[Federal Register Volume 66, Number 192 (Wednesday, October 3, 2001)]
[Proposed Rules]
[Pages 50358-50366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24643]


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FEDERAL ELECTION COMMISSION

11 CFR Parts 100, 114, and 117

[Notice 2001-14]


The Internet and Federal Elections; Candidate-Related Materials 
on Web Sites of Individuals, Corporations and Labor Organizations

AGENCY: Federal Election Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Commission is publishing proposed rules relating to the 
Internet and Federal elections. These rules address issues raised in a 
Notice of Inquiry that was published by the Commission in November of 
1999. The proposed rules would clarify the status of campaign-related 
Internet activity conducted by individuals, and of hyperlinks and 
endorsement press releases on Internet web sites established by 
corporations and labor organizations. The draft rules that follow do 
not represent a final decision by the Commission on the issues 
presented in this rulemaking. Further information is provided in the 
supplementary information that follows.

DATES: Comments must be submitted on or before December 3, 2001.

ADDRESSES: All comments should be addressed to Rosemary C. Smith, 
Assistant General Counsel, and must be submitted in either written or 
electronic form. Written comments should be sent to the Federal 
Election Commission, 999 E Street, NW., Washington, DC 20463. Faxed 
comments should be sent to (202) 219-3923, with printed copy follow-up 
to insure legibility. Electronic mail comments should be sent to 
[email protected]. Commenters sending comments by electronic mail 
must include their full name, electronic mail address and postal 
service address within the text of their comments. Comments that do not 
contain the full name, electronic mail address and postal service 
address of the commenter will not be considered. The Commission will 
make every effort to have public comments posted on its web site within 
ten business days of the close of the comment period.

FOR FURTHER INFORMATION CONTACT: Rosemary C. Smith, Assistant General 
Counsel, or Paul Sanford, Staff Attorney, 999 E Street, NW.,

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Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: The Commission is publishing this Notice of 
Proposed Rulemaking [``NPRM''] to invite comments on proposed rules 
that would apply to certain types of campaign-related Internet activity 
by individuals, corporations and labor organizations. This NPRM follows 
publication of a Notice of Inquiry (``NOI'') on November 5, 1999, in 
which the Commission sought comments on a wide range of issues related 
to campaign activity conducted on the Internet. 64 FR 60360 (Nov. 5, 
1999). After reviewing the comments received in response to the NOI, 
the Commission has decided to issue proposed rules in three areas: (1) 
Application of the volunteer exemption in 2 U.S.C. 431(8)(B)(ii) to 
Internet activity by individuals; (2) Hyperlinks placed on corporate or 
labor organization web sites; and (3) Press releases announcing 
candidate endorsements that are made available on corporate and labor 
organization web sites. The Commission may take additional action on 
some or all of the other issues raised in the NOI at a later time.

A. Background

    Recent election cycles have seen a dramatic increase in the use of 
the Internet to conduct campaign activity related to federal elections. 
The use of the Internet for activity relating to federal elections 
raises issues regarding the application of the Federal Election 
Campaign Act of 1971, as amended, 2 U.S.C. 431 et seq. (``FECA'' or 
``the Act'').
    Generally, the FECA requires individuals, candidates, party 
committees, separate segregated funds (``SSFs'') and nonconnected 
committees to file disclosure reports regarding their election-related 
activity, and also sets restrictions or limitations on the amounts that 
may be contributed to candidates and political committees by 
individuals, corporations, labor organizations and other entities. 
Although the FECA was enacted prior to widespread use of the Internet, 
and has been narrowed by court decisions such as Buckley v. Valeo, 424 
U.S. 1 (1976) and FEC v. Massachusetts Citizens for Life, 479 U.S. 238 
(1986), several provisions of the Act are broad enough to potentially 
encompass some types of campaign-related Internet activity conducted by 
individuals, corporations and labor organizations.
    For example, the Act's definitions of ``contribution'' and 
``expenditure'' are broad enough to potentially apply to some Internet 
activity conducted by individuals. Section 431(8) of the Act states 
that the term ``contribution'' includes ``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.'' 2 U.S.C. 
431(8)(A)(i). Similarly, section 431(9) states that the term 
``expenditure'' includes ``any purchase, payment, distribution, loan, 
advance, deposit, or gift of money or anything of value, made by any 
person for the purpose of influencing any election for Federal 
office.'' 2 U.S.C. 431(9)(A). These definitions have been incorporated 
into sections 100.7(a) and 100.8(a) of the Commission's regulations.
    The FECA's definition of ``independent expenditure'' is also broad 
enough to potentially apply to some individual Internet activity. 
Section 431(17) of the Act states that ``the term `independent 
expenditure' means an expenditure by a person expressly advocating the 
election or defeat of a clearly identified candidate which is made 
without cooperation or consultation with any candidate, or any 
authorized committee or agent of such candidate, and which is not made 
in concert with, or at the request or suggestion of, any candidate, or 
any authorized committee or agent of such candidate.'' 2 U.S.C. 
431(17). This definition is incorporated into 11 CFR 109.1.
    The FECA is also broad enough to potentially apply to some Internet 
activity conducted by corporations and labor organizations. Section 
441b of the Act states that ``[i]t is unlawful * * * for any 
corporation whatever, or any labor organization, to make a contribution 
or expenditure in connection with any election'' for Federal office. 2 
U.S.C. 441b(a). Section 441b also contains a separate definition of 
``contribution or expenditure'' that applies to corporations and labor 
organizations. This definition states that ``the term `contribution or 
expenditure' shall include any direct or indirect payment, 
distribution, loan, advance, deposit, or gift of money, or any 
services, or anything of value * * * to any candidate, campaign 
committee, or political party or organization, in connection with'' any 
election to any federal office. 2 U.S.C. 441b(b)(2). The definition of 
``contribution or expenditure'' applicable to corporations and labor 
organizations has been incorporated into section 114.1 of the 
Commission's regulations. The prohibition on corporate and labor 
organization contributions and expenditures is in 11 CFR 114.2.
    The Commission has been called upon to apply these definitions in 
several past advisory opinions. However, in applying these rules, the 
Commission has also had to determine whether the statutory and 
regulatory exceptions to these definitions would place the activity at 
issue outside the coverage of the Act. For example, the Act states that 
the definition of ``contribution'' applicable to individuals does not 
include

