HCR Request For TX Ethics Commission Advisory Opinion

NAJVAR
LAW FIRM
One Greenway Plaza Suite 100 Houston, Texas 77046 www.najvarlaw.com Jerad Wayne Najvar Ph: 281.684.1227 Twitter: @NajvarLaw jerad@najvarlaw.com
September 25, 2012 Ms. Natalia Luna-Ashley General Counsel Texas Ethics Commission PO Box 12070 Austin, TX 78711 Re: Request for Advisory Opinion Dear Ms. Luna-Ashley: I am writing on behalf of Harris County Republicans ("HCR"), a "general-purpose committee" registered with the Texas Ethics Commission ("TEC" or "Commission"), to request an advisory opinion that certain transactions in which HCR plans to engage, specifically, soliciting and accepting political contributions via text message, will comply with title 15 of the Texas Election Code and with the Commission's rules. HCR is a Texas political committee that works to reach voters in Harris County precincts where the limited resources of candidates are not typically expended, with the goal of increasing Republican turnout county-wide. HCR intends to raise funds by soliciting text message contributions. In a recent series of advisory opinions, the Federal Election Commission has approved two basic methods by which federal political committees may solicit and collect funds via text message. See FEC Advisory Opinions 2012-30 (Revolution Messaging); 2012-28 (CTIA-The Wireless Association) ("CTIA II"); 2012-26 (Cooper for Congress, m-Qube, and ArmourMedia, Inc.) ("m-Qube II"); 2012-17 (Red Blue T LLC, Armour Media, Inc., and m-Qube, Inc.) ("mQube I"). In the requests that resulted in those opinions, multiple companies that specialize in administering text message transactions described how their systems work in the context of political contributions. The requestors, and the FEC, also relied on the description of the wireless industry in Advisory Opinion 2010-23 (CTIA-The Wireless Association).1 After analyzing the methods by which funds are collected and transferred, and how the requisite information and affirmations are collected from contributors, the FEC held that such transactions complied with all of the requirements of federal campaign law, including the recordkeeping and reporting requirements imposed on political committees. The Presidential campaigns were the first political committees to implement this new and exciting technology;
1
HCR incorporates the description of the wireless industry and of the mechanics of the text-contribution-processing systems as described in these advisory opinions. HCR has attached these advisory opinions in the appendix to this request.
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AOR - Harris County Republicans
Americans may now contribute $10 to Romney for President by texting the word "GIVE" to short code 37377, or $10 to Obama for America by texting the word "GIVE" to short code 62262.2 HCR intends to contract with a third party to initiate such a text message contribution campaign to fund HCR's activities under Texas law. Because the relevant provisions of the Texas Election Code are virtually identical to the requirements of federal law, HCR believes that the Commission may readily conclude that the methods approved by the FEC for processing text contributions are likewise compliant with all requirements of Texas law as it is currently written. This letter will first describe the basic framework and various parties involved in text contributions. Next, it will describe the two methods for processing text contributions that have been approved for use in federal campaigns. Finally, this letter requests the Commission's opinion as to the application of specific provisions of Texas law implicated by text message contributions under both of these methods, either of which HCR may choose to utilize depending on the Commission's answers. Framework and parties "Common short codes" ("short codes") and "keywords" form the basis of the text contribution system. "A short code is the five- or six-digit number to which a wireless user can send text messages to access mobile content, and a keyword is a word associated with a specific contribution amount and/or a specific recipient." FEC Advisory Opinion 2012-30 (Revolution Messaging) at 2, n. 1. The requestors in FEC advisory opinion request 2012-30 ("AOR 2012-30"), which is attached in the appendix to this request, set out a concise summary of the function of short codes. See AOR 2012-30 at 2-3. Any party who wishes to interact with wireless phone users leases a short code from an industry trade association called CTIA-The Wireless Association. Textcontribution campaigns require the use of what is known as a "premium" short code, which allows greater capability in relation to a "standard" short code. As AOR 2012-30 further describes, short codes may also be either "dedicated" or "shared." A "dedicated" short code is leased to a single content provider (in this context, a single political campaign). A "shared" short code, by contrast, may be utilized simultaneously by several campaign users, who would be assigned unique "keywords" for purposes of assigning and identifying contributions to specific users. The example of charitable contributions collected by the Red Cross after the earthquake in Haiti serves to illustrate. Wireless users were asked to contribute $10 to the Red Cross by texting the keyword "HAITI" to the short code "90999." FEC Advisory Opinion 2012-30 at 2, n. 1. There are either three or four discrete parties that work together in the solicitation, processing, and collection of contributions via text message.
