Federal Election Commission Main Page
FEDERAL ELECTION COMMISSION
Washington, DC 20463
April 25, 1996
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1996-2
Stephen M. Heaton, General Counsel
CompuServe, Inc.
5000 Arlington Centre Blvd.
Columbus, OH 43220
Dear Mr. Heaton:
This responds to your letter dated January 15, 1996, as
supplemented by your
letter dated April 2, 1996, requesting an advisory opinion
on behalf of CompuServe, Inc. ("CompuServe") concerning the
application of the Federal Election Campaign Act of 1971, as
amended ("the Act"), and Commission regulations to the
provision of free online accounts to Federal candidates.
CompuServe has announced that it is creating a
"nonpartisan online election headquarters," named "The
Election Connection `96," in order to provide information
concerning the 1996 elections to its subscribers. This
service will offer CompuServe members information,
discussion, and news on candidates, issues, and elections
across the United States. In conjunction with this,
CompuServe will offer free member accounts "on a nonpartisan
basis" to all candidates for Federal and statewide elective
offices.1 You state that, by doing this, CompuServe
hopes to encourage the broader dissemination of
information relating to election candidates,
stimulate public awareness and discussion of
issues of public importance, and help open direct
access to candidates by voters, thereby providing
another outlet, outside of the traditional filter
of the media, for CompuServe members to evaluate
the candidates and their positions.
Candidates could post online their position papers on
issues, provide CompuServe members access to candidate
information, and "respond directly to voters' questions and
concerns."
For accounts similar to the ones to be offered as a
public service to candidates, CompuServe normally charges
$9.95 per month for membership, with membership for the
first month provided at no charge. Membership typically
includes five free hours of use (ten hours the first month),
with additional hours billed at $2.95 per hour. You note,
however, that CompuServe does not limit free member accounts
to Federal candidates. It provides free accounts on a
regular basis to persons such as journalists covering the
online industry who might generate publicity for CompuServe
services. In addition, you have presented information
indicating that CompuServe provides free accounts to a large
number of public-service oriented users, including a wide
variety of schools and charitable organizations, as well as
museums, religious organizations, and governmental entities.
Other users of free accounts include a few trade and
professional associations.
You assert that publicity obtained through such users
heightens the company's prestige and goodwill, stimulates
usage by existing CompuServe members, and encourages non-
members to subscribe to CompuServe. You contend that
providing free accounts to Federal candidates will serve the
same purposes.
You ask whether CompuServe's proposed offer of free
member accounts to all Federal candidates is permissible
under the Act.
The Act and Commission regulations prohibit any
contribution or expenditure by a corporation in connection
with a Federal election. 2 U.S.C. 441b(a); 11 CFR
114.2(b). For purposes of this prohibition, the term
"contribution or expenditure" includes "any direct or
indirect payment, distribution, loan, advance, deposit, or
gift of money, or any services, or anything of value ... to
any candidate, campaign committee, or political party or
organization, in connection with" any Federal election. 2
U.S.C. 441b(b)(2); see 11 CFR 114.1(a)(1). The term
"anything of value" includes "in-kind contributions," i.e.,
good or services provided at no charge or at less than the
usual and normal charge for such goods or services. 11 CFR
100.7(a)(1)(iii)(A). See 11 CFR 100.8(a)(1)(iv)(A). The
difference between the amount actually charged and the usual
and normal charge is the amount of the contribution. 11 CFR
100.7(a)(1)(iii)(A). In analyzing the permissibility of
your proposal, the Commission focuses on the provision of
the on-line accounts at the "usual and normal charge" and
the significance of the promotional value you describe.
In previous advisory opinions, the Commission has
applied the usual and normal charge principle to a variety
of situations where a corporation provides goods or services
at a discount, or with a rebate, to a Federal candidate or
political committee. The Commission has permitted a number
of the proposed transactions on the basis that the discount
or rebate is made available in the ordinary course of
business, and on the same terms and conditions (e.g.,
business volume), to the company's other customers that are
not political committees or organizations. Such
transactions have included a publisher's sale of books to
the author's principal campaign committee at a "bulk rate"
purchase price, subject to certain conditions, where such a
rate is a standard price available for large purchasers who
agree to those conditions; a bank's grant of fee waivers on
loans to candidates where it has provided waivers, based on
similar business considerations (e.g., estimated
profitability of an account), to commercial customers; the
offer of catering and reception services to political
committees at a reduced rate available on equal terms to
other customers; and the offer by a hotel corporation of
discount or complimentary rooms and other amenities to
campaigns that reserve a certain number of rooms at the
appropriate rate where the same offer is made to other
customers satisfying the same conditions. Advisory Opinions
1995-47, 1994-10, 1989-14, and 1987-24.
