"We're getting into the new frontier here," declared a Federal Election Commission (FEC) spokesman recently regarding Internet political activity ("IPA"). IPA is significantly influencing the current federal election cycle, and that influence will continue to grow. So far, the Federal Election Commission (FEC) has not defined the scope of the Federal Election Campaign Act of 1971 ("FECA" or the "Act") and other regulations as they apply to campaign-related speech and political activities in Cyberspace.

This paper examines the impact of federal campaign-finance laws on Internet political activity. First, I will define "IPA." Next, I will outline the Federal Election Campaign Act of 1971, as amended. After that, I will discuss how the Internet has removed the assumptions upon which the FECA was based. Subsequently, I will summarize some actual IPA situations in which the FEC interpreted the FECA. Finally, I will conclude that a moratorium on applying FEC rules and regulations on IPA is the appropriate solution to the FECA problem.

Cyberspace has given citizens a global platform to discuss every issue under the sun. Politics is a favorite subject in news groups and list-servs, chat rooms and bulletin boards, and, the most common form, electronic mail (email). Another important platform is the Internet and World Wide Web pages. This paper will focus on political activity on Internet Web sites ("IPA").

The United States Supreme Court has concluded that it is "no exaggeration . . . that the content on the Internet is as diverse as human thought." Today, more than half of all adult Americans has access to the Internet. Of those Americans who visit the Internet each week, nearly twenty-five percent seek political information. That is nearly ten percent of all voters.

The number of people seeking political information on the Internet has doubled since the last presidential election cycle, and the number grows every day. There are countless sites dedicated to politics on the Internet. There are partisan sites and sites devoted to supplying nonpartisan political information. There are candidate sites, and citizen political sites that advocate and parody. Each site located in the United States is subject to FEC oversight.

FEC Chairman Scott Thomas has said that the FECA applies to IPA. "We have to try to work within the statutory and regulatory framework we have" said Thomas. The Chairman does not believe that Congress has given him any flexibility, and that he has an "obligation to stay within [the] existing role."

Because IPA is now operating within the current regulatory scheme, it is important to understand how that scheme operates. This section will outline the Federal Election Campaign Act of 1971, as amended.

I begin by tracking the development of campaign restrictions on federal elections in the United States. After that, I examine the 1971 Act and the 1974 amendments to the Act. Next, I review the First Amendment concerns raised by the FECA restrictions. Finally, I summarize several provisions of the Act that are pertinent to IPA.

Regulating federal elections is not a recent idea. President Theodore Roosevelt proposed campaign finance reforms as early as 1905, after enormous corporate contributions to presidential campaigns came to light. In 1907, President Roosevelt’s efforts resulted in the Tillman Act, the first federal legislation that restricted campaign financing in America.

The Tillman Act was designed to lessen "the disproportionate influence of wealthy individuals and special interest groups on the outcome of federal elections." The 1907 legislation prohibited corporations and national banks from contributing to federal election campaigns. The Tillman Act was expanded in 1910, and again in 1911. The changes required campaigns to disclose the sources of their financing. Throughout the years, Congress enacted a hodgepodge of additional modest campaign finance laws.

The 1960 Presidential race between Nixon and Kennedy fundamentally changed the way elections were conducted in America. That election ushered in the television era and, with it, the need for an ever-increasing campaign war chest to pay for the television advertising time.

Federal election campaigns increasingly focused their attention on television advertising. Because there are a limited number of time slots and candidates vie with all other advertisers for the most effective time slots, the price of campaigns skyrocketed.

The FECA was a congressional response to the perception that the increase need for money, brought along an increase in the corruptive influence of the contributors. The Act merged all existing campaign-financing regulations into a single act. The Act also required federal candidates, political parties and political action committees ("PACs") to disclose more information than ever before about contributions to campaigns for the Presidency and Vice Presidency, the United States Senate and the United States House of Representatives.