See Comment on AOR 2012-31 by ArmourMedia, Inc., http://saos.nictusa.com/saos/searchao?SUBMIT=continue&PAGE_NO=-1.
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1. Content providers are those to whom the contributions are given; in this context, the political campaign is the "content provider." 2. Application providers "convert text messages received through short codes into data that can be interpreted and used by content providers."3 3. Aggregators are firms that "link content providers [i.e., political committees], service providers (such as AT&T), application providers, and [wireless consumers] together."4 4. Wireless service providers are the wireless companies (such as AT&T, Verizon Wirless, etc.) that provide cellular phone service to wireless consumers. The Mechanics of Text Contributions In Advisory Opinion 2012-17 (m-Qube I), the Federal Election Commission approved a process for text contributions described as follows. m-Qube, the connection aggregator, agreed to provide services to a political committee to process contributions in two ways. In the first method, the wireless user would text a keyword to the committee's designated short code. mQube would receive the message and then respond by text message, requesting that the contributor respond (again by text) to (1) confirm intent to make the contribution to the committee and (2) certify eligibility to make a contribution under federal law.5 In the second method, the user would enter her cell phone number on the committee's web site. The user would be required to certify, before submitting the number, that she is eligible to make a contribution under federal law. After submitting the number and the certification, m-Qube would send a text to the user's phone with a PIN, which the user would enter on the committee's website, confirming the contribution. As reflected in AO 2012-17, under either method, the contributor is required to confirm her intent to make the contribution and affirm that she is eligible to contribute under applicable law. This would complete the "opt-in" process, and would generate a charge on the wireless user's account. Under the m-Qube proposal approved by the FEC, the political committee does not have to wait for the contributor to receive and pay her wireless bill before receiving any benefit of the
3 4 5
FEC Advisory Opinion 2012-30 (Revolution Messaging) at 2, n. 2. FEC Advisory Opinion 2012-30 (Revolution Messaging) at 2, n. 2 (bracketed text added for clarity). m-Qube provided two examples of the substance of the confirmation requests with respect to federal law: Reply YES to give $20 to Romney & certify ur 18+ & donating with own funds, not foreign national or Fed contractor. Terms m-qube.com/r Msg&Data Rates may Apply Reply YES to give $20 to Obama & certify ur 18+ & donating with own funds, not foreign national or Fed contractor. Terms m-qube.com/o Msg&Data Rates may Apply
The hyperlinks contained within these certifications, when clicked by users on their smartphones, would display a webpage with the unabbreviated confirmation language, and would explain relevant terms such as "foreign national" and "Federal contractor." FEC AO 2012-17 at 3, n. 4. Modified to match Texas law and stay within 160 characters, the statement may read, for example: Reply YES to give $20 to HCR & certify ur 18+ & donating w/ own non-corporate/labor funds & not foreign national. Terms m-qube.com/hcr Msg&Data Rates may Apply.
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contribution. Instead, a transaction termed "factoring" would be used to provide immediate benefit to the committee. Under the factoring agreement, the committee essentially sells its accounts receivable to the aggregator at a discount, and in return, receives a portion of the contribution up front (the "factored" payment).6 Once the wireless user pays her bill, the service provider remits payment to the aggregator (less its transaction fee) and then the aggregator pays the remaining balance due to the political committee as a "trailing payment" (which represents the rest of the contribution amount, less the aggregator's transaction fee). The FEC describes this factoring arrangement in detail: The factoring process begins with an assessment by m-Qube of the transaction data that it has received on a daily basis, and a calculation of the net amount of funds that will eventually be collected from the mobile service providers. m-Qube takes into account certain variables "in [the] ordinary course of business ... including perceived risk on liabilities associated with the programs, and the availability of funds to provide the factored donations" to arrive at an appropriate factored payment amount. m-Qube states that it will calculate and transmit a "conservative" factor to political committees to protect against overpayments. Under its service order as currently drafted, m-Qube may suspend or terminate factored payments at any time, with or without notice to its customers, and may require its customers to provide a security deposit to guard against overpayments before restarting the payments. [N. 8: An overpayment may result from unexpected numbers of consumers disputing charges for third party content, such as contributions initiated through short codes. "Technical inconsistencies" between wireless service providers and aggregators can also result in overpayments.] If a customer receives factored payments that exceed the amount of outpayments due to it, the customer may not terminate the service order or transfer services, programs, or short codes from m-Qube until it has repaid mQube. m-Qube may require that its political committee customers refund to mQube any overpayment that results from a higher than expected number of subscribers refusing to pay text message charges on their bills. Similarly, if mQube is charged an adjustment by a "Network Operator" that exceeds the total amount owed by m-Qube to its customer, m-Qube may require the customer to repay the factored payment to m-Qube. m-Qube proposes to adhere to these standard terms for its political committee customers. m-Qube plans to transmit factored payments to political committee customers on a weekly basis. For example, m-Qube would assess all of the opt-ins that it received between Day 1 and Day 7 and, based on that data, transmit a factored payment on Day 10. m-Qube does not propose to identify any of the wireless users whose opt-ins it analyzes as part ofthe factoring process or to
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The total dollar amount ultimately received by the political committee is referred to as the "outpayment," and represents the net benefit to the committee after transaction fees charged by the wireless service provider and aggregator are deducted from the contribution amount. The up-front payment from the aggregator to the committee - the "factor" - is a portion of the total outpayment. FEC AO 2012-17 at 3, n. 6.