Applying the usual and normal charge standard to a
corporation's offer of a reduced billboard advertising rate
to a Federal candidate's campaign committee, the Commission
concluded that the discounted rate would represent a
prohibited corporate contribution. The rate at issue was a
reduced rate that the corporation had a "practice" of
providing "for civic and political purposes." The
Commission reasoned that, because this rate was not
routinely offered in the ordinary course of business to the
corporation's nonpolitical clients, it could not be offered
to Federal candidates. Advisory Opinion 1978-45; see also
Advisory Opinion 1988-25.
The Commission has also applied the usual and normal
charge standard with respect to the provision of free goods
or services to a Federal candidate. In Advisory Opinion
1978-60, the Commission concluded that a television network
corporation could give the candidate a copy of a videotape
segment in which the candidate appeared, so long as the
company's policy was to provide a videotape copy free of
charge to any member of the public appearing in a newscast.2
In a footnote, that opinion cited to Re:
AOR 1976-56 in which the Commission concluded that a hotel
could provide complimentary hotel accommodations to a
Federal candidate if the hotel provides such accommodations
in the ordinary course of business to non-candidates, as
well as candidates, and that the hotel could "reasonably
expect to derive a commensurate commercial return from the
offer," e.g., to bring increased prestige or future
customers to the hotel. Nevertheless, Advisory Opinion 1978-
60 did not rely on the commensurate commercial return as a
factor in reaching its decision.
The Commission has subsequently examined the issue of
such commercial return, i.e., promotional value derived by
the vendor in the provision of free goods or services, and
has generally concluded that the asserted promotional or
goodwill value to a corporate vendor from the acceptance and
use of free goods and services by a candidate or committee
would not avoid a prohibited corporate contribution. See
Advisory Opinions 1991-23, 1988-25, 1987-22, and 1986-30.
See also Advisory Opinion 1988-12.3 The Commission has
also stated that the opinions allowing corporate vendors to
provide discounts in the ordinary course of business "do not
establish the rule that valuable goods and services may be
given without any charge to, or payment by, a Federal
candidate or political committee." Advisory Opinion 1988-
25.
In Advisory Opinion 1986-30, the Commission concluded
that Federal candidates could not obtain the free use of a
houseboat owned by the corporate manufacturer for a campaign
tour through lakes and waterways in their congressional
districts, even though the corporation offered the houseboat
without charge in order to promote commercial sales during
the tour. Furthermore, in Advisory Opinion 1991-23, the
Commission concluded that a corporate donation of a car for
a trade association SSF's raffle, where the corporation was
not an association member, was prohibited by 2 U.S.C. 441b,
and that the promotional aspects of the donation did not
affect that conclusion.4
The narrow exception to these conclusions has been in
the context of national nominating conventions. Advisory
Opinion 1988-25 presented a situation in which an automobile
manufacturer proposed to provide a fleet of cars without
charge for both major parties to use at their Presidential
nominating conventions. After analyzing prior opinions and
affirming that allowing discounts in the ordinary course of
business does not give sanction to the provision of free
goods or services in return for promotional value, the
Commission reviewed its convention regulations pertaining to
the provision of
automobiles, to discounted sales or leases of goods and
services, and to the donation of funds or services
commensurate with the commercial return reasonably expected
to be derived by the business. The Commission concluded
that the proposed program was permissible, stating that it
fell "within the parameters of the kind of activity
sanctioned by" those regulations. The conclusion was
explicitly predicated "on several factors, most of which
would be evident in qualifying under the specific
exemptions," such as the company's established practice of
providing proportionate value in other non-political events,
the fact that commercial benefit equal to the value provided
will be derived, and "the unique promotional versus
political opportunities that a national nominating
convention presents." The opinion's analysis of Commission
precedent rejecting a reliance on promotional value and the
emphasis on the special aspects of a national nominating
convention indicate, however, that promotional value is not
generally an exception to the prohibition of corporate
contributions.5
You have demonstrated that CompuServe provides free
member accounts to a number of organizations and entities
with a variety of public service orientations. You indicate
that such free accounts increase the company's prestige and
goodwill and encourage future use by present subscribers and
potential subscribers. Even if the categories of free
customers you describe is varied enough to indicate that
your proposal may be in the ordinary course of business,
the Commission still concludes that your proposed gift to
Federal candidates of valuable services which enable them to
communicate with voters and advocate their candidacies would
constitute in-kind contributions to those candidates and
would be prohibited by 2 U.S.C. 441b(a). As indicated in
the opinions addressing the relevance of promotional value,
the fact that CompuServe may derive substantial publicity,
goodwill, or other commercial benefit does not negate or
reduce the corporate contribution. Such publicity or
benefit does not constitute consideration for the services
provided. See Advisory Opinions 1988-25 and 1988-12.
