Federal Election Commission Main Page
October 28,
1994
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1994-30
Edward D. Feigenbaum
Attorney at Law
P.O. Box 383
Noblesville, IN 46060-0383
Dear Mr. Feigenbaum:
This responds to your letter dated August 3, 1994, as
supplemented by your letter dated August 31, 1994, requesting
an advisory opinion on behalf of Conservative Concepts, Inc.
and Michael R. Pence concerning the application of the
Federal Election Campaign Act of 1971, as amended ("the
Act"), and Commission regulations to ads for the sale of
T-shirts bearing campaign messages.
Your request centers around two types of business
ventures to be conducted by Conservative Concepts, Inc.
("CCI") entailing the manufacture, advertising and sale of
T-shirts containing logos advocating the election of
candidates, e.g., "X for Congress" or "Y for Senate," and
perhaps including the phrases, "Vote Republican" or "Vote
Democratic," as appropriate. One venture would involve
advertising of T-shirts on a syndicated talk show known as
The Mike Pence Show and the other would involve the sale of
the T-shirts at events such as rallies, joint candidate
appearances, and debates.
CCI is an Indiana company, incorporated in late 1993 by
Ray Hilbert and Berry Payton, whose principal business is the
manufacture for sale of assorted paraphernalia (e.g.,
T-shirts, lapel and bumper stickers, mugs, and hats) with
logos on them, principally logos with political messages.
The company markets its products at events such as outdoor
festivals, flea markets, and conventions, and in wholesale
sales to retail outlets. The company intends to focus its
activities on candidates who have a conservative ideology,
without regard to their party affiliation.
As an alternative to the sale by CCI, Raymar Incentives,
a sole proprietorship formed by Mr. Hilbert in late 1992,
would market and advertise the shirts. Raymar is a specialty
advertising agency offering such products and services as the
wholesale and retail of clothing, corporate gifts, incentive
programs, consumer marketing, and private franchising to a
principally non-political market. You state that, to the
best of your knowledge, Mr. Hilbert and Mr. Payton have not
engaged in activities supporting candidates or political
parties during the current election cycle, nor do they
anticipate engaging in such activities during this cycle.
The Mike Pence Show is a daily syndicated radio talk
show hosted by Indianapolis attorney Michael R. Pence. It is
syndicated by Network Indiana, which is a division of Wabash
Valley Broadcasting Corporation and includes 80 radio
stations among its affiliates. The show is a joint venture
between Network Indiana and Mr. Pence's Hoosier Conservative,
Inc. (established in 1993). You describe the show as
"Indiana's only conservative talk show dedicated exclusively
to politics and popular culture in Indiana." It can be heard
on 14 Network Indiana affiliate stations. You state that,
although it promotes itself as a "conservative" show, it is a
non-partisan public affairs radio program. The three-hour
format includes two hours of talk and telephone calls from
statewide listeners based on topical news and a third hour
focusing on a guest who appears in the studio or by
telephone. These guests have included Federal and state
candidates from both major parties, and there have been some
joint appearances by candidates for the same office.
The first venture would involve the purchase by CCI of
advertising time on the Pence Show for the sale of T-shirts
using the following type of language:
Listeners, if you live in the [D.C. Metro] area and
wish to show your support for [Trevor Potter], call
[this telephone number] and you can buy a [Potter
for Congress]-imprinted t-shirt for just [$15.95
plus tax and shipping costs]. This offer is not
affiliated with, or authorized or paid for by any
candidate or political party.
Another advertisement featuring the name of more than
one candidate might be aired as follows:
Listeners, if you live in the [D.C. Metro] area and
wish to support [Trevor Potter], or if you live in
the [greater northern Virginia] area and wish to
show your support for [Danny McDonald], call [this
telephone number] and you can buy a [Potter for
Congress or McDonald for Senate]-imprinted t-shirt
for just [$15.95 plus tax and shipping costs].
This offer is not affiliated with, or authorized or
paid for by any candidate or political party.
CCI would use other language at the advice of the
Commission.