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transmit their names and addresses to political committee customers, consistent with its current practice for customers that are not political committees. After m-Qube receives payment from wireless service providers, mQube's current practice is to reconcile the amount that it has provided to its customers as factored payments and the actual outpayment that each customer is entitled to receive. Typically, m-Qube transmits these "trailing payments" within 30 days after it receives payment from the wireless service providers, but m-Qube proposes to transmit trailing payments to its political committee customers within ten days after receipt. Consistent with its current practice for customers that are not political committees, m-Qube does not propose to establish a segregated account for the trailing payments to political committee customers; trailing payments will be made from its general corporate treasury funds. The trailing payments, however, will be linked to a short code associated with a particular political committee, and m-Qube represents that this link, in conjunction with the requirement that each political committee only register one short code, ensures that contributions are segregated from corporate treasury funds. Also, while m-Qube does not propose to provide the contributor names and addresses to political committee customers, m-Qube will provide the ten-digit phone number associated with the contribution as well as (l) the amount and date of the contribution, (2) the fact that the contributor clicked "YES" or "Y" in response to the question regarding whether they agreed to have the contribution charged to their wireless bill and (3) the fact that the contributor clicked "YES" or "Y" in response to the affirmation question indicating their eligibility to contribute. m-Qube also represents that it can keep a running, real-time tally of the dollar amount of contributions made via text message from a particular telephone number. Because m-Qube keeps a running tally each month in order to enforce the aforementioned $50 cap, m-Qube can also continue the tally past each billing cycle. m-Qube represents that recipient political committees will have realtime secure access to the m-Qube gateway where the tally of contributions will be maintained, allowing committees to identify phone numbers that are associated with contribution totals of $200 or more.7 m-Qube represents that either it or its political committee customers can block text message contributions from phone numbers associated with pre-paid carriers and any other phone number at any time for any reason by using the m-Qube gateway. AO 2012-17 (m-Qube I) at 4-5 (footnotes either inserted into text or omitted). While m-Qube represented in this advisory opinion request that it would, by contract, limit to $50 the amount of text contributions permitted by any single phone number to a particular political committee per billing cycle,8 the wireless carriers have actually limited such transactions to $10 or $20 per
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Under federal law, $200 is relevant because contributions in excess of that amount must be itemized with the contributor's name, address, and employment information. See 11 C.F.R. 100.12 and 104.3(a)(4).