The FECA was amended in 1974 after questions were raised about financial abuses in the 1972 presidential campaign. The 1974 amendments set limits on contributions by individuals, political parties and PACs and limited expenditures used in support of candidates. In addition, the Act established the Federal Election Commission ("FEC"), an independent agency charged with the responsibility of enforcing and administering the FECA. The Act, as amended, was wide-ranging and encompassed "all phases of and all participants in the election process."

Shortly after the 1974 amendments, the Act’s constitutionality was challenged in the United States Supreme Court in the landmark case Buckley v. Valeo. The plaintiffs asserted, among other things, that the Act violated the First Amendment guarantee of free speech because "limiting the use of money for political purposes constitutes a restriction on communication . . . since virtually all meaningful political communications in the modern setting involve the expenditure of money."

The Buckley court said:

The Buckley court stuck down the Act's provisions limiting a candidate’s campaign expenditures, because those provisions placed substantial restrictions on the ability of candidates, citizens and PACs to engage in protected political expression. Therefore, the court said, limiting expenditures violated the First Amendment’s guarantee of free speech.

While the court struck down several provisions of the FECA, many provisions survived. The court found that the contribution and disclosure provisions were appropriate legislative weapons against "the reality or appearance of corruption," and, therefore, survived the strict scrutiny of the court. When examining IPA, several provisions of the FECA are pertinent.

First I will review the limits the FECA places on campaign contributions. Next, I will set out contributions and expenditures that are prohibited in federal elections. After that, I list the Act’s disclosure requirements. Finally, I will define "independent expenditure."

The Act limits contributions by individuals and groups to candidates, party committees and PACs. The chart reproduced below is published by the FEC and outlines the limits that apply to federal election participants.

Contributions are not limited to cash. Section 431(8) of the Act defines the term "contribution'' broadly to include "any gift, subscription, loan, advance or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office.'' In addition, a "contribution" also includes "the payment by any person of compensation for the personal services of another person which are rendered to a political committee without charge for any purpose."

FEC regulations further define "any thing of value" to include any "in-kind" contribution and furnishing goods or services without charge as a covered expenditure.

Contributions do not include, however, "the value of services provided without compensation by any individual who volunteers on behalf of a candidate or political committee."

In addition to limiting contributions by individuals, groups and committees, the FECA prohibits corporations, labor organizations, federal government contractors and foreign nationals from making any contributions and expenditures to influence federal elections. The Act also prohibits individuals from making contributions in another person's name and restricts cash contributions to amounts less than $100.

Candidates, party committees and PACs are required to file quarterly reports. The reports must disclose the money they raised and spent, and generally identify the source of the contributions. In addition, candidates must disclose and attribute contributions from PACs and party committees. The records must also include the name and address of everyone making a contribution in excess of $10, along with the date and amount of the contribution. If a person’s contributions are more than $200, the citizen’s occupation and principal place of business must also be included.

The most important provision in the FECA, as applied to individual citizens on the Internet, is the provision defining independent political expenditures. Although the Act does not limit independent expenditures, the FECA classifies "expenditures made by any person in cooperation, consultation, or concert with, or at the request or suggestion of, a candidate, his authorized political committees, or their agents" as contributions.

Even if a citizen does not act "in concert" with a candidate, if an individual makes independent expenditures totaling more than $250 in a calendar year that "expressly advocat[s] the election or defeat of a clearly identified [federal] candidate" the citizen must file disclosure reports with the FEC.

In addition, the citizen must include a disclaimer with any communication that "clearly states the name of the person who paid for the communication and state that it is not authorized by any candidate or the candidate's committee." If the individual spends more than $1000, that citizen has to register as a PAC and adhere to all applicable disclosure requirements.

The FECA was enacted because Congress believed that if campaign contributions and expenditures were controlled, so too would corruption. The Buckley Court recognized that "the primary interest served by the limitations . . . is the prevention of corruption and the appearance of corruption spawned by the real or imagined coercive influence of large financial contributions on candidates' positions and on their actions if elected to office."