You present the possibility of "packaging the
advertisement as part of the radio show." You explain that
the Mike Pence Show is marketed on a barter basis to Network
Indiana affiliates. Stations that decide to carry the show
do so by yielding eight minutes of advertising time per hour
to Network Indiana (syndicator of the show), and these eight
minutes are broadcast along with the program to the 14
affiliates airing it. CCI plans to purchase a portion of
those eight minutes per hour from Network Indiana. Thus,
when the show is bartered to a station, the CCI ads will be
already part of the package that the station receives. This
also means that CCI will not have to purchase advertising
time from each station.
CCI has not made any contact with any campaigns pending
the outcome of this opinion. If CCI determines that it is
permissible to market a product with a candidate's name
without the candidate's permission, the company will make no
contact, except perhaps for a letter to the candidate "simply
indicating that the company is undertaking the activity."
The second situation, i.e., the sale of the same
T-shirts at events such as rallies, joint appearances, and
debates that the candidate would be attending, is not
connected with any advertising. As with the above
arrangement, no funds would go to the candidate's campaign.
Periodically, CCI will request a list of appearances from the
campaign, perhaps accompanied by a message to the candidate
simply indicating that the company is undertaking the vending
activity.
Neither one of the proposed activities will entail
payments or contributions from CCI to the candidates'
campaigns from the sale of the T-shirts. You assert that
your client's interest is strictly profit-oriented and not
for the purpose of influencing a Federal election. You note
that CCI has no control over the use of the shirts after they
are purchased and that there is no way to determine whether
the purchaser is merely a collector or a supporter of the
candidate who will wear the shirt in an attempt to convey his
or her support.
You ask a number of questions pertaining to the
above-described transactions. You wish to know if radio
advertising for the retail sale of the shirts constitutes a
contribution if the candidate(s) are named, and whether the
result would differ if the ad suggests that if the listener
backs the candidate's candidacy, the listener might wish to
buy the T-shirt. You also ask whether either one of these
types of radio ads constitutes an independent expenditure.
Additionally, you ask whether, if the company seeks the
approval of a candidate to use the candidate's name on a
T-shirt, this would "change the relationship between the
advertiser and the candidate so as to constitute an
impermissible independent expenditure..."
Furthermore, you ask whether, if the company's ad is
"`packaged' as part of the syndicated radio show," would the
Commission impute a contribution to the radio network
responsible for distribution of the show. Finally, you ask
whether the Commission's determination in any of the above
questions would change if the company limited itself to
producing shirts for only certain candidates or if it only
featured one candidate in a given advertising spot.
With respect to the second venture, you wish to know
whether a prohibited corporate contribution or expenditure
would result and whether the Commission's conclusion would be
affected by periodic requests from the company to the
campaign for a list of scheduled appearances.
Analysis
I. First Situation
The Commission has considered situations involving
business ventures by corporations and other entities
involving candidate or party-related merchandise. If outlays
of funds, goods, or services are made by a business entity
selling items and these outlays are not paid for by the
campaigns benefiting, referred to, or affected, the question
arises as to whether such outlays are contributions or
expenditures subject to the Act's limits under 2 U.S.C. §441a
or prohibited by 2 U.S.C. §441b(a), or whether they are
merely entrepenurial or commercial activity unlimited by the
Act. See 2 U.S.C. §§431(8)(A)(i) and 441b(b)(2); 11 CFR
100.7(a)(1) and 114.1(a)(1). The same questions arise as to
the purchases of the merchandise.
The above questions often arise in the context of
coordination or arrangements between vendors and campaigns.
If a vendor acts without such coordination or arrangement,
and the vendor is incorporated, the activity will still be
prohibited if it constitutes an independent expenditure,
e.g., a communication which expressly advocates the election
or defeat of a clearly identified candidate and which is not
made with the cooperation or prior consent of, or in
consultation with, or at the request or suggestion of, any
candidate or authorized committee or agent of a candidate.