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This $50 limitation is relevant under federal law because contributions exceeding $50 implicate the requirement that a party forwarding a contribution provide the contributor's name and address. See FEC AO 2012-17 at 10 (citing 2 U.S.C. 432(b)(1), (2); 11 CFR 102.8(a), (b)). Because the FEC viewed the factored payments as extensions of credit rather than contributions, it held that the
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transaction. FEC AO 2012-30 (Revolution Messaging) at 3. Thus, it would take at least three contributions from the same phone number to exceed $50. Question 1: Would HCR's treasurer be in compliance with Texas Election Code 254.031(a) if he monitored incoming text contributions to ensure that contributions associated with any single phone number did not exceed $50 in any reporting period? The treasurer of a political committee is not required to itemize contributions so long as they aggregate $50 or less from any single contributor in a reporting period. Instead, "the total amount of the political contributions of $50 or less accepted during the reporting period" is sufficient. Tex. Elec. Code 254.031(a)(5). It is only after a person contributes over $50 in a reporting period that a treasurer is required to report the name and address of the contributor and dates of the contributions. Id. 254.031(a)(1). Further, the treasurer of a political committee is only required to keep a "record" of such information as is "necessary for filing the reports required by [chapter 254]." Id. 254.001(c). As stated above, political committees will have "real-time secure access to the m-Qube gateway where the tally of contributions will be maintained," and "m-Qube represents that either it or its political committee customers can block text message contributions from any phone number at any time for any reason by using the m-Qube gateway." AO 2012-17 at 5. In order to prevent acceptance of any contributions that would lack the required recordkeeping information, HCR would use its vendor's system to review the text contributions as they come in and block any contributions in excess of $50 from a single phone number per reporting period. Consequently, would HCR's treasurer satisfy the reporting and recordkeeping requirements of 254.031(a) if he monitors incoming text contributions to block any contributions that would aggregate in excess of $50 from any single phone number in a reporting period, and reports the total of all accepted text contributions as unitemized contributions? If it is relevant to the Commission's analysis, please note that HCR plans to record text contributions as being acceptedin the full amount of the contributionon the date the contributor pledged the contribution by replying to the confirmation requests described above. In other words, HCR would record the contribution as being pledged in full on the date of the text message interchange, rather than recording a contribution on the date of the factored payment and another on the date of the trailing payment. Accordingly, such pledges will be reported in accordance with applicable law. See 1 Tex. Admin. Code 20.56; Ethics Advisory Op. No. 231 (1994).9 Question 2: If the answer to Question 1 is No, would HCR's treasurer be in compliance with section 254.031(a) if he collects additional identifying information from text contributors such that text contributions can be aggregated with contributions made by other means by the same contributor?
forwarding requirements were not implicated. Id. Coincidentally, $50 is relevant also under Texas law, but for a different reason: it is the threshold after which itemization is required. Tex. Elec. Code 254.031(a)(1).
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The FEC held that "[u]nder m-Qube's proposed factoring arrangement, which is similar to how credit card contributions are handled, the Commission considers the contributions to be received at the time of the opt-in, as opposed to when the bill is paid." FEC AO 2012-17 (m-Qube I) at 6.
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If it is the Commission's view that filers are required to verify the identity of text contributors for purposes of aggregating text contributions with traditional contributions made by the same contributor (i.e., to determine whether the contributor has given in excess of $50 in a reporting period, requiring itemization), that can also be achieved. Soon after approving the proposal discussed above in m-Qube I, the FEC approved a similar request by Revolution Messaging, LLC, an application provider, permitting it to process contributions that aggregated in excess of the $50 per-billing-cycle and $200 per year limits within which m-Qube had circumscribed its proposal. FEC AO 2012-30 (Revolution Messaging). The FEC approved this proposal because Revolution Messaging represented that it would "send a confirmation text asking the contributor to provide the information required pursuant to the recordkeeping and reporting requirements of [federal law] via a series of text messages or by completing a form on the website of Revolution Messaging." Id. at 3.10 In other words, whereas the m-Qube scenario relies on unitemized reporting by limiting aggregate contributions below the triggering amount ($200 under federal law), obviating the need for collecting multiple data points from the wireless user, the Revolution Messaging scenario does collect all the contributor information required for recordkeeping and therefore obviates the need for imposing a limit on text contributions (other than those generally applicable under federal law). While HCR believes it highly unlikely that any contributor would desire to give large amounts to it (or to any candidate or committee) via text message, Revolution Messaging's proposal illustrates how a committee can, through the third party aggregator or application provider, collect all necessary contributor information in this context. Therefore, if the Commission finds that a political committee must collect the names and addresses of text contributors in order to verify whether itemization for a certain contributor is required (when aggregated with that person's contributions by check, credit card, or other means), HCR would ensure that that information is collected as part of its text contribution program. This can be achieved in the manner represented in the Revolution Messaging advisory opinion.11
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The confirmation webform and text script as proposed by Revolution Messaging would include the following:
By checking this box, I confirm that the following statements are true and accurate: 1. Contributions made by text message from this wireless phone will be paid for with my personal, unreimbursed funds, and not those of another. 2. Contributions made by text message from this wireless phone will not be made by a corporation, labor organization, or other person paying my wireless bill. 3. I am not a Federal government contractor. 4. I am not a foreign national who lacks permanent resident status in the United States. 5. I am at least 18 years of age. These attestations could be modified to conform with Texas law. For example, item 3 could be removed, since Federal contractors are not prohibited from making contributions to state political committees.