In addition, Congress believed that publicly disclosing a list of contributors would "discourage those who would use money for improper purposes either before or after the election. A public armed with information about a candidate's most generous supporters is better able to detect any post-election special favors that may be given in return."

The Internet fundamentally alters the underlying assumptions on which the FECA is based. The FECA is set up to monitor a campaign finance scheme constructed around a limited, centralized and expensive media system controlled by a handful of national participants.

The Internet, on the other hand, has an unlimited number of distribution channels, because it is, by design, a decentralized global "network of networks." The Buckley court equated money with speech. The Internet changes that equation. A citizen may communicate with countless individuals around the world for almost nothing. Also, a candidate may communicate with citizens without having to filter the message through a media outlet.

IPA presents a unique problem to regulators given the task of monitoring political activity in America. In this section I will outline the Federal Election Commission’s attempt to set the boundaries of the FECA on the Internet.

In order to understand the agency’s view, it is appropriate to review FEC opinions, comments, and notices. First, I will define what an AO is and the measure of authority it carries. Secondly, I will summarize several FEC advisory opinions (AO) and review the Tweezerman Corporation matter. Finally, I will access the most recent FEC notice of inquiry.

An advisory opinion is a written FEC reply to a citizen’s request for answers "concerning the application of the Act . . . or any regulation prescribed by the Commission." The request must "set forth a specific transaction or activity that the requesting person plans to undertake or is presently undertaking and intends to undertake in the future." Hypothetical situations do not qualify for an AO.

The person that requested an AO, and anyone else that "acts in good faith in accordance with that advisory opinion shall not, as a result of any such act, be subject to any sanction provided by the Federal Election Campaign Act of 1971." Therefore, a review of issued advisory opinions is a good indication of what the "state of the law" is concerning a particular activity.

The first AO concerning Internet activity was a request by an independent PAC named Newtwatch. Newtwatch’s mission was to "provide a forum for publicly available information on selected public officials, most notably Speaker of the House Newt Gingrich." The PAC "exist[ed] principally as a 'virtual PAC' on the World Wide Web."

Newtwatch requested an AO concerning whether using their Web site "to distribute its communications regarding Speaker Gingrich and to solicit contributions constitute[d] general public political advertising." They also wanted to know if the FECA permitted the Committee to accept contributions using credit cards, fund transfers and other electronic means submitted direct from their Web site.

To answer the first question presented, the FEC relied on regulation 11 CFR 110.11(a)(1)(iv)(A). That regulation provides that, "whenever an unauthorized committee solicits contributions through general public political advertising, the communication must include a disclaimer, ‘presented in a clear and conspicuous manner,’ which clearly identifies the payor."

The FEC concluded that because the Internet had greatly expanded, become easier to access and declined in cost, Newtwatch’s Web Site "should be viewed as a form of general public political advertising under 11 CFR 110.11." Therefore the site must include a qualifying disclaimer.

For the second question regarding accepting credit cards, the FEC concluded the Act and regulations "allow lawful contributions to be made not only by personal check, but also in other ways, including properly documented use of contributors' credit cards." The Committee was required to maintain the proper records "preserved and available for audit, inspection or examination by the Commission for at least three years after the filing of the report to which the documentation relates."

The next AO I will summarize raised a question concerning presidential campaign fund raising. Lamar Alexander’s election committee, Alexander for President, Inc., ("AFP") used a World Wide Web site to solicit contributions for Alexander's presidential candidacy. Supporters were asked to send "personal checks to the Treasurer of the Committee at Committee headquarters."

AFP requested an AO on whether their campaign contributions solicited via the Internet were eligible for matching funds from the Presidential Primary Matching Payment Account.

