By Conor H. Kennedy
In Citizens United v. Federal Election Commission (“Citizens United”), the Supreme Court nullified a major provision of campaign finance legislation. The Federal Election Commission (“FEC”) can no longer regulate the mandated disclosure, allowable sources, or contribution limits of corporations’ independent political advocacy.
Prominent legal scholar Lucian Bebchuk argues that the “insiders” who manage companies are now empowered to use direct expenditures to legally entrench themselves atop publicly traded companies, their shareholders’ objections notwithstanding. From such a powerful vantage, these “insiders” have strong incentives to spend their general treasury funds on political advertising to help candidates who favor legislation benefiting them as a class.
Whether and how “insiders” respond to these incentives is currently up for debate. Still, increasingly weak shareholder rights or abstract reputational costs are now the sole disciplining factors preventing corporations from deluging our political speech channels with direct expenditures. It therefore seems more likely than not that business insiders will take full advantage of the emerging legal landscape by significantly increasing political expenditures through the general treasury funds they control.
Accordingly, reform advocacy groups have redoubled their calls to bolster the FEC’s approach to offline coordination standards. The offline coordination standards govern the degree to which corporations can orchestrate their political spending on television and radio advertising with specific candidates or parties. The courts have rejected the FEC’s prior offline coordination standards, but not because of empirical evidence that specific advertisements have been actually coordinated. As noted in the latest court opinion overturning the FEC’s offline coordination regulations, “no such evidence has yet been identified[, but that] is far from a guarantee that no such evidence will develop in the future.”
Advocacy groups like the Campaign Legal Center are picking up where court oversight left off, both by testifying in front of the FEC to stave off the prospect of substantial coordination and by urging Congress to write its own, stronger coordination standards to compel the FEC to act. This Comment hopes to contribute to the advocacy effort by suggesting that Congress and the FEC should consider altering online coordination standards as well.
The FEC’s online coordination standards were not challenged or overturned in the latest round of court review, even though they exempted any expenditures on political messaging distributed through free online services like YouTube.[i] A 2009 Columbia Law Review student comment highlighted the potential for abuse of virtually unregulated online political expenditures.
In the next few election cycles, the loci of political news and commentary will continue to migrate online. The groups influencing that process are likely to allocate their investments toward ventures which have worked in the past. The “Yes We Can” web video, commonly known as one of the most successful and innovative online expenditures in the 2008 campaign, bares the trappings of the political advertising we can anticipate in the near future: an unregulated third party funded the production of a web video which a candidate then spread to millions of supporters.
There is no reason to believe that the “Yes We Can” video was coordinated with the Democratic Party or the Obama campaign. However, one might expect that a prolonged, systematic effort to emulate its production and distribution model would foreseeably lead corporate spenders to take advantage of the non-regulation of coordinated online expenditures. After all, when a corporation can coordinate one type of expenditure (i.e., expenditures distributed on free internet services) guaranteed to mesh with its preferred candidate or party’s dynamic efforts to shape the 24-hour news cycle, but cannot coordinate other expenditures (i.e., offline expenditures), the corporation has an incentive to move its money toward the coordinated expenditure. Now that Citizens United has provided additional incentives for professional managers to invest their general treasury money on campaign expenditures, they also have additional incentives to research the most effective legal ways in which to do so. We are therefore likely to witness a growing effort to exploit the online coordination standard.
This week, the FEC is hearing testimony about proposed post-Citizens United coordination standards. Once the FEC sets a baseline by promulgating new standards, Congress is prepared to readjust that baseline to its own liking. I argue that both entities should make preemptive efforts to regulate now instead of sweeping up after an election cycle of substantial online coordination. (more…)