2 U.S.C. §441b(a); 11 CFR 109.1(a) and 114.2(b). See also
2 U.S.C. §431(17) and 11 CFR 100.16 and 109.1(b).
In Advisory Opinion 1976-50, a corporation planned to
produce and market T-shirts at its own expense for a
principal campaign committee, receive payment from individual
purchasers, and send a portion of the purchase price to the
committee. The Commission concluded that this amounted to
the advance of corporate funds to assist the committee in a
fundraising effort and was therefore impermissible. In
Advisory Opinion 1989-21, the Commission considered an
unincorporated free-lance artist's proposal to market
merchandise embellished with "cartoon characters" and the
likenesses of political candidates as a means of raising
funds for Federal candidates and party committees. Under the
plan, the artist would pay all the costs associated with
producing the fundraising items and would send 10% of the
retail price to the committees. The Commission held that the
individual's advance outlays to produce and market the items
would be considered loans to the candidates and that the
entire amount paid for the fundraising items, not just the
10%, would be considered contributions by purchasers. The
Commission also stated that because the individual would be
acting as the committee's "agent . . . to receive
contributions and make expenditures," she would have to
include disclaimers with her solicitations and conform with
the recordkeeping and reporting requirements of the Act.
In reaching this conclusion, however, the Commission
also stated that "as a practical matter, [it] recognizes that
entreprenurial activity involving candidate-related
merchandise is commonplace." Stating that the commercial
sale of candidate-related merchandise "would not necessarily
constitute an 'expenditure' or 'contribution' by the
purchasers," the Commission identified certain factors that
it would consider in determining the nature of such
entreprenurial activity: whether the sales involve
fundraising activity or solicitations for political
contributions; whether the activity is engaged in by the
vendor for genuinely commercial purposes; whether the items
are sold at the vendor's usual and normal charge; and whether
the purchases are made by individuals for their personal use
in political expression. Advisory Opinion 1989-21.
Examples of entrepenurial activity may be found in
Advisory Opinion 1988-17, which addressed several proposed
transactions by a company, whose principal purpose was the
production of commemorative medallions. Pursuant to
contracts with congressional and presidential campaigns, the
company planned to produce medallions containing the likeness
of the particular presidential or congressional candidate.
The campaigns would provide the upfront production expenses
to the company and bear all the expenses for marketing, and
pay a fee to the company. Checks for the purchase of the
medallions would be sent to and payable to the respective
campaigns. The Commission, in approving this arrangement,
contrasted this situation with Advisory Opinion 1976-50 and
other situations where the corporation forwarded "royalty"
money or assumed costs without full compensation.
The Commission also considered other sales of the
medallions. The company planned to market and sell the
medallions to separate segregated funds and non-connected
PACs which in turn would provide the medallions as gifts and
souvenirs to their contributors. The Commission stated that
the proposal appeared to entail "profit-making, arm's length
commercial transactions in which the corporation offers to
sell products that may be useful to political organizations"
and that such transactions would not be precluded by the Act
if the purchase price was usual and normal, and that the
company's marketing activity to PACs will be conducted on a
strictly commercial basis without an attempt to influence the
election of a candidate. Another proposal entailed the
company producing and marketing the medallions at its own
expense and selling them to the general public only after the
candidate's election, loss, or withdrawal, and after
completion of the candidate's debt retirement. Without
stating whether this proposal had to be conducted only after
election day and debt retirement, the Commission asserted
that the plan was permissible so long as the company
"pursue[d] this venture on a commercial basis for the purpose
of making a profit."
Your proposal for the radio advertising of T-shirts
without the variations discussed below1/ does not appear to
entail any arrangements with campaigns, other than a possible
letter informing the candidate that CCI is undertaking these
ads, that would suggest an election influencing purpose
instead of one that is merely commercial. For example, there
is no arrangement whereby CCI would lay out funds for
advertising expenses in coordination with a committee and no
arrangements whereby a portion of the sales proceeds will be
retained by or remitted to the committee of the referenced
candidate. In addition, with reference to what may
constitute coordination compromising the nature of an
independent expenditure, the request does not appear to
envisage any arrangements whereby information as to the
amounts of sales, location, and other aspects of CCI's sales
plan are communicated to any candidate's campaign, or whereby
information as to any campaign's plans are communicated to
CCI, thus affecting CCI's spending. See 11 CFR
109.1(b)(4)(i).2/ Thus, it appears that no prohibited
corporate contribution by CCI, or contribution subject to the
limits by Raymar Incentives, is implicated.
If the company's activities constitute independent
expenditures, however, then such activity by CCI would be
prohibited and such activity by Raymar would be reportable.