    The use of real or personal property, including a church or 
community room used on a regular basis by members of a community for 
noncommercial purposes, * * * voluntarily provided by an individual 
to any candidate or any political committee of a political party in 
rendering voluntary personal services on the individual's 
residential premises or in the church or community room for 
candidate-related or political party-related activities * * *.

2 U.S.C. 431(8)(B)(ii). See also 11 CFR 100.7(b)(4), (b)(5) and (b)(6). 
The Commission's regulations contain a parallel exception to the 
definition of expenditure. Section 100.8(b)(5) states that

    (N)o expenditure results where an individual, in the course of 
volunteering personal services on his or her residential premises to 
any candidate or political committee of a political party, provides 
the use of his or her real or personal property to such candidate 
for candidate-related activity or to such political committee of a 
political party for party-related activity.

11 CFR 100.8(b)(5). See also 11 CFR 100.8(b)(6) and (b)(7). This 
provision can also be interpreted as an exception to the definition of 
``independent expenditure,'' since that definition incorporates the 
term ``expenditure.'' 2 U.S.C. 431(17), 11 CFR 100.16.
    Section 441b also contains exceptions that could place some 
corporate and labor organization Internet activity outside the scope of 
the Act. Section 441b(b)(2) states that the definition of 
``contribution or expenditure'' applicable to corporations and labor 
organizations does not include, inter alia,

    (A) Communications by a corporation to its stockholders and 
executive or administrative personnel and their families or by a 
labor organization to its members and their families on any subject; 
(and) (B) nonpartisan registration and get-out-the-vote campaigns by 
a corporation aimed at its stockholders and executive or 
administrative personnel and their families, or by a labor 
organization aimed at its members and their families * * *.

2 U.S.C. 441b(b)(2). The Commission has promulgated rules describing 
several types of corporate and labor organization activity that are 
exempt

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from the prohibition on contributions and expenditures. See 11 CFR 
114.3 and 114.4.
    The Commission's advisory opinions provide some guidance on the 
application of these definitions and their exceptions to campaign 
activity conducted on the Internet. However, the scope of these 
opinions is limited to the specific factual situations presented. The 
Commission initiated this rulemaking in order to provide more 
comprehensive guidance to the regulated community on these issues. This 
NPRM will focus on the application of the contribution and expenditure 
definitions and exceptions described above to Internet campaign 
activity conducted by individuals, corporations and labor 
organizations.

B. The Notice of Inquiry

    The Notice of Inquiry sought comments on a wide range of issues 
relating to the use of the Internet for campaign activity. 64 FR 60360 
(Nov. 5, 1999). One threshold question raised was whether campaign 
activity conducted on the Internet is properly subject to the Act and 
the Commission's regulations at all. In addition, the NOI asked 
commenters to submit comments on whether Internet campaign activities 
are analogous to campaign activities conducted in other contexts, or 
are instead so different that they require different rules. The 
Commission also asked commenters to discuss aspects of the Commission's 
current regulations that may affect or inhibit the use of the Internet 
in ways that may not have been anticipated or intended when the 
regulations were promulgated, and which may now be inappropriate when 
applied to Internet activity.
    More than 1300 commenters submitted comments on the Notice of 
Inquiry. The Commission received comment from individuals, state and 
national political parties, and from advocacy organizations that focus 
on a wide range of public policy issues, such as the First Amendment 
and civil rights. The Commission also received comments from advocacy 
organizations that focus on Internet and technology issues, including 
several devoted to the development of the Internet as a tool for 
advancing democracy and for educating the public about political 
candidates and issues. Several for-profit Internet ventures submitted 
comments, including one major Internet service provider. In addition, 
the Commission received comments from national labor organizations, the 
publisher of a journal on law and technology, and from several law 
firms that represent clients involved in various Internet activities, 
including one that represents several candidates and party committees. 
These comments are summarized below.