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Of course, this would also permit collection of principal occupation information, so that in the unlikely event that a general purpose committee such as HCR received and accepted contributions aggregating in excess of $50 from a single phone number by text, it would have the required reporting information. See Tex. Elec. Code 254.151(6).
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Question 3: Does the proposed commercial transaction of factoring of political contributions, when performed by an aggregator in the normal course of business, conform with the requirements of title 15, Election Code? For purposes of title 15, a "contribution" is a "direct or indirect transfer of money, goods, services, or any other thing of value and includes an agreement made or other obligation incurredto make a transfer. The term includes a loan or extension of credit, other than those expressly excluded by this subdivision." Tex. Elec. Code 251.001(2). Expressly excluded from the definition are "loan[s] made in the due course of business by a corporation that is legally engaged in the business of lending money and that has conducted the business continuously for more than one year before the loan is made." Id. 251.001(2)(A); see also 1 Tex. Admin. Code 24.5. By rule, the Commission has stated that "[t]he term ["contribution"] does not include a transfer for consideration of any thing of value pursuant to a contract that reflects the usual and normal business practice of the vendor." 1 Tex. Admin. Code 20.1(3). Contributions from corporations to general purpose committees are prohibited. Tex. Elec. Code 253.094(a), 253.096, 253.104. As described above, the factoring arrangement by which factored and trailing payments would be made to HCR would be undertaken pursuant to a contract between HCR and the connection aggregator for which the aggregator receives consideration in the form of the transaction fee deducted from the contribution amount.12 Mechanically, as summarized by the FEC, m-Qube represented that it would "assess all of the opt-ins that it received between Day 1 and Day 7 and, based on that data, transmit a factored payment on Day 10." FEC AO 2012-17 at 4. Later, after receiving payment from the wireless providers, m-Qube reconciles the factored payments already made with the remaining amount due to its customer, and typically remits the "trailing payment" 30 days after receipt. Id. For political committee customers, however, mQube represents that it will provide trailing payments within 10 days. Id. And, as the description excerpted above from AO 2012-17 clearly shows, the aggregator has built in numerous measures to protect its financial interest in the arrangement (such as providing for clawbacks in the event of overpayments).13
12
With respect to a discretebut relatedissue, the FEC has concluded that wireless carriers may develop a new rate structure for text-contribution-processing services to political committees as compared to the rates that would be charged to commercial (nonpolitical) "content providers," due to the unique nature of political contributions, because it found the proposal to be based on commercial considerations and did "not reflect considerations outside of a business relationship." FEC AO 2012-31 (AT&T) at 4. While the Ethics Commission has previously stated that the terms of a transaction must "reflect the usual and normal practice of the industry, and be typical of the terms the commercial party offers to political and non-political entities alike," see Ethics Advisory Op. No. 143 (1993), in this instance at least two major wireless carriers have described a compelling reason for differentiating between political contributions and ordinary commercial text transactions. See FEC AO 2012-31 (AT&T) and comments thereto by Cellco Partnership d/b/a Verizon Wireless (filed Sept. 10, 2012) (documents associated with an FEC advisory opinion request are accessible on the FEC website at http://saos.nictusa.com/saos/searchao). HCR urges the Commission to permit such differentiation, as did the FEC, or to avoid making a pronouncement on this specific issue until presentation of a request by a wireless carrier which elaborates as to why there is no "non-political" parallel in this context.
