Joshua L. Shapiro, Corporate Media Power, Corruption, and the Media Exemption

• Publication year: 2006

COMMENTS

CORPORATE MEDIA POWER, CORRUPTION, AND THE MEDIA EXEMPTION

Only months before the 2004 presidential election, subscribers to Sirius Satellite Radio heard a novel offering on one of the network's conservative talk stations: a daily three-hour program of news and pro-gun commentary called NRANews.¹Created by the National Rifle Association (NRA), the radio program reaches approximately four hundred thousand Sirius subscribers as well as an online audience at nranews.com.²The NRA's venture into satellite radio is a modest first step in the association's plan to build a greater media enterprise.³More importantly, the creation of NRANews gives the association an avenue to avoid the campaign finance laws that otherwise govern its activities.

As a nonprofit corporation, the NRA is subject to provisions of the Bi- Partisan Campaign Reform Act of 2002 (BCRA),⁴which is more popularly known as McCain-Feingold. The implications of BCRA's new framework, particularly its prohibitions on corporate electioneering communications,⁵are that during specified periods prior to the general and primary elections the NRA cannot even mention the name of any candidate for federal office in a television or radio communication (regardless of whether the group was endorsing or opposing the candidate).⁶Wayne LaPierre, the association's executive vice president, stated his resolve to fight this restriction, "I vowed from the very start after [BCRA] passed, we would not be silenced."⁷

Skirting campaign finance regulations was not just a coincidental byproduct of NRANews; it was the driving force behind the endeavor. The NRA vigorously opposed BCRA and challenged the new campaign finance law as a plaintiff in McConnell v. Federal Election Commission (FEC).⁸Yet even as the NRA opposed the constitutionality of BCRA in federal court, it searched for ways to avoid the statute's reach.⁹NRANews was the solution. For as Mr. LaPierre presciently remarked, "If you own the news operation, you can say whatever you want."¹⁰

Through NRANews, the NRA can take advantage of a provision in the current campaign finance laws: the media exemption, which, as its name suggests, exempts press and media entities from campaign finance regulation of corporate expenditures.¹¹While it is difficult to determine NRANews's impact, if any at all, on the 2004 elections, the media exemption might have garnered more attention had the Sinclair Broadcasting Group aired the anti- Kerry film, Stolen Honor: Wounds That Never Heal.¹²With Sinclair demanding that each of its sixty-two television stations air the film,¹³supporters of John Kerry feared the potential political fallout.¹⁴Although Stolen Honor and NRANews are both examples of groups with similar political leanings taking advantage of the media exemption, the exemption is not a partisan issue.¹⁵Instead, the media exemption looms as the most pressing problem facing campaign finance regulation.

Professor Richard Hasen, the most prominent scholarly critic of the press exemption, argues that "a media exception to campaign finance laws is unjustifiable."¹⁶In particular, he deems it an affront to the goals of campaign finance laws that the laws "exempt Rupert Murdoch, defense contractors,

Mickey Mouse and a host of other characters simply because they used their wealth to buy a newspaper or broadcast station."¹⁷While Hasen frames his argument in terms of an equality rationale for campaign finance reform,¹⁸this is an inappropriate perspective given Supreme Court jurisprudence rejecting such a justification.¹⁹

A Question of Fair Air Play: Can Current Remedies for Media Bias Handle Threats Like Sinclair's Aborted Anti-Kerry Program?, LEGAL TIMES, Nov. 15, 2004, at 68. The Democratic National Committee argued that airing the film violated BCRA's ban on corporate electioneering communications and did not qualify for the media exemption. Complaint Against Sinclair Broad. Group, Democratic Nat'l Comm. Complaint to FEC 4 (Oct. 12, 2004), available at http://eqs.nictusa.com/eqsdocs/0000458E.pdf.

This Comment instead views the media exemption as ripe for attack on the basis of an independent rationale, one that is accepted under the Court's campaign finance jurisprudence: preventing corruption or the appearance of corruption.²⁰Media corporations have a staggering advantage in terms of access and influence.²¹This influence will only grow exponentially larger as the laws governing media ownership move towards greater consolidation.²²

The Court has consistently found that the corruption rationale applies to campaign finance regulation of corporations²³and this view applies with equal (if not greater) force to media corporations.²⁴For instance, as Chief Justice

Id.