1. General Comments on the NOI

a. Whether To Undertake a Rulemaking
    Many of the commenters expressed views on the general question of 
whether the Commission should undertake a rulemaking relating to the 
use of the Internet for campaign activities. At the time the Notice of 
Inquiry was published in November of 1999, some commenters urged the 
Commission to refrain from comprehensive rulemaking until after the 
2000 election. Other commenters said that the Commission should conduct 
further inquiry before issuing new rules and allow ample time for the 
major stakeholders to address the issues raised.
    The commenters expressed widely differing views on the preferred 
scope of the rulemaking. One commenter urged the Commission to adopt a 
comprehensive approach to regulation of political activity on the 
Internet, rather than issuing guidance piecemeal through advisory 
opinions. Another commenter encouraged the Commission to promulgate new 
and separate rules governing the use of the Internet that minimize the 
requirements placed on web sites and individuals. In contrast, the 
third commenter said the Commission should not be drawn into effort to 
develop a comprehensive framework for regulating every type of Internet 
political activity, because the Commission will not be able to keep up 
with fluid and evolving industry standards.
b. Ways in Which the Internet Differs From Traditional Media
    Several commenters argued that the Internet differs from 
traditional communications media, in support of the assertion that the 
assumptions of the campaign finance laws are inapplicable to the newer 
medium. According to these commenters, the Internet differs in the 
following respects:
    (1) The Internet is abundant. There is no ``scarcity,'' i.e., no 
limit on the number of communicators, as there is with other media;
    (2) The Internet is inexpensive, which allows everyone to 
participate. Thus, the traditional models regarding cost upon which the 
FECA is based do not apply.
    (3) The Internet is interactive and multidirectional. Unlike other 
media, Internet users can easily talk back to those who supply Internet 
communications.
    (4) The Internet is user-controlled, i.e., each user selects the 
content with which he or she will come in contact, whereas the FECA 
assumes a limited number of people will control the content to which 
the end users are exposed.
    (5) The Internet is decentralized. There are no gatekeepers, and no 
web sites or speakers have any inherent advantage over any other web 
sites or speakers. Each one has the same distribution potential; and
    (6) The Internet is global. Thus, it provides immediate access, and 
would be difficult to regulate.
The commenters asserted that the FECA is based on the traditional mass 
media model, where candidates must buy advertisements or rely on news 
coverage to reach the public. In contrast, the commenters argue, 
candidates advertise directly on the Internet by creating web sites, 
thereby avoiding the added cost of buying advertising. One commenter 
interpreted the Supreme Court's opinion in Reno v. ACLU, 521 U.S. 844 
(1997), to say that the factors permitting government regulation in 
other contexts are not present in cyberspace.
    A number of nonprofit groups also praised the Internet's ability to 
provide efficient, timely information about candidates. These 
commenters said that the Internet promotes cleaner, more informed 
elections by reducing the importance of money and the need for 
fundraising, thereby improving the quality of debate and increasing 
competition.
c. General Recommendations for Commission Action
    Many of the commenters submitted general recommendations for 
Commission action. Hundreds of commenters, for example, stated their 
opposition to any regulation of the Internet or any involvement of the 
Commission with the Internet. Over 340 commenters stated that the 
Commission should generally avoid any regulation of Internet 
activities, with many of the commenters explaining that the Internet 
cannot or should not be regulated because the medium is a form of 
constitutionally-protected speech. Other commenters said that the 
Commission should refrain from issuing regulations restricting the 
Internet, and instead establish an unambiguous legal framework that 
allows maximum freedom to participate in political activity with 
minimal government involvement, in order to foster development of the 
medium. Many of these commenters said that if the Act is applied to the 
Internet, the resulting regulatory burdens will stifle

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participation by individuals and small groups. They also believe that 
the regulatory safeguards applicable to traditional media are 
unnecessary for the Internet, because the low costs and wide 
accessibility of the Internet allow individuals to put forth their 
views on a relatively equal basis with the largest traditional 
publisher, effectively preventing misuse. Most of these commenters 
indicated that web sites run by individuals or small organizations 
should be subject to less regulation and scrutiny than campaign-
directed sites or commercial sites run for profit.
    One commenter said that the purposes of the FECA would best be 
fulfilled by a hands-off approach to regulation of the Internet, 
particularly for individuals, volunteers and membership associations. 
Another commenter said that regulating political activity on the 
Internet could deter individual and grassroots efforts that would 
possibly gain visibility only on the web. A third commenter said that 
the FEC should take into account the policy underlying the First 
Amendment, the FECA and section 230 of the Telecommunications Act of 
1996, which the commenter asserted is to promote democratic 
institutions by increasing the quantity, diversity, and opportunities 
for political speech.
    Several commenters cited constitutional considerations in arguing 
that the Commission should not regulate political activity on the 
Internet. One commenter said that only regulations that address the 
compelling state interest in protecting elections from the corrosive 
effect of private wealth are justified. This commenter argued that the 
low cost of the Internet prevents corruption. Another commenter took a 
similar position, and said that regulations would discourage individual 
participation in political debate, and would limit much needed 
information dissemination. A third commenter urged the Commission to 
adopt a presumption that the use of the Internet is not regulated by 
the FECA, and narrowly tailor any new rules based on record evidence, 
to ensure that they withstand constitutional scrutiny.
    Another commenter expressed opposition to the rulemaking unless it 
is to establish that Internet activities are fully protected by the 
First Amendment, and exempt from reporting requirements and limits. 
This commenter urged the Commission to treat all forms of Internet 
communication as the modern equivalents of personal correspondence, 
pamphlets, newspapers and other forms of political speech, and argued 
that nobody that is not already being regulated should come under FEC 
jurisdiction because of Internet activity.
    However, not all of the commenters were opposed to Commission 
regulation of Internet political activity. A number of commenters 
expressed concern that in the absence of specifically applicable 
regulations, political parties and organizations would use the Internet 
to circumvent the FECA or otherwise abuse the freedoms of the medium, 
and urged the Commission to promulgate rules explicitly applying the 
Act to political activity conducted on the Internet. One commenter said 
that the Internet is a means of communication like any other, and 
warrants no special exemption from regulation. Another said that 
Internet campaign activities are analogous to other campaign activities 
and therefore come under the Commission's authority. Two commenters 
urged the Commission to treat candidate web sites the same as any other 
campaign-related expense, in order to serve the intent of the statute 
to level the playing field between incumbents and challengers. Some 
commenters drew a distinction between solicited and unsolicited 
material, and requested restrictions on ``spam,'' or unsolicited e-mail 
and other unsolicited material.
    One commenter said that while the Commission should not restrict 
First Amendment rights, it likewise should not grant broad permanent 
exemptions that would threaten on-line privacy or other compelling 
state interests, or that would undermine existing disclosure 
requirements. Another commenter said the Commission should apply some 
of the current regulations to Internet activity, but should not unduly 
limit activity such as hyperlinks, banner ads and other communications. 
Instead, this commenter urged the Commission to proceed slowly, and 
adopt a flexible regulatory approach. Finally, one commenter recognized 
the Commission's interpretive authority, but urged the Commission to 
exercise that authority only when it has a high degree of confidence 
that the Internet activity being conducted implicates the Act.