The FEC said, "the fact that the Internet is used to convey the solicitations does not affect whether the resulting contributions would qualify for Federal matching payments." In addition, the "Committee's solicitation, acceptance and processing of contributions made in response to its Internet solicitations will not differ in any material respect from the treatment of contributions it solicits and accepts through direct mail."

The FEC also reviewed a matter concerning Tweezerman Corporation. The founder and President of the company, Dal LaMagna, was a candidate for the United States House of Representatives in 1996. The corporation maintained a site on the World Wide Web at http://www.tweezerman.com.

On the company’s home page, at the bottom, a hyperlink brought surfers to a Web site that raised money for the candidate. The text of the hyperlink read, "Dal La Manga, the founder and president of TWEEZERMAN, is running for the U.S. Congress in New York." The hyperlink was the only reference to Mr. LaManga’s campaign.

Mr. LaManga maintained that hyperlinks are "critical to navigating on the Internet." In addition, the link did not have any value "therefore the link should not be considered an in-kind contribution."

The FEC disagreed, stating "Although the respondents are correct in stating that links between sites are routinely used and that links make surfing the net easy, they are incorrect in further stating that 'these links are [customarily] free of charge. There is no disputing that paid advertising and paid hyperlinks on the WWW are a very big business."

Further, the Commission said that "the mere fact that something is ordinarily provided free of charge does not alone answer the question of whether it has value -- certainly, something can be free of charge but still have value."

Because the link had value, and a corporation provided the link, providing the link violated 2 U.S.C. 441b(a) which prohibits corporate contributions to federal election campaigns. The FEC imposed a fine on Mr. LaManga’s campaign for this and other violations in the amount of $16,000.

Leo Smith designed web sites for businesses and non-profit organizations. Mr. Smith, in protest of House Republican efforts in the impeachment hearing of President Clinton, created an Internet Web site with the slogan "defeat Nancy Johnson." Representative Nancy Johnson was the Republican candidate in the Sixth Congressional District of Connecticut. In addition, Mr. Smith recommended that visitors "[w]ork to elect Koskoff for Congress." The site also provided a form to contribute money or volunteer time to the Koskoff campaign and a link to the candidate’s official web site.

Mr. Smith had limited contact with the Koskoff campaign; the campaign corrected the spelling of the candidate’s name. The site included a disclaimer "This web site is posted by a registered Independent voter in the Sixth District. This site is not affiliated with or supported by the official Koskoff for Congress campaign."

Mr. Smith contended that because the web site was located in a sub-directory of his company domain and he used his own computer, "no funds were received or expended to create the Web site."

The FEC disagreed. They concluded that, given the FECA definition of "expenditure" in 2 U.S.C. § 431(9), the site was "something of value" and required Mr. Smith to include a proper disclaimer that included his full name, rather than describing himself as an "Independent voter in the Sixth District." The Commission also required Mr. Smith to determine the value of the expenditures before they could advise which reporting requirements were appropriate.

Although the Commission did not set a value to the site, they recommended Mr. Smith apportion the "fee to secure the registration of domain name, the amounts [he] invested in [his] hardware, and the utility costs to create the site."

Bradley for President Inc. ("BFP") had set up a site on the World Wide Web. A Prospective donor could contribute to BFP by "filling out an electronic form and transmitting it to the Committee." BFP had set up a series of steps to ensure that FECA provisions were followed, then BFP accepted the contribution via credit card.

BFP requested an AO about applying the FECA to funds gathered from the Web site via credit card contributions. BFP wanted to know if these funds were eligible for matching funds under the Presidential Primary Matching Payment Account Act.

The Commission said "that the current Commission regulations at 11 CFR 9034.3, which interpret 26 U.S.C. § 9034(a), explicitly state that contributions made by means of credit card transactions cannot be matched." However, the Commission said that if BFP followed the process indicated, the Commission would change the regulations in order to allow "the specific transaction or activity set forth in your request."