2 U.S.C. §§434(c) and 441b(a); 11 CFR 104.4(b), 104.5(g),
109.2, and 114.2(b). The T-shirts being sold to the general
public undoubtedly display messages that "expressly advocate"
the election or defeat of a candidate. See Buckley v. Valeo,
424 U.S. 1, 44; FEC v. Massachusetts Citizens for Life
("MCFL"), 479 U.S. 238, 249-250 (1986). Nevertheless, in the
absence of coordination or consultation with political
committees resulting in contributions by the vendors, the
Commission has still permitted an alternative to treating
such activity as political activity resulting in independent
expenditures. An application of the factors cited in
Advisory Opinion 1989-21 may permit your activity to fall
within the category of commercial, rather than political,
activity. For example, you assert that CCI's interest is
strictly profit-oriented and the activity is not undertaken
for the purpose of influencing an election. You note that
purchasers may respond to your ads for any number of reasons,
e.g., as a political memorabilia collector's item or as a
supporter of a given candidate. In addition, your activity
does not entail any fund-raising or solicitation for a
campaign.
You have stated that CCI intends to focus on candidates
who have a conservative ideology. Companies often determine
to direct their business activities toward one type of
political orientation. Such a focus may require a careful
scrutiny of the amounts charged by the company, the contacts
the company may have with a campaign (as opposed to other
vendors that may have reason to contact a campaign), the
scheduling of business activities, and other business
practices. See Advisory Opinion 1991-32. Nevertheless, it
does not, by itself, negate the merely commercial nature of
an activity.
As indicated in your questions, one aspect of your
proposed message, however, would compromise the merely
commercial nature of your activity and bring it under the
category of independent expenditure. In addition to
manufacturing and offering a shirt with a message of express
advocacy, you propose to gear the motivation for making a
purchase to those who wish to support or express support for
a particular candidate. Moreover, you target the geographic
area of the purchaser, i.e., to persons who are likely voters
in the area in which the referenced candidate is running. A
message that is merely commercial would make no mention of
the motivation of the purchaser as being the support of a
candidate. In order to avoid a message expressly inviting
support for a candidate, i.e., express advocacy, the
advertisement should omit the phrases "if you wish to
support" or "wish to show your support" and the reference to
where the purchaser lives. In the context of the language
you have suggested, quoted above, the Commission advises you
to state that the T-shirts are being offered for sale, state
what is on the shirt or otherwise describe the shirt, and
then provide the information as how to purchase the shirt.
The restatement of the message printed on the shirt would
not, by itself, constitute express advocacy if done as just
described.3/
You posit the situation where the company seeks the
approval of the candidate to use the candidate's name on the
T-shirt, and ask whether this would change the relationship
between the company and the candidate so as to constitute an
in-kind corporate contribution. The response to this
question depends upon the nature of the communication and the
surrounding circumstances. If CCI calls the campaign only in
order to avoid a legal conflict over trademark or other trade
usage, the relationship between the company and the campaign
is not changed. In contrast, the seeking of approval to
proceed with the advertising on a basis related to the
election of the candidate (e.g., the campaign is pleased to
know that shirts with the candidate's name or likeness are
being offered to the public), outside of a vendor-vendee
business arrangement with a campaign, may change the nature
of your activity from merely commercial. This would entail
"prior consent" by the candidate for activity which would
affect his campaign. See 11 CFR 109.1(a).
You ask whether the packaging of the company's ad as
part of the syndicated radio show would, by itself, result in
a conclusion that the network responsible for the show's
distribution had made a contribution or expenditure, assuming
the ad was determined to be a contribution or expenditure.
Without any further information indicating otherwise, the
Mike Pence Show and its syndicator appear to be utilizing the
kind of broadcast facilities that would fall within the news
story exception to the definitions of "expenditure" and
"contribution" at 2 U.S.C. 431(9)(B)(i), and 11 CFR
100.8(b)(2) and 100.7(b)(2).4/ Network Indiana's sale of the
advertising time to CCI and subsequent inclusion of the ad in
its barter package to its affiliates would not result in a
contribution or expenditure if such transactions involve the
usual and normal charges and are in the ordinary course of
business (i.e., Network Indiana packages other non-political
ads as part of the Pence Show). See Advisory Opinions
1990-19 and 1979-36.5/
Finally, with respect to the radio broadcasts, you wish
to know whether the Commission's conclusions would change
should CCI decide to limit itself to shirts for only certain
candidates or only feature one candidate in a given spot. As
alluded to above, a decision by CCI to limit itself to
certain candidates is a factor relevant to determining
whether a business enterprise's activities are merely
commercial, rather than political, particularly in view of
its intent to focus on candidates of a particular ideology.