C. The Proposed Rules

    After reviewing the issues raised and the comments received in 
response to the NOI, the Commission has decided to propose rules to 
address three issues: (1) Application of the volunteer exemption in 2 
U.S.C. 431(8)(B)(ii) to Internet activity by individuals; (2) 
Hyperlinks placed on corporate or labor organization web sites; and (3) 
Candidate endorsements announced on corporate and labor organization 
web sites. The comments received relating to these specific areas are 
summarized below, followed by a description of the proposed rules.

1. Internet Activity by Individuals

a. The Notice of Inquiry
    The NOI invited comments on how the Act should be applied to web 
sites created by individuals that contain references to candidates or 
political parties. The Commission has addressed issues relating to 
Internet campaign activities by individuals in two past advisory 
opinions. Advisory Opinion (''AO'') 1998-22 involved a web site 
operated by an individual using a computer jointly owned by the 
individual and his wholly-owned limited liability company, or ``LLC.'' 
Because the individual administered the site himself using existing 
equipment, Internet services and domain names, he incurred no 
additional costs in operating the site. Nevertheless, the Commission 
concluded that if an individual creates a web site that contains 
express advocacy of a clearly identified candidate, the costs of the 
site are an expenditure under the Act and must be reported if they 
exceed $250 in a calendar year. 2 U.S.C. 434(c), 11 CFR 109.2. The 
Commission also said that even if the costs of the site are part of the 
expenses of maintaining several unrelated sites, they can be 
apportioned, so that a portion of the costs can be treated as part of 
the independent expenditure. AO 1998-22.
    However, in AO 1999-17, the Commission concluded that costs 
incurred by a campaign volunteer in preparing a web site on behalf of 
candidate on his or her home computer are exempt from the contribution 
definition under the volunteer exception in Sec. 100.7(b)(4) of the 
regulations. The Commission said that the volunteer exception applies 
to ``individuals known to the campaign who, with the campaign's 
permission (at some level) engage in volunteer activity.'' Id. The 
Commission also said that the costs of electronic mail sent by a 
campaign volunteer using his or her own computer equipment would be 
covered by the volunteer exception, and thus would not result in a 
contribution to the campaign. Id.
    The NOI asked whether costs incurred by individuals in posting 
candidate-related materials should be covered by the FECA, and if so, 
how the value of the individual's contribution or independent 
expenditure should be determined? In addition, the NOI asked whether an 
individual posting the materials should be required to treat a portion 
of the cost of the computer