Moreover, the Commission has applied this principle to
situations where goods or services are provided without
charge, and it has explicitly noted that the allowance for
providing goods or services at a discount does not (except
under narrow circumstances not present here) extend to
providing them without any charge. Advisory Opinion 1988-
25.
This response constitutes an advisory opinion
concerning application of the Act, or regulations prescribed
by the Commission, to the specific transaction or activity
set forth in your request. See 2 U.S.C. 437f.
Sincerely,
(signed)
Lee Ann Elliott
Chairman
Enclosures (AOs 1995-47, 1994-10, 1991-23, 1989-14, 1989-13,
1988-25, 1988-12,
1987-22, 1986-30, 1982-44, 1978-60, 1978-45, and Re:
AOR 1976-56)
_______________________________
1 Although you do not specifically state what is included
in the concept of all candidates on a nonpartisan basis, the
Commission assumes that, with respect to Federal candidates,
this group would correspond to the group of candidates set
out in 11 CFR 114.4(b)(1)(i) and (ii) [60 Fed. Reg. 64276
(December 14, 1995)] who must be given the opportunity to
make appearances on corporate premises if any candidate is
invited to do so. In that regulation, this consists of all
candidates for a House or Senate seat who request to appear
and all Presidential or Vice Presidential candidates who are
seeking nomination or election, who meet pre-established
objective criteria under 11 CFR 110.13(c), and who request
to appear. The Commission acknowledges that this situation
differs slightly in that a request by a candidate for an on-
line account would be made, if at all, after an offer is
made to all Congressional candidates and to all Presidential
and Vice Presidential candidates meeting objective criteria.
2 In another opinion involving a media corporation, the
Commission permitted a cablecast television station to
provide free time to the DNC and the RNC so that each party
could air a two-hour presentation discussing public issues
from the party's perspective and soliciting contributions to
the national party committee. Advisory Opinion 1982-44.
The Commission concluded that this donation of time would
not constitute a prohibited corporate contribution because
such activity was a form of commentary falling within the
exemption for a news story, editorial, or commentary
distributed through the facilities of a broadcasting
station, newspaper, magazine, or other periodical
publication. 2 U.S.C. 431(9)(B)(i); 11 CFR 100.7(b)(2) and
100.8(b)(2). Since neither CompuServe nor its described
online services is a facility qualifying for the media
exemption, as described in the Act, the Commission's
conclusion in that opinion is inapplicable to your proposal.
3 In that opinion, the Commission indicated that the
goodwill value of an endorsement by political party
officials that would assist in the bank's commercial
promotion of its credit cards to party members would not
validate payments by the bank as consideration for a
contractual relationship with the political party.
4 The Commission also rejected a proposal by a computer
corporation to furnish free computers, software, and
technical training to Federal candidates who promised to use
the computer and software solely for FECA compliance.
Advisory Opinion 1989-13. Although the concept of
promotional value is not discussed in the opinion, its
conclusion, that the services were not within the
contribution exception for legal and accounting compliance
services to a campaign, implies that, even if promotional
value was asserted, it would not have changed the result.
See 2 U.S.C. 431(8)(B)(ix)(II); 11 CFR 100.7(b)(14).
5 In Advisory Opinion 1991-23, the Commission made
reference to one other narrow exception in addition to the
national party convention context, i.e., "where certain
general promotional amenities, discounts, and rebates were
offered within a pre-existing business relationship." The
example referred to was Advisory Opinion 1987-24 where some
free rooms and certain amenities were provided to customers
who reserved a larger block of rooms (see above). This,
however, constitutes a discount or rebate situation, rather
than a provision of free goods or services.