Understanding H.R. 1 (Part 3): Political Activity on the Internet

March 10, 2021, Covington Alert

With a growing chorus of support across the progressive landscape, the For the People Act of 2021 has emerged as a key legislative priority for congressional Democrats in the 117th Congress. Envisioned as a “transformational anti-corruption and clean elections reform package,” the bill would enact sweeping changes to federal election laws along with important changes to federal campaign finance, lobbying, and government ethics laws. Taken together, these changes would have significant implications for private parties engaged in all manner of political activity.

After House Democrats relied on their slim majority to pass the For the People Act, the bill now faces more uncertain prospects in the evenly divided Senate. Nonetheless, Democratic leaders are sure to continue to press aggressively to move the bill through the upper chamber. Likewise, even absent passage of the entire package, Democrats may look for opportunities to pass key elements of the broader bill on a bipartisan basis.

To assist clients in understanding how the For the People Act would affect their existing activity and compliance obligations, this is the third of several alerts that will provide insights into key elements of the bill and what they mean for our clients. This alert addresses the bill’s proposed changes to the federal rules governing political advertising and other activity on the internet.

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Much like the bill’s campaign finance provisions, which are largely elements of the pre-existing Democracy Is Strengthened by Casting Light On Spending in Elections (DISCLOSE) Act, the elements of the For the People Act that address online political activity are largely drawn from the previously introduced Honest Ads Act. As discussed below, these proposals would bring significantly expanded disclosure requirements, both for entities engaging in political activity online and the platforms that host them.

New Disclosure Requirements and Standardized Digital Disclaimers

Originally introduced following the 2016 election cycle, the Honest Ads Act is designed to address foreign interference in American elections and require additional transparency for online political advertisements. To accomplish the latter goal, the bill would expand existing provisions of the Federal Election Campaign Act (“FECA”) to explicitly include online activity, while also setting out new disclosure requirements for online platforms that host political content.

Electioneering Communications

One of the bill’s key changes is to expand the definition of an “electioneering communication” to include paid online communications (i.e., those that are placed or promoted for a fee). While online communications that expressly advocate for or against candidates are already covered by FECA’s disclosure rules, online communications do not trigger the current “electioneering communications” disclosure rules that apply to communications that merely mention a clearly identified federal candidate during the 60 days before a general, special or run-off election or 30 days before a primary election. The For the People Act would change that by requiring disclosure of and disclaimers on paid online communications referring to federal candidates that appear in those 30- or 60-day time periods.

“Public Communications” and Coordinated Spending

The For the People Act would also codify an important distinction between paid and unpaid online and digital advertising. Whether and how FECA regulates certain activities often turns on whether the activity is a “public communication.” By regulation, a “public communication” does not include an online communication, unless it is an ad placed for a fee on another person’s website. The For the People Act would amend FECA to clarify that “public communications” include any “paid internet or paid digital communication.”

One key practical effect of this definition is that it continues to exempt online activity that is not placed or promoted for a fee from the prohibition on “coordinated activity” between a campaign and outside spenders like parties or Super PACs. This was a prominent issue in allegations that Hillary Clinton’s Presidential campaign improperly coordinated spending decisions by a “hybrid” PAC. In 2019, a deadlocked Federal Election Commission (“FEC”) declined to investigate the allegations on the grounds that the FEC’s coordinated communication regulations do not reach unpaid internet communications, drawing a fierce dissent from then-Chair Ellen Weintraub and follow-on litigation in the U.S. District Court for the District of Columbia. That litigation was dismissed on procedural grounds last month, leaving the question unresolved.

Online Advertisement Disclaimers

Finally, existing FECA disclaimer requirements for broadcast and offline political communications would also be extended to paid online political advertisements and other communications. The bill broadens current disclaimer requirements that apply to advertisements disseminated “by radio” or “by television” to now cover all advertisements, including online advertisements, that are in “audio format” or “video format.” For certain online or digital communications that cannot meet the full disclaimer requirements, disclaimers would be required to state the name of the entity sponsoring the communication and provide a means for the recipient to easily obtain any additional required disclaimer information. This would presumably be accomplished through the including of a hyperlink, hover-over text or similar tools.