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hardware, software, or Internet services as part of the contribution or 
expenditure. Finally, the NOI sought comments on the extent to which 
uncompensated Internet activity by individuals should be covered by the 
volunteer exemption.
b. Comments
    The Commission received numerous comments on the application of the 
Act to web sites created by individuals. Most commenters argued that 
costs incurred by individuals engaged in Internet activities should not 
be considered contributions or independent expenditures under the FECA. 
Many of these commenters thought Internet activity conducted by 
individuals should be covered by the volunteer exception. Some 
commenters argued that the Internet is easily accessible and that 
posting information involves minimal costs. Others claimed that 
Internet users must take some affirmative action to view materials on 
the Internet. Another group of commenters asserted that the primary 
purpose of most politically-oriented Internet activities is to share 
ideas and information. For these reasons, they proposed that only sites 
directly funded or controlled by a campaign should be treated as 
contributions or expenditures.
    These commenters generally agreed with the argument that the 
volunteer exception should cover web sites created by individuals and 
electronic mail transmitted by individuals, and that the volunteer 
exception should exempt these activities from the contribution limits 
whether or not the individual is working on his or her own, or is 
volunteering directly for a campaign. Several commenters criticized AO 
1998-22, saying that the opinion was wrongly decided and should be 
superseded because it fails to grasp that the Internet is a medium in 
which speech is cheap. These commenters expressed the opinion that the 
low cost of Internet communication clearly puts individual web sites 
within the volunteer exception. Thus, they assert, it is inappropriate 
to treat the costs of Internet access as an expenditure. Another 
commenter also urged the Commission to vacate AO 1998-22, saying that 
individuals should not be required to count all expenses for personal 
and home computer equipment towards the FECA thresholds.
    Three commenters urged the Commission to relax the disclosure 
requirements for individual Internet activity conducted independently 
from the candidate. They suggested that the Commission not require an 
individual to include a disclaimer or submit disclosure reports unless 
the individual's spending exceeds a substantial threshold. One 
commenter suggested a threshold of $10,000, while another suggested 
$25,000.
    In contrast, other commenters argued that the Commission should 
apply the contribution and expenditure definitions to Internet activity 
consistent with the application of these definitions to other 
activities that are not significantly different. A few commenters 
suggested that the Commission issue a per se rule that individuals will 
not be required to register or report unless their direct out-of-pocket 
expenses for express advocacy exceed $250. One commenter suggested that 
Internet-related services, such as Internet access, web site creation 
and web site maintenance, should be treated as in-kind contributions, 
but only when they are provided directly to candidates and political 
campaigns.
    Several commenters submitted comments on the types of individual 
expenses that should be considered contributions or expenditures for 
purposes of the Act. Two commenters expressed the opinion that the cost 
of a computer and other electronic media should not be considered 
contributions or expenditures unless there is evidence that the 
individual is working with a candidate or has purchased equipment for 
the sole purpose of supporting a candidate. Two other commenters urged 
the Commission not to include allocated ``sunk'' costs, i.e., costs 
that have already been incurred and cannot be recovered, unless they 
were incurred principally to support or oppose candidates. Similarly, 
several commenters argued that only the incremental costs incurred 
while engaging in Internet political activity should be counted towards 
an individual's expenditure reporting threshold.
c. Proposed 11 CFR 117.1
    To clarify the application of the Act to campaign-related Internet 
activity by individuals, the Commission is proposing to add new 
Sec. 117.1, which would describe certain types of individual Internet 
activities that would not be treated as contributions or expenditures. 
Section 117.1(a) would contain an exception from the definition of 
``contribution'' in Sec. 100.7(a) of the current regulations. Section 
117.1(b) would contain a parallel exception from the expenditure 
definitions in Secs. 100.8(a) and 109.1.
    Proposed Secs. 117.1(a) and (b) would state that no contribution or 
expenditure results where an individual, without receiving 
compensation, uses computer equipment, software, Internet services or 
Internet domain name(s) that he or she personally owns to engage in 
Internet activity for the purpose of influencing any election to 
Federal office. These exceptions would apply whether or not the 
individual's activities are known to or coordinated with any candidate, 
authorized committee or party committee. See 11 CFR 100.23. In 
addition, Internet services personally owned by an individual would 
include Internet access and web hosting services provided by an 
Internet service provider (``ISP''), if these services are provided to 
the individual pursuant to an agreement between the ISP and the 
individual acting in his or her individual capacity. The individual's 
use of servers, storage devices and other equipment owned by the ISP 
pursuant to such a service agreement would also be covered by the 
exception, regardless of where that equipment is physically located.
    However, the proposed exceptions would not apply to equipment, 
services or software owned by an individual's employer, even if the 
individual was using them as part of volunteer activity conducted on 
his or her own time. (Note, however, that if the use of a corporation's 
or labor organization's computer facilities is ``occasional, isolated 
or incidental'' under 11 CFR 114.9(a) or (b), no contribution or 
expenditure would result, so long as the individual reimburses the 
corporation or labor organization for any associated increase in 
overhead or operating costs.)
    The effect of the proposed contribution and expenditure exceptions 
would be that individuals would be able to engage in a significant 
amount of election-related Internet activity without being subject to 
the Act. The costs incurred in activities that fall within the 
contribution exception would not count toward the limits on individual 
contributions to candidates and party committees. Furthermore, the 
costs of activities that fall within the expenditure exception would 
not be independent expenditures under 11 CFR 100.16 and 109.1. As a 
result, individuals would not be required to disclose these costs when 
they exceed $250 in a calendar year, 2 U.S.C. 434(c), nor would they be 
required to include disclaimer statements, 2 U.S.C. 441d. See 11 CFR 
109.2, 109.3 and 110.11.
    The status of costs that are not covered by these exceptions would 
depend, among other things, on whether the costs at issue would 
constitute a ``contribution'' or ``expenditure'' under the FECA, and 
whether the individual that incurs the costs coordinates his or her 
activity with a candidate, authorized

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committee or party committee, or instead conducts the activity 
independently. 11 CFR 100.16 and 100.23. Coordinated expenditures that 
are not covered by the contribution exception would be in-kind 
contributions subject to the individual contribution limits, and 
independent expenditures that are not covered by the expenditure 
exception would be subject to the $250 reporting threshold in 2 U.S.C. 
434(c). See also 11 CFR 109.2, AO 1998-22. The Commission invites 
comments on the exceptions from the contribution and expenditure 
definitions in proposed sections 117(a) and (b).

