Courts May Take Lid Off Political Ad Spend

Late last month the Associated Press reported that organizations on both sides of the health care debate had spent $110 million on TV ads so far this year. In the last week of September, the AP said, spending averaged $1.1 million per day. 

That’s a lot of money, especially in a down economy and in light of political spending restrictions adopted by Congress and the Federal Election Commission  (FEC).

Also last month, there were important developments in two First Amendment court cases that should ease those restrictions and lead to even more spending by advocacy groups and political candidates. Through advertising, corporations, labor unions and independent groups could also play an unprecedented role in the 2010 elections.

I want to bring readers up to date on the two court cases, and then review the still-applicable legal basics around the broadcast of issue advertising.

The court cases challenge aspects of the McCain-Feingold campaign finance reform law, aka the Bipartisan Campaign Reform Act (BCRA), which limits the financing of political ad spending in several ways. Among them are restrictions on corporations’ and labor unions’ ability to fund issue ads and ads that endorse or oppose candidates. Both for-profit and nonprofit corporations are affected. 

The FEC has rules and issues rulings to implement BCRA. Some were adopted in 2005 to address the spending of tens of millions of dollars on aggressive advertising during the 2004 election campaign by groups such as Swift Boat Veterans for Truth and MoveOn.org.

In 2003, the U.S. Supreme Court upheld portions of BCRA against First Amendment free speech and other challenges. Since then, however, there has been a countertrend of judicial paring back of BCRA and its FEC implementation. 

For example, as covered in this space in July 2007, in FEC v. Wisconsin Right to Life the Supreme Court significantly expanded the types of political issue ads that corporations and labor unions can finance and run before federal elections.

Prior to the decision, corporations and labor unions could not use their general treasury funds (“soft money”) for issue ads that even referred to a federal candidate during the 30 days before a primary and the 60 days before a general election.

Since the Wisconsin ruling, the prohibition has been pruned back to ads expressly advocating the election or defeat of a federal candidate. Unless an ad does that, it and the organization behind it do not trigger the financing ban.  

In September 2009, this trend accelerated dramatically in two Washington courtrooms.

On Sept. 9 the Supreme Court cut short its summer recess for a rare special session: a second oral argument in Citizens United v. FEC solely on the First Amendment free speech issues. 

There had already been oral argument, in March, on the application of BCRA to the specific facts of the case. Citizens United, a nonprofit corporation, produced a 90-minute film called Hillary: The Movie. It expressed opposition to Hillary Clinton’s presidential candidacy and was shown to the public via video on demand. Citizens United sought an injunction against FEC enforcement of the BCRA ban on corporate funding of “express advocacy” for or against a federal candidate. The group also claimed that the financing ban violated its freedom of speech.

There is a strong tradition of courts deciding cases on the narrowest basis possible, without reaching broad constitutional issues unless absolutely necessary. Limits on corporate spending to influence campaigns have been in place, and upheld by courts, for more than a century. The goal of those limits has been to prevent corruption of elected officials and elections, and the resolution of important public issues, via the large concentrations of wealth in corporations and labor unions.

Against this backdrop, Citizens United is now widely viewed as the vehicle for a 5-4 majority of Supreme Court justices to overturn precedent and hold that corporations have the same free speech rights as individuals with respect to elections and public issues. This could transform American political campaigns, and could happen this year. For broadcasters there could be a large increase in political ads, both “issue” and candidate.

The U.S. Court of Appeals for the D.C. Circuit, where the second September development occurred, is often considered the second most important American court. In 2004 the FEC limited political spending by nonprofit groups, including how much of a given expenditure could be funded from general treasury funds (“soft money”) and donations (“hard money”). The nonprofit group Emily’s List challenged those regulations.

On Sept. 18, in Emily’s List v. FEC, a three-judge panel of the court ruled that independent nonprofit groups are like individual citizens, if they’re not affiliated or coordinating with an election campaign. They can raise and spend unlimited amounts of money — hard or soft — for advertising, get-out-the vote efforts and voter registration drives in federal elections.  

Applying that determination, the court held that five FEC rules violate the free speech rights of organizations such as Emily’s List. Among them was a $5,000 per year cap on an individual’s contributions to a “527 group” (so-called for the tax law provision that applies to nonprofits engaged in political activities) that said it would try to influence an election directly.

The net result? More money available from nonprofits that are not connected to a candidate, party or for-profit corporation for issue and candidate advertising from more sources, if the ruling is upheld on appeal (or if the FEC declines to appeal). The FEC can appeal the three-judge decision either to the full Court of Appeals and then to the Supreme Court, or directly to the Supreme Court.

Issue Ads:  A Short Primer

While waiting for the judicial process to finish in the two cases, the following reminders of still-applicable law should be borne in mind by all broadcasters, TV and radio. This is not an exhaustive list, and individual fact situations should be discussed with counsel. 

Stations are not required to accept or run issue ads. The ads are not subject to lowest unit charge. Stations can censor them (such as by requiring revisions) and be held liable for their content (such as for libel). There is no equal time/equal opportunities requirement for issue ads. Candidate ads, in contrast, must be run for federal candidates and all candidates requesting equal opportunities, at lowest unit rate, and stations may not censor them or be held liable for their content.

Once campaigns for public office have begun, be careful not to book more issue ads than a station can accommodate while also meeting its obligations to afford candidates for federal office their personal right to access to airtime, equal opportunities for candidates’ opponents and any state and local races that the station opts to provide time for.

All stations have a general obligation to operate in the public interest. This applies to decisions to air issue advertising. Licensee judgments about what is in the public interest usually are deferred to by the FCC if reasonable. When considering ad content, keep in mind that the FCC “safe harbor” of 10 p.m. to 6 a.m., when children are not presumed to be in the audience. This does not mean that “anything goes” if aired during the safe harbor.

When asked to run an ad attacking a candidate or otherwise raising concerns such as inaccuracy, stations can: let the ads run and take the risks; decline to run the ads or stop them at any time; ask the advertiser to indemnify them in writing against damages; investigate the ad’s claims; and/or require substantiation from the advertiser of the facts alleged.

FCC political broadcast rules are not affected by the FEC rules and cases discussed above; the FCC rules continue to apply.

Issue ads must identify who actually paid for the ad, using the language “paid for by” or “sponsored by.” The ID must reflect the person or entity that paid, even if another name is used in the transaction or elsewhere. In addition to audio, the ID must be displayed visually in letters at least 4 percent of the vertical height of the screen and on the air for at least four seconds against a contrasting background.

The BCRA requires that station public files contain the following for issue ads: a record of each request for issue ad time; whether the station accepted or rejected the ad wholly or in part; the rate charged; dates and times of broadcast; class of time; what issue is discussed in the ad, and, for the person or entity buying the ads, name, address, phone number of a contact person, and a list of the chief executive officers, board of directors or other officials of the buyer of the time for the spots. Change in these requirements is possible due to the unfolding of the court cases described above, but for now it is necessary to comply with them.