The bill would also clarify that a disclaimer is not “clear and conspicuous” if it “is difficult to read or hear or if the placement is easily overlooked.” The bill provides safe harbors under this requirement for disclaimers on certain online or digital advertisements. For example, where a covered online communication includes audio, disclaimers would be deemed sufficient if they last at least three seconds.

As it stands, many major platforms have already implemented some sponsor disclaimer requirements, leading to a patchwork of requirements across the digital landscape. The FEC has been working on updating its disclaimer rules for internet communications since 2011, and the process has stalled and restarted several times since then. With clear statutory authority, the FEC would again face the challenge of drafting specific regulations in this fast-changing technological space.

New Compliance Obligations for Platforms and Broadcasters

The For the People Act would also require major online platforms that sell political advertisements to create a file of online advertisements similar to those that broadcasters must keep under federal communications law, require online platforms (along with broadcast, cable, and satellite stations and providers) to take specific steps to ensure foreign nationals are not purchasing political advertisements, and punish deceptive speech online.

Online Ad Database

The bill would require covered platforms to maintain a publicly available database of all requests to purchase political advertisements from a single source with an aggregate value of more than $500 in a calendar year. Covered platforms would include any “public-facing website, web application, or digital application (including a social network, ad network, or search engine)” that sells political advertisements and has more than 50 million unique monthly users in the United States for the majority of the months in the preceding 12 months.

The databases must disclose a copy of each advertisement along with detailed information about the advertisement, including the targeted audience, the average rate charged, and a list of the leadership of the requesting entity, among other information. An amendment on the House floor further requires disclosure of the number of unique viewers of each advertisement, along with the number of times the advertisement was shared. In addition to candidate-focused advertisements, any advertisement “relating to any political matter of national importance”—including communications that relate to a federal election or “national legislative issue of public importance”—would be included in the database.

This would be the first time that FECA’s disclosure and recordkeeping obligations directly target the companies that accept and display political advertisements, rather than the candidates and committees that pay for the advertisements. While many platforms have already built out advertising databases, these new requirements would go far beyond the information typically collected and disclosed for political advertisements.

Many states have attempted to require similar online ad databases, with varying results. A law in Washington state led some platforms to simply stop selling political ads in the state and at least parts of the Maryland law were held unconstitutional. Whether this federal version will fare differently remains to be seen.

Foreign Involvement in Online Advertising

The bill would also require online platforms—as well as television and radio broadcast stations, and cable and satellite providers—to make “reasonable efforts” to ensure that all political advertisements they display are not purchased, directly or indirectly, by a foreign entity or individual. In order to meet this requirement, platforms and other broadcasters and providers must ask all individuals and entities purchasing a political advertisement whether the purchase is being made by a foreign individual or entity. This new requirement would require platforms offering political advertisements to conduct additional due diligence before selling and running political advertisements.

Deceptive Content and “Deepfakes”

Finally, under a separate provision meant to address so-called “deepfakes,” the For the People Act would impose civil liability on any person, political committee, or “other entity” who, within 60 days of an election and “with actual malice,” distributes “materially deceptive audio or visual media of [a] candidate with the intent to injure the candidate’s reputation or to deceive” voters. Although a safe harbor provision would shield a distributor of such material from liability so long as the deceptive media is accompanied by a disclaimer, the proposed language is so broadly phrased as to impose potential liability on a wide variety of content creators, those who share deceptive content, and any others who facilitate the distribution of such content.

In particular, this new provision could raise the prospect of significant liability for digital platforms on which deceptive media is shared. Similar proposals have drawn significant criticism from advocates of free internet speech, and the regulation of deepfakes often implicates broader efforts to pare back the liability limitations for online platforms under Section 230 of the Communications Decency Act of 1996.

In any event, should the bill become law, platforms that move expeditiously to remove or properly labeled deceptive content would likely avoid a finding of actual malice. However, even the potential risk of additional liability will bring new urgency to the necessity to quickly identify and address manipulated content.

Online “Stand By Your Ad” Requirements

As we discussed in greater detail in our alert addressing corporate and trade association campaign activity, the For the People Act would require outside groups funding political advertisements to include disclaimers from their senior-most executive, along with a visual list of their largest donors. Coupled with the provisions of the Honest Ads Act incorporated into the bill, these rules would apply equally to online advertisements newly regulated by the FEC.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Election and Political Law practice.