2. Hyperlinks on Corporation and Labor Organization Web Sites

a. The Notice of Inquiry
    Many corporations and labor organizations operate web sites to 
communicate with their restricted class and the general public. As 
explained above, section 441b of the Act prohibits corporations and 
labor organizations from making contributions or expenditures in 
connection with federal elections. Thus, the Act generally prohibits 
these entities from using web sites that are available to the general 
public to assist or advocate on behalf of any federal candidate.
    The Notice of Inquiry sought comments on the circumstances under 
which a candidate-related or election-related hyperlink on a corporate 
or labor organization web site should be treated as a prohibited 
contribution or independent expenditure. The NOI observed that a 
hyperlink on a corporate or labor organization's web site may be 
something of value to the linked candidate, political committee or 
political party, since the link will inevitably steer visitors from the 
corporation or labor organization's site to the linked site. In AO 
1999-17, the Commission concluded that a hyperlink to a candidate or 
committee's web site is a contribution under the Act if those providing 
the link do so at less than the amount that they would usually charge 
for the link. Thus, if a corporation or labor organization provides a 
free hyperlink to a candidate or committee's web site when it would 
ordinarily charge for the link, this could be viewed as a contribution 
or expenditure under the Act.
    On the other hand, the costs of providing the link are often 
negligible or nonexistent, and the practice in some areas of the 
Internet industry may be to charge nothing for these links. Thus, the 
usual and normal charge for providing a link may be zero. The NOI 
sought comments on whether, in light of these considerations, a 
hyperlink on a corporate or labor organization web site should be 
considered a contribution or expenditure.
b. Comments
    One commenter argued that, under the Supreme Court's decision in 
Reno v. ACLU, 521 U.S. 844 (1997), Internet communications are not 
communications with the general public, and thus, the prohibition on 
corporate and labor organization expenditures would not apply. See 11 
CFR 114.2(a). However, most of the comments implicitly or explicitly 
assumed that Internet communications are communications with the 
general public for purposes of the Act. The Commission recently 
approved final rules that treat Internet communications as ``general 
public political communication'' for purposes of the contribution 
limits in section 441a. 11 CFR 100.23(e)(1). See also 66 FR 23537 (May 
9, 2001).6
    On the general question of whether corporate and labor organization 
Internet communications should be treated as contributions or 
expenditures, several commenters took the position that the existing 
regulations generally applicable to corporation and labor organization 
activity should also apply to Internet political activity by these 
entities. Thus, these commenters believe that web sites owned, 
maintained or operated by a corporation or a labor organization should 
be forbidden from advocating for or assisting a candidate. One 
commenter specifically argued that the actions of corporations and 
labor organizations should be more strictly regulated than the 
activities of individuals.
    In contrast, one commenter asserted that the Commission should 
mirror the volunteer exemption that applies to individuals for 
corporations, and rule that most corporate political speech on the 
Internet is not ``something of value'' that can be considered a 
contribution subject to regulation under the FECA.
    Two commenters went further, arguing that section 441b does not 
apply to corporate and labor organization communications on the 
Internet. These commenters assert that section 441b only prohibits 
corporations and labor organizations from making contributions of 
``anything of value'' in connection with a federal election. Thus, in 
their view, section 441b only prohibits communications entailing a 
measurable monetary sum. These commenters claimed that Internet 
communications generally do not involve substantial costs. 
Consequently, they reasoned, section 441b does not apply to Internet 
communications. These two commenters also urged the Commission to 
consider the requirements of the FECA satisfied if express advocacy on 
a labor organization web site includes the proper disclaimer.
    Some of the comments submitted regarding hyperlinks on individual 
web sites were also relevant to hyperlinks on web sites operated by 
corporations and labor organizations. Thirty commenters argued that 
hyperlinks are merely pointers that present an option for a viewer, but 
do not add value to a site or advocate the contents of the target site. 
Nineteen commenters suggested that hyperlink restrictions could reduce 
the value of the entire Internet. Eighteen commenters took the position 
that regulation is unnecessary because hyperlinks cost next to nothing 
to create. Ten commenters opposed hyperlink regulations because they 
believe hyperlink regulations would be difficult to enforce. Several 
commenters recommended that a hyperlink be treated as a contribution 
only in specific circumstances, such as when it is presented in a 
fraudulent or misleading manner or when it is provided without charge 
when a charge would normally be assessed for similar services.
    Other commenters urged the Commission to treat hyperlinks like 
footnotes, endnotes, numbers in a phone book, maps or signs offering 
directions to campaign headquarters, providing a friend or caller with 
a phone number, or the mere provision of information or a path to 
information, much like providing someone with a telephone number or an 
address. These commenters argued that links should not be treated as an 
implied endorsement, because the user must take proactive steps to 
pursue further information. Two commenters characterized hyperlinks as 
the backbone of the web, and argued that treating them as contributions 
or something of value will discourage web site operators from linking 
to official candidate sites. Another commenter characterized hyperlinks 
as part of the Internet infrastructure.
    Other commenters expressed similar views. One commenter asserted 
that the mere establishment of hyperlinks, even if coordinated, should 
not be regulated. Another commenter argued that if a hyperlink is 
placed on a site without any attempt to distinguish candidates or their 
political affiliation, the link should be treated as nonpartisan voter 
drive activity under section 431(9)(B)(ii) of the FECA, regardless of 
the type of web site on which it is posted. A third

[[Page 50364]]

commenter took the position that a link cannot be treated as a 
contribution or expenditure because it does not contain substantive 
content. The commenter argued that hyperlinks may facilitate access to 
communication that contains express advocacy, but they cannot 
themselves be a communication containing express advocacy.
    One commenter said the standard of ``usually charged for'' cited in 
AO 1999-17 is inadequate, because some web sites have both paid and 
unpaid links. This commenter urged the Commission to specifically state 
that hyperlinks are not ``something of value,'' and only treat a link 
as a contribution when (1) the web site routinely charges for similar 
links, (2) the web site has provided the particular links in a partisan 
manner, and (3) the text of or content around the link contains express 
advocacy. Another commenter urged the Commission to use categories to 
apply the ``less than usual and normal charge'' standard. Under this 
approach, a link to a particular candidate's web site would not be a 
contribution to that candidate unless the site charges less than it 
would for links to another candidate's web sites.
    Other commenters favored less regulation of hyperlinks. One 
commenter suggested that the Commission establish a presumption that a 
hyperlink is not a contribution absent facts to the contrary. Under 
this approach, if a web site provided a link for which it would 
normally charge a fee, the Commission would treat this as one factor 
tending to rebut the presumption that the link is not a contribution. 
Another commenter took a more absolute position, saying that there is 
no definitive way to determine the value of a hyperlink. Consequently, 
this commenter believes, they should not be regulated on any type of 
web sites.
c. Proposed 11 CFR 117.2
    The Commission is proposing to add provisions to the regulations 
that would address the placement of hyperlinks on corporate and labor 
organization web sites. New Sec. 117.2 would state that the 
establishment and maintenance of a hyperlink from the web site of a 
corporation or labor organization to the web site of a candidate or 
party committee for no charge or for a nominal charge would not be a 
contribution or expenditure, even if the corporation or labor 
organization selectively provides hyperlinks to one or more 
candidate(s), political committee(s), or political parties without 
providing hyperlinks to any opposing candidate(s), political 
committee(s) or political parties.
    However, three conditions must be met in order for the hyperlink to 
be exempt from the contribution and expenditure definitions. First, the 
hyperlink will only be exempt if the corporation or labor organization 
does not charge or charges only a nominal amount for providing 
hyperlinks to other organizations. Second, the hyperlink may not be a 
coordinated general public political communication under Sec. 100.23 of 
the Commission's rules. Finally, if the hyperlink is anchored to an 
image or graphic material, that material may not expressly advocate 
under Sec. 100.22. Similarly, the text surrounding the hyperlink on the 
corporation or labor organization's web site may not expressly 
advocate. However, if the hyperlink is anchored to the text of the URL 
of a candidate or party committee's web site, the text of the URL is 
not subject to the express advocacy limitation. Thus, even if the text 
of the URL itself expressly advocates, the hyperlink would be exempt, 
so long as the other conditions are met. The Commission invites 
comments on proposed Sec. 117.2.