The Governor George W. Bush for President Exploratory Committee, Inc. ("the Committee") set up an Internet Web Site at http://www.georgewbush.com and relied on the Internet as much as any campaign ever has. The Committee was troubled that, should the FEC determine independent web sites and other IPA supporting the election of Governor Bush for President are contributions, they would surpass the contribution limits and the Committee would be denied matching funds or fined.

The Committee sent a request for AO to the FEC and presented a number of questions about IPA. The request covered several areas of inquiry:

First the Commission made an important declaration, "if a volunteer for the campaign chooses to prepare a web site supporting the campaign using his or her personal property at home, i.e., a home computer, that action would not be a contribution."

In addition, the Commission said that Web sites that the Committee is unaware of, also would not be considered contributions to the Committee. The Committee "does not have an obligation to search the web to discover the existence of pro-Bush activity."

Next, the Commission addressed the question about links between Web Sites. The Commission said, "[p]roviding a link to web sites operated by the Committee would be considered a service and something of value to the campaign and could, under certain circumstances, meet the definition of ‘contribution’ under the Act and Commission regulations." If, however, the web page providing the link would not normally charge for such a link, the link would not be considered a contribution under the FECA. On the other hand,

Further, the Commission clarified its position concerning links provided by Web sites that normally do charge and corporations that are not permitted to contribute to campaigns. "If the links are not established or maintained at the request or suggestion of, or in cooperation, consultation or concert with the Bush campaign, then the Bush campaign has no obligation to request removal of the links and no reporting obligations in regard to them."

The Commission answered questions about vendor sites by referring to answers of links and citizen sites. If the Committee is unaware of, or not connected to the vendors, the "activities of the vendors do not produce a reporting obligation for the Committee."

Next, the Committee’s questions turn to Internet polling and whether the media exception applies. "The Commission generally notes that only the web sites operated by entities whose activities fulfill the requirements of the ‘press exemption’ could receive the benefit of 2 U.S.C. 431(9)(B)(i)." Therefore, the Committee can not rely on the media exception to any of their activity.

• If the FEC determines that there is no reportable value to sending an e-mail, what is the result if the volunteer uses an e-mail system at his or her place of business? Is this a corporate contribution?

Next, the Commission addressed the question about e-mail. The Commission applied the same analysis as they did to citizen Web Sites. If volunteers perform the activity, than the activity is not attributable to the Committee. In addition, "[t]he contribution limit of the volunteer would not be affected by this activity."

The remaining questions that The Governor George W. Bush for President Exploratory Committee, Inc. raised would have to wait for another day. An AO is only appropriate "with respect to a specific transaction or activity by the person." Because many of the questions posed by the Committee were hypothetical or applied to some third persons, the Commission said, "any further comment on the activity . . . would not be an appropriate subject for an advisory opinion."

Recently, the FEC issued a "notice of inquiry" ("NOI") entitled Use of the Internet for Campaign Activity, seeking public input into the rule-making process. The NOI states that "[t]he [FEC] is conducting this review in order to assess the applicability of the Federal Election Campaign Act and the Commission's current regulations to campaign activity conducted using [the Internet]." The NOI asks the "threshold question," should IPA "be treated as a contribution or an expenditure" under existing laws?

FEC Commissioner David Mason proposed the NOI, and raised several additional questions, including:

• Does the media exemption, which allows newspapers to make endorsements without their counting as a contribution, apply to Internet "magazines"? Can some Internet sites be considered "periodical publications"? Would "list serves" or regular e-mails qualify as periodical publications?

• How should political committees report Internet expenditures? Multi-candidate committees may host Web sites that include candidate-specific materials. Should the multi-candidate committee be required to calculate the value of information about a specific candidate to be reported as a contribution?

• Should links to candidate or political committee Internet sites be treated as campaign expenditures in and of themselves, or are such links simply the equivalent of mailing addresses or phone numbers?

