Contribution Camouflage

Did Netscape and other high-tech companies’ failure to report free political ads bend California campaign laws?

Off and on for the past month, amid all the clutter of self-promotion on Netscape’s site, there was a series of pointed political messages: “Say No to Prop. 211,” “Read about industry responses to Proposition 211, why government officials oppose it, and what effect it could have on you.” [Screen shot]

Both blurbs link to the Web site of Taxpayers Against Frivolous Lawsuits (TAFL), the primary anti-Prop. 211 organization. Why is Netscape putting political messages advocating the defeat of a California proposition on its home page?

The short answer is that Prop. 211, a bill designed to make it easier for stockholders to sue corporations when there is a possibility of fraud, could affect Netscape Corp.’s bottom line. The volatility of high-tech stocks, like Netscape’s, makes them more likely targets of fraud accusations. But more importantly, Netscape’s use of its Internet presence to lobby against the proposition raises new questions about how campaign finance law will be applied to the online world. What constitutes a political ad on the Internet? And how should regulators distinguish between free advertising and editorial “content”?

Netscape is not alone in carrying the small anti-211 logo linked directly to TAFL. In fact, the list of Web sites sporting anti-211 buttons reads like a who’s who of Silicon Valley: Sun, Netscape, Excite, Bigfoot. [Screen shots: Sun, Netscape, Excite, Bigfoot.]

But unlike the ubiquitous blue ribbons protesting the Communications Decency Act — necessary attire this past year for any self-respecting Web site — these anti-211 buttons are subject to California campaign finance disclosure laws. Corporations, like Netscape or Excite, are required to report any cash contributions or use of resources worth more than $1000 to expressly advocate a position on a political campaign.

As Kim Alexander, Executive Director of the California Voter Foundation, a nonprofit campaign finance disclosure advocacy group, points out, “If a Web page publisher takes advertising and has paid advertisements on their page and they put an ad up for free for some campaign measure or candidate, then I believe that ad should be reported as an in-kind contribution.”

But as of the last filing date, none of the ads have been reported.

The Fair Political Practices Commission, the California government agency charged with enforcing campaign finance disclosure laws, is a bit behind the curve when it comes to regulating online campaign finance contributions. A spokesperson for the agency says that there are no pending cases involving the Internet and they have never ruled on any case involving the Internet. He says the commission is reviewing the issue, but that he doesn’t have any idea when they will be done with the review. As a general note, he adds, the commission’s investigations often come down to a question of scale. They are not particularly concerned, for example, when a company puts up a sign on the side of their building supporting or opposing a particular campaign.

John Doerr, co-chair of TAFL, argues that a company putting an anti-211 logo on their Web site is “like hanging a big sign or billboard out on the side of your building.”

Perhaps, but that would have to be a pretty big billboard. Netscape has the most popular site on the Web, boasting more than 2.9 million visits per day. And the value of this kind of exposure is clearly greater than $1000, opening Netscape up to criticism for not reporting the logos as in-kind contributions. Ads on Netscape’s site, according to their ad rate card, cost $8,000 per month for the cheapest page, and go way up from there. Similarly, Excite’s ad rate card lists their front-page ads at $15,000 per month.

As Ellen Miller, executive director of the Center for Responsive Politics, points out, “The Web has tremendous potential obviously for organizing, but also for evading campaign finance laws.”

Netscape officials argue that their link and blurb opposing Prop. 211 did not constitute an ad. They say the link was created by the “content department” and that they are therefore not required to report it. [Editor’s note, October 28th: Netscape has since decided to report the blurbs as in-kind contributions. Says Peter Harter, Public Policy Counsel at Netscape, “Though we don’t believe we have a legal obligation to report the link, we feel it is the prudent and responsible thing to do. But we have to be careful because there are free speech issues involved here.”] Larry Little, from Excite’s marketing and communications department, says that the anti-211 logo is a “non-paid ad,” and they don’t believe the ad needs to be reported.

Alexander sees this as a real fine-line issue. “On the Internet, we are all publishers,” she says. “Over-regulation of it would have a chilling effect on political speech.”

“But these companies are creating a precedent, whether they like it or not,” Alexander adds. “They need, for the sake of all of us, to use that influence responsibly.”

One More Thing

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