3. Press Releases Announcing Candidate Endorsements

a. The Notice of Inquiry
    Under section 114.4(c) of the current regulations, corporations and 
labor organizations may distribute certain candidate-related and 
election-related materials to the general public without violating 
section 441b of the FECA. Under paragraph (c)(6) of Sec. 114.4, a 
corporation or labor organization may endorse a candidate, and may also 
publicly announce the endorsement and state the reasons therefore 
through a press release and press conference, so long as disbursements 
for the press release and press conference are de minimis. The 
corporation or labor organization's disbursements will be considered de 
minimis if the press release and notice of the press conference are 
distributed only to the representatives of the news media that the 
corporation or labor organization customarily contacts when issuing 
nonpolitical press releases or holding press conferences for other 
purposes. 11 CFR 114.4(c)(6).
    In AO 1997-16, the Commission applied this exception to a corporate 
endorsement posted on the corporation's web site. The Commission 
concluded that communication of the endorsement via the web site would, 
in effect, be communication with the general public, and thus would be 
a prohibited corporate expenditure under 2 U.S.C. 441b(b)(2)(A) and 11 
CFR 114.4. However, the Commission said that an endorsement could be 
posted on a corporation or labor organization's web site if access to 
the endorsement were limited to the restricted class using a password 
or similar method, or if the corporation or labor organization's 
separate segregated fund paid the costs of posting the endorsement.
    The NOI sought comments on whether a corporation or labor 
organization that routinely posts press releases on the Internet should 
be allowed to post a press release announcing a candidate endorsement 
on a portion of its site that is accessible to the general public, or 
should be required to limit access to members of the restricted class.
b. Comments
    Several commenters addressed the subject of endorsements on 
corporate and labor organization web sites. One commenter argued that 
corporations that routinely post press releases on their own web sites 
should be allowed to post endorsements. Another commenter took the 
position that posting a press release should be allowed provided the 
press release is used in a similar way to any other press release. This 
commenter reasoned that if other press releases are generally available 
to the public, endorsement press releases should also be accessible to 
the general public. Another commenter suggested that corporations and 
labor organizations should be allowed to post candidate endorsement 
press releases on their web sites so long as they make no special 
effort to direct web traffic to the endorsement portion of their sites. 
This commenter also urged the Commission to supersede AO 1997-16.
    In contrast, two commenters suggested that corporations and labor 
organizations be required to place endorsement press releases in a 
discrete ``media only'' area of their web sites designated solely for 
media communications. These commenters said this area could be a deep 
link page, to limit exposure. However, under these circumstances, the 
commenters argued, corporations and labor organizations should be 
allowed to place candidate endorsements on their web sites, since this 
reflects the way they communicate with the news media in the Internet 
age.
c. Proposed 11 CFR 117.3
    The Commission proposes to add Sec. 117.3 to new part 117 to 
address the issue of endorsement press releases on corporate and labor 
organization web sites. Proposed Sec. 117.3 would state that,

[[Page 50365]]

for the purposes of the provisions governing endorsements in 
Sec. 114.4(c)(6) of the current regulations, a corporation or labor 
organization may make a press release announcing a candidate 
endorsement available to the general public on its web site, provided 
that four conditions are met: (1) The corporation or labor organization 
ordinarily makes press releases available to the general public on its 
web site; (2) The press release is limited to an announcement of the 
corporation or labor organization's endorsement or pending endorsement 
and a statement of the reasons therefore; (3) The press release is made 
available in the same manner as other press releases made available on 
the web site; and (4) The costs of making the press release available 
on the web site are de minimis.
    This provision would enable a corporation or labor organization to 
post a press release announcing a candidate endorsement on its web site 
without limiting access to the press release to its restricted class. 
Thus, Sec. 117.3 would partially supersede AO 1997-16. However, the 
corporation or labor organization would be required to limit the press 
release to an announcement of the corporation or labor organization's 
endorsement and a statement of the reasons for the endorsement. Section 
117.3 would not allow the corporation or labor organization to post 
express advocacy materials such as banner advertisements for a 
candidate on its web site. The Commission invites comments on this 
proposal.

Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory 
Flexibility Act)

    I certify that the attached proposed rules, if promulgated, would 
not have a significant economic impact on a substantial number of small 
entities. The basis of this certification is that the proposed rules 
are permissive in nature, in that they allow individuals, corporations 
and labor organizations to engage in activity that might otherwise be 
limited or prohibited under the FECA. Therefore, the rules would impose 
no economic burdens on these entities.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 114

    Business and Industry, Elections, Labor.

11 CFR Part 117

    Elections, Internet.
    For the reasons set forth in the preamble, the Federal Election 
Commission proposes to amend Subchapter A of Chapter I of Title 11 of 
the Code of Federal Regulations as follows:

PART 100--SCOPE AND DEFINITIONS (2 U.S.C. 431)

    1. The authority citation for part 100 would continue to read as 
follows:

    Authority: 2 U.S.C. 431, 434(a)(11), 438(a)(8).

