Since the early days of the internet, the Federal Election Commission (FEC) has kept its hands off of unpaid online political expression. Though federal campaign finance law generally treats paid online communications as something of value subject to contribution limits and public disclosure, the FEC has long carved out an exception for internet communications that are not “placed for a fee.” With the rise of social media, this “internet exemption”—originally intended to protect expression on personal blogs in the early 2000s—has given campaigns, businesses, and political organizations significant leeway to produce and distribute political messages online. In recent years, some groups have tested the outer limits of the exemption, treating all costs that could conceivably support an unpaid online post as exempt from regulation, including not only the costs to produce the content posted online, but also less direct “input costs,” like consultant travel, surrogate media training, and event production. The FEC initially continued its hands-off approach, declining to rein in this broad interpretation, but in light of a recent federal court decision, groups may soon need to reevaluate their assessment of which activities really are exempt.

The case, Campaign Legal Center v. Federal Election Commission, goes back to 2016, when the campaign-finance watchdogs filed a complaint with the FEC alleging that Correct the Record (CTR), a super PAC that supported Hillary Clinton’s presidential campaign, made millions of dollars in prohibited and excessive in-kind contributions to the campaign in the form of coordinated expenditures, which CTR failed to properly disclose, in violation of the Federal Election Campaign Act (FECA). Ordinarily, super PAC communications made in coordination with a campaign are considered prohibited in-kind contributions to the campaign. But because CTR engaged only in unpaid online advocacy, CTR claimed its expenses—including polling, research, office rentals, consultant fees and expenses, and media training—were “input costs” for unpaid internet advocacy that fell within the “internet exemption” and openly announced it was coordinating with the Clinton campaign. 

The FEC’s Office of General Counsel recommended that the agency find reason to believe that several violations occurred, but the FEC could not agree, voting 2-2 on a partisan basis, and dismissed the matter. An explanation issued by the controlling bloc of Republican commissioners explained that all costs incurred to produce unpaid internet communications are broadly exempt from regulation under federal campaign finance law. The commissioners noted that “[r]equiring speakers to further allocate overhead expenses across internet communications (or other activities) and then exempting only those component fees deemed essential for the internet communication’s placement would eviscerate the internet exemption and the deliberate policy decisions behind it, and potentially chill political speech online.” But a Democratic commissioner countered that this interpretation would “swallow the coordination rules.”

After several years of litigation and a host of procedural twists and turns, the courts determined the FEC had acted contrary to law in dismissing CLC’s complaint. The recent circuit court decision affirmed a lower court’s conclusion that the internet exemption cannot be read to cover expenditures that are only “tangentially” related to an eventual internet message. The Commission’s conclusion to the contrary stretched the reading of the internet exemption beyond lawful limits because it would permit any “coordinated expenditure to escape treatment as a contribution, so long as that expenditure somehow informs a blog post or improves a tweet.” The circuit court concluded that only “direct” costs of unpaid online content are exempt and remanded the case to the district court, with instructions to remand to the FEC to “sketch the bounds” of when input costs are covered by the exemption. For groups that rely on the internet exemption to communicate on unpaid online social channels, the decision throws into question the distinction between “true” and “tangential” input costs, just as the general election kicks into high gear. As the FEC reconsiders the case, organizations that coordinate with campaigns for online communications should stay attuned to developments and reassess their reliance on the internet exemption.