• Should the commission regulate the placement of banners ("electronic bumper stickers") on non-campaign Web sites? Since the marginal cost of adding such a banner to a Web site is near zero, what is its value for Federal Election Campaign Act purposes?

• How should Internet-based organizations be treated for purposes of the FEC's membership rules?

• Should hosts of Internet discussion sites be held liable for postings (for instance, express advocacy) by persons participating in the discussion?

Another FEC Commissioner, Karl Sandstrom, also addressed the IPA issue in a guest column in the September 5, 1999 edition of The Washington Post. Commission Sandstrom concluded that the Internet "is beyond the capabilities of the FEC to be the Web police." Referring to FEC advisory opinion’s and other FEC comments about the Internet, Commissioner Sandstrom said that "[t]he FEC must provide answers, but those answers will prove inadequate if it fails to recognize the uniqueness of the Internet."

He highlighted a considerable problem for proposed regulation of IPA.

The FEC seeks public input about IPA. The commissioners, however, can not agree as to the appropriate action.

The Internet has ushered in a new era in politics. The old rules just do not apply to this new medium. "It's like applying the rules of the road that existed for the pony express to space travel." So far there are more questions than answers. In this section, I will argue that the FECA should not be applied to IPA. First I will reveal that there only two options: impose the FECA on IPA, or do not. After I conclude that the best option is not to apply the FECA to IPA, I propose a moratorium. Next, I explain that the moratorium is in line with the goals and purpose of FECA. Finally, I conclude that the Internet is unique, and should be exempt from old, outdated laws.

The Chairman of the FEC has said that FECA rules and FEC regulations apply to the Internet, just as they do to every other medium. Don Simon, vice president of Common Cause, a leading group advocating campaign-finance reform, believes the Internet shouldn't be exempt from federal campaign laws.

House Majority Whip Tom Delay, on the other hand, proposed legislation that would prevent the FEC from regulating any campaign-related Internet activity except that related to online fundraising from FEC rules. Lamar Alexander believes, "[t]he Internet may be the last, best hope for democratizing the presidential nomination process."

The views are opposing; the FECA should apply to IPA or does not apply. So far the FEC has had a difficult time applying the antiquated FECA to the high technology Internet. The advisory opinions and other analysis outlined in this paper demonstrate that simple issues (Can I link to a candidate’s Web site) become very complicated when the FECA is applied. My position is that the FECA should not apply to Internet political activity.

This is not the only area in which the Internet has been beyond the laws. State taxes are a good example. When it became clear that state imposed taxes had the potential to seriously interrupt commerce on the Internet, Congress acted quickly and imposed a three-year moratorium.

If e-commerce should be so important as to necessitate a moratorium, how much more so are freedom and the Bill of Rights? If left to the FEC, the freedoms found on the Internet will slowly be evaporated. After all, the FEC is an agency interested in setting out new turf, and thereby increasing its power and authority. The Commission may make small gestures of flexibility, but they are bound to apply the FECA as written.

If "the primary interest served by" the FECA "is the prevention of corruption and the appearance of corruption spawned by the real or imagined coercive influence of large financial contributions on candidates," then the best way to remove that corruption is to eliminate the influence of large financial contributors. And the best way to eliminate the influence of large financial contributor’s is by establishing a free flow of information about the campaign and the candidate.

Therefore allowing the free flow of information removes the primary interest of the FECA, causing the FECA to fail under strict scrutiny of the court. IPA is not the kind of activity that the United States Supreme Court would allow the FECA to restrict. If the FECA places restrictions on speech, thereby limiting the free flow of information, the intent of the Act is hindered rather than helped.

The amount of political activity on the Internet is too great for an agency to police. Therefore, enforcement will be selective, which would also be contrary to the professed goal. Therefore, the only logical solution to this problem is for Congress to impose a moratorium on applying FEC rules and regulations on IPA. Any lessor action risks the free flow of information upon which the Internet, and political thought, flourishes.