    2. Section 100.7 would be amended by adding a new sentence at the 
end of paragraph (b)(4) to read as follows:


Sec. 100.7  Contribution (2 U.S.C. 431(8)).

* * * * *
    (b) * * *
    (4) * * * See 11 CFR 117.1 for rules governing an individual's use 
of computer equipment, software, Internet services or Internet domain 
name(s) that he or she personally owns to engage in Internet activity 
in support of or in opposition to any candidate or any political 
committee of a political party.
* * * * *
    3. Section 100.8 would be amended by adding a new sentence at the 
end of paragraph (b)(5), to read as follows:


Sec. 100.8  Expenditure (2 U.S.C. 431(9)).

* * * * *
    (b) * * *
    (5) * * * See 11 CFR 117.1 for rules governing an individual's use 
of computer equipment, software, Internet services or Internet domain 
name(s) that he or she personally owns to engage in Internet activity 
in support of or in opposition to any candidate or any political 
committee of a political party.
* * * * *

PART 114--CORPORATE AND LABOR ORGANIZATION ACTIVITY

    4. The authority citation for part 114 would continue to read as 
follows:

    Authority: 2 U.S.C. 431(8)(B), 431(9)(B), 432, 434(a)(11), 
437d(a)(8), 438(a)(8) and 441b.

    5. Section 114.1 would be amended by adding new paragraph 
(a)(2)(iv) to read as follows:


Sec. 114.1  Definitions.

    (a) * * *
    (2) * * *
    (iv) The establishment and maintenance of a hyperlink under the 
conditions described in section 117.2 of this chapter;
* * * * *
    6. Section 114.4 would be amended by adding a new sentence at the 
end of paragraph (c)(6)(i) to read as follows:


Sec. 114.4  Disbursements for communications beyond the restricted 
class in connection with a Federal election.

* * * * *
    (c) * * *
    (6) * * *
    (i) * * * The press release may be made available through the 
corporation's or labor organization's web site under the conditions 
described in section 117.3 of this chapter.
* * * * *
    7. Part 117 would be added to read as follows:

PART 117--USE OF THE INTERNET FOR CAMPAIGN ACTIVITY

Sec.
117.1   Individual volunteer activity that is not a contribution or 
expenditure.
117.2   Hyperlinks from corporation or labor organization web sites.
117.3   Corporate and labor organization endorsement press releases 
beyond the restricted class in connection with a federal election.

    Authority: 2 U.S.C. 431(8), 431(9), 437d(a)(8), 438(a)(8) and 
441b.


Sec. 117.1  Individual volunteer activity that is not a contribution or 
expenditure.

    (a) Contribution. Notwithstanding the provisions of Sec. 100.7(a) 
of this chapter, no contribution results where an individual, without 
receiving compensation, uses computer equipment, software, Internet 
services or Internet domain name(s) that he or she personally owns to 
engage in Internet activity for the purpose of influencing any election 
for Federal office, whether or not the individual's activities are 
known to or coordinated with any candidate, authorized committee or 
party committee.
    (b) Expenditure. Notwithstanding the provisions of Secs. 100.8(a) 
and 109.1 of this chapter, no expenditure results where an individual, 
without receiving compensation, uses computer equipment, software, 
Internet services or Internet domain name(s) that he or she personally 
owns to engage in Internet activity for the purpose of influencing any 
election for Federal office, whether or not the individual's activities 
are known to or coordinated with any candidate, authorized committee or 
party committee.


Sec. 117.2  Hyperlinks from corporation or labor organization web 
sites.

    (a) Notwithstanding the provisions of Sec. 114.1(a) of this 
chapter, the establishment and maintenance of a hyperlink from the web 
site of a

[[Page 50366]]

corporation or labor organization to the web site of a candidate, 
political committee or party committee for no charge or for a nominal 
charge is not a contribution or expenditure, provided that:
    (1) The corporation or labor organization does not charge or 
charges only a nominal amount for providing hyperlinks to other 
organizations;
    (2) The hyperlink is not coordinated general public political 
communications under Sec. 100.23 of this chapter; and
    (3) The following materials do not expressly advocate under 
Sec. 100.22 of this chapter:
    (i) The image or graphic material to which the hyperlink is 
anchored; and
    (ii) The text surrounding the hyperlink on the corporation or labor 
organization's web site, other than the text of a Uniform Resource 
Locator to which the link is anchored.
    (b) The exception in paragraph (a)(1) of this section applies even 
if the corporation or labor organization selectively provides 
hyperlinks to one or more candidate(s), political committee(s), or 
political parties without providing hyperlinks to any opposing 
candidate(s), political committee(s) or political parties.


Sec. 117.3  Corporate and labor organization endorsement press 
releases.

    For the purposes of Sec. 114.4(c)(6) of this chapter, a corporation 
or labor organization may make a press release announcing a candidate 
endorsement available to the general public on its web site, provided 
that:
    (a) The corporation or labor organization ordinarily makes press 
releases available to the general public on its web site;
    (b) The press release is limited to an announcement of the 
corporation's or labor organization's endorsement or pending 
endorsement and a statement of the reasons therefore;
    (c) The press release is made available in the same manner as other 
press releases made available on the web site; and
    (d) The costs of making the press release available on the web site 
are de minimis.

    Dated: September 27, 2001.
Danny L. McDonald,
Chairman, Federal Election Commission.
[FR Doc. 01-24643 Filed 10-2-01; 8:45 am]
BILLING CODE 6715-01-P