast stations and newspapers. It was referred to the
Committee on House Administration.
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CRS specialist Joseph E. Cantor (now retired) originally co-authored this report.