Nevertheless, there is nothing in the Act requiring a
business entity to target its business toward clients or
individuals that represent all parties or ideologies. The
decision to feature a t-shirt for one candidate only in a
given advertising spot does not, by itself, constitute an
expenditure for that candidate. The normal business and
advertising practices of the company, as well as any
deviation from them, and how such business and advertising is
usually conducted by businesses not attached to a campaign
would have to be examined in order to reach any definitive
conclusion.
II. Second Situation
Your second situation entails the sale of the T-shirts
at rallies, joint appearances, and debates that the candidate
would be attending. The Commission understands the business
advantage to be gained by selling the T-shirts at such
events. If this involves no coordination or arrangements
with the candidate or his or her campaign, no contribution
would result and your activity could be classified as merely
commercial. Receiving a list of scheduled appearances,
without any other communication between the company and the
campaign as to the plans of the campaign or the company's
plans to sell T-shirts featuring the candidate, would not
change the Commission's conclusion.
If the campaign and the company communicate in order to
make a determination as to the events at which CCI would sell
and where (during the event) the company would place its
booth or stand for the sale of shirts, the conclusion may
differ. If a decision is made based on a discussion between
the company and the campaign of how the campaign may benefit
or otherwise be affected (e.g., whether this would conflict
with the campaign's sales of its own shirts or augment the
event's impact, what location for the company would be
beneficial for the campaign), such coordination may result in
an in-kind contribution by the company. See Advisory Opinion
1993-18. This latter situation may occur particularly with
respect to closed spaces such as auditoriums (or large
meeting rooms in hotels) and their outer halls or the
enclosed exhibit areas of an outdoor fair where campaign
officials may have control over the company's access to such
space. In contrast, where the vendor would need only the
permission of local authorities to perform its sales activity
in outdoor locations near the site of a campaign rally, the
possibility of a contribution in kind is greatly diminished.
However, the Commission expressly notes that this
conclusion is predicated on the representations you have made
that your activities are for purely commercial purposes, and
are not coordinated with any candidate (beyond the limited
contacts permitted above) or made for the purpose of
influencing any candidate's election or defeat. If these
representations are not met, then your activities would not
be protected by this advisory opinion.
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.
For the Commission,
(signed)
Trevor Potter
Chairman
Enclosures (AOs 1993-18, 1991-32, 1990-19, 1989-21, 1988-17,
1979-36, and 1976-50)
1/ See discussion in footnote 2 and discussion as to
seeking approval of the candidate's campaign.
2/ A simple statement that CCI is airing such ads (referred
to above) would most likely not, by itself, constitute
coordination or an arrangement with a campaign. Discussion
as to when or how often the ads would air, or the volume of
shirts to be sold, may lead to a different conclusion.
Seeking and receiving consent from a campaign may also be a
factor. See below.
3/ The Commission's conclusion does not address a situation
of a T-shirt advertisement that mentions opposing candidates
who seek the same office.
4/ Michael R. Pence was a Republican Congressional
candidate in 1988 and 1990, but is not, at present, a
candidate. There is no indication from the materials you
have presented that Network Indiana, Hoosier Conservative, or
the Wabash Valley Broadcasting Corporation is owned or
controlled by a political party, political committee, or
candidate.
5/ Network Indiana's involvement may raise a concern in
another respect if it sells advertising both to CCI and to
the campaign of a candidate whose name appears on a shirt ad
placed by CCI. The concern would arise if, in selling the
time and placing these ads at certain points in the package,
Network Indiana informs both CCI and the campaign as to the
other's plans with a view toward affecting how much time the
campaign might purchase (e.g., for purposes of name
recognition). Since this scenario was not explicitly
presented, the Commission does not state an opinion as to
this situation. Nevertheless, the situation does have
implications under 11 CFR Part 109 (Independent
Expenditures).