Burger once noted, "it could be argued that . . . media conglomerates . . . pose a much more realistic threat to valid interests than do . . . entities not regularly concerned with shaping popular opinion on public issues."²⁵Likewise, Justice Scalia has argued that the exclusion of media corporations from campaign finance regulation of corporations makes little sense under the corruption rationale. "[M]edia corporations not only have vastly greater power to perpetrate the evil of overinforming," Justice Scalia stated, "they also have vastly greater opportunity."²⁶

Indeed, to bolster this argument, the number and variety of media organizations and outlets have skyrocketed in recent years, but ownership remains concentrated.²⁷Media power in just few hands means that the people wielding that power have a significant advantage over others in the electoral arena.²⁸Particularly in the context of endorsements, concerns about corruption or the appearance of corruption are heightened.²⁹

Despite the lamentation from Professors Samuel Issacharoff and Pamela S. Karlan that "[e]lectoral reform is a graveyard of well-intentioned plans gone awry,"³⁰this Comment accepts that campaign finance reform is a fixture and thus makes no grand plans to radically change its course. Likewise, this Comment does not go so far as to argue for the complete elimination of the media exemption.³¹

This Comment argues instead that the exemption should be narrowed by the Court so as to further the underlying goal of the exemption (and, at the same time, not offend the First Amendment), which is to provide for an independent and robust institutional press.³²This Comment articulates the scope of the constitutionally required media exemption and then tries to answer the following: where should the line be drawn?

Part I.A describes the limitations placed on corporations regarding what role they may play in the electoral process under the Federal Election Campaign Act (FECA). In addition to discussing how corporations have to speak through a separately funded political action committee, this Part discusses why this system is unappealing to corporations and thus might entice corporations to seek ways to circumvent this campaign finance structure. Part I.B briefly outlines BCRA's contribution to the campaign finance landscape and the law's impact on corporate speech. Part I.C presents an overview of the media exemption as it is spelled out under the statutory framework of FECA and BCRA.

Part II details the First Amendment issues attendant with any discussion of the media exemption and then assesses how the Supreme Court has dealt with (albeit only peripherally and generally) the constitutionality of the exemption. This Part concludes that the Court has not taken a firm stance on the media exemption other than to hold that it is constitutionally permissible. This leaves the boundaries of the media exemption open for further definition.

Part III addresses how the FEC, having taken its cues from the lower federal courts, applies the exemption. Part III.A explores how the FEC determines whether something is a press entity. Part III.B examines how, after the FEC determines something is a press entity, it then determines whether the entity is under political control and if the entity is acting under a legitimate press function. This Part concludes that the FEC's application of the exemption is too lenient and thus open to exploitation.

Part IV proposes that the Court should narrow the media exemption so that it comports with the Court's campaign finance jurisprudence, particularly the reliance on the corruption rationale. To accomplish this task, the Court should remove endorsements from the exemption's scope.

The media exemption serves important goals when it is used for true press activities, but the exemption becomes a loophole when it is exploited in situations like NRANews. As Larry Noble, a former general counsel to the FEC predicted, "If the N.R.A. is successful at this, we will definitely see other groups explore going down the same road."³³Just as 527s were exploited during the 2004 election cycle,³⁴the media exemption might very well become next big campaign finance loophole.

I. FECA, BCRA, AND THE MEDIA EXEMPTION

A. What Corporations Can and Cannot Do Under FECA

Among its notable provisions such as contribution limits and disclosure requirements, the 1974 Amendments to FECA³⁵prohibit corporations from engaging in specified aspects of the political process.³⁶FECA makes it unlawful for a corporation to use its treasury funds to "make a contribution or expenditure in connection with any [federal] election."³⁷A contribution or expenditure includes "direct or indirect payment, distribution, loan, advance, deposit, or gift of money, or any services, or anything of value."³⁸As interpreted by the FEC, "anything of value" encompasses "all in-kind contributions," meaning "the provisions of any goods or services without charge . . . is a contribution."³⁹Therefore, a news story about a candidate would be a campaign expenditure because that story would be of value to the candidate.

Illustrative here is the FEC investigation into Wal-Mart's activities during the 2002 North Carolina U.S. Senate race. Roughly two months before...