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The FEC summarizes those protections as follows: As m-Qube does with its non-political customers, it would employ extensive safeguards to avoid making excessive factored payments. m-Qube will calculate and transmit a "conservative" factor to political committees, and it will reevaluate the potential risks of making factored payments on a weekly basis. Under the terms of its service order, m-Qube may suspend or terminate factored payments at any time, with or without notice to its customers, and may require its customers to provide a security deposit to guard against overpayments before restarting the payments. m-
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If HCR enters such a factoring agreement with a connection aggregator, as part of the aggregator's usual and normal business, will the factored payments be considered contributions or in-kind contributions when accepted by HCR? Rule 20.1(3) specifically holds that any transfer for consideration of anything of value pursuant to a contract is not a contribution so long as it is carried out in the "usual and normal business practice of the vendor." 1 Tex. Admin. Code 20.1(3). Thus, so long as factoring is part of the usual and normal business practice of the aggregator, Rule 20.1(3) compels the conclusion that the factored payments are not contributions.14 This would be consistent with the treatment of political contributions by credit card, which also involve an up-front payment advanced by an incorporated third party. Credit card contributions are routinely made to and accepted by Texas candidates and committees, and factored payments as described above are the same in all material respects. If the Commission agrees with this conclusion, may HCR accept factored payments even if the aggregator is incorporated? I appreciate your consideration of this request. Text message contributions will permit small-dollar contributors to participate in our political system in new and powerful ways, and this technology represents an entirely new potential funding stream for candidates and committees. Please do not hesitate to contact me if you require any further information. Very respectfully,
Jerad Najvar Attorney for Harris County Republicans Enclosures (appx)
Qube may also require customers that receive overpayments to reimburse m-Qube. If a customer receives factored payments that exceed the amount of outpayments due to it, the customer may not terminate the service order or transfer services, programs, or short codes from mQube until it has repaid m-Qube. Similarly, if m-Qube is charged an adjustment by a Network Operator that exceeds the total amount owed by m-Qube to its customer, mQube may require the customer to repay the factored payment to m-Qube. FEC AO 2012-17 at 8.
14
The FEC's analysis under relevant federal law provisions held that the factoring arrangement represented an extension of credit rather than a sale of assets. See FEC AO 2012-17 at 8, n. 12. Regardless of how factored payments are characterized, per Rule 20.1(3), they are not "contributions" under Texas law if they meet the requirements of Rule 20.1(3).
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AOR Harris County Republicans Appendix 1. FEC Advisory Opinion 2012-30 (Revolution Messaging) 2. FEC Advisory Opinion Request 2012-30 3. FEC Advisory Opinion 2012-28 (CTIA-The Wireless Association) 4. FEC Advisory Opinion 2012-26 (Cooper for Congress, m-Qube, Inc., and ArmourMedia, Inc.) ("m-Qube II") 5. FEC Advisory Opinion 2012-17 (Red Blue T, LLC, ArmourMedia, Inc., and m-Qube, Inc.) ("m-Qube I") 6. FEC Advisory Opinion 2010-23 (CTIA-The Wireless Association)
FEDERAL ELECTION COMMISSION Washington, DC 20463
September 4, 2012 CERTIFIED MAIL RETURN RECEIPT REQUESTED ADVISORY OPINION 2012-30 Joseph E. Sandler, Esq. Neil P. Reiff, Esq. Elizabeth L. Howard, Esq. Sandler, Reiff, Young & Lamb, P.C. 1025 Vermont Avenue, NW Washington, DC 20005 Dear Mr. Sandler, Mr. Reiff, and Ms. Howard: We are responding to your advisory opinion request on behalf of Revolution Messaging, LLC (Revolution Messaging), concerning the application of the Federal Election Campaign Act (the Act) and Commission regulations to your proposal to process contributions by text message. The requestor asks whether its proposal (1) to enable the processing of contributions by text message to a political committee in excess of $50 per billing cycle and $200 per calendar year or election cycle, and (2) to enable political committees to share a premium short code to process contributions by text message, complies with the Act and Commission regulations. The Commission concludes the proposal complies with the Act and Commission regulations. Background The facts presented in this advisory opinion are based on your letter received on August 6, 2012 and your email received on August 7, 2012. Certain facts have also been incorporated from Advisory Opinion 2010-23 (CTIA The Wireless Association) (CTIA I) and Advisory Opinion 2012-17 (Red Blue T LLC, ArmourMedia, Inc., and m-Qube, Inc.) (m-Qube I). Revolution Messaging is a limited liability company organized under District of Columbia law that has elected to be treated as a partnership for income tax purposes. It is a full-service digital technology and strategy company that specializes in providing mobile communications strategies, content, and text messaging services to progressive non-profit organizations, labor organizations, and Democratic Federal and State political committees and
AO 2012-30 Page 2 organizations. Revolution Messaging coordinates mobile messaging on behalf of its clients through a proprietary web-based platform that allows them to obtain common short codes and customized keyword associations; 1 send customized messages to wireless users; and maintain, analyze, and manage data provided by wireless users and data relating to actions taken by wireless users in the course of text messaging programs. Revolution Messaging also advises its clients in creating websites, mobile applications, and outgoing text messages. As an application provider of text messaging services, Revolution Messaging administers the mobile communications programs of various political committees. 2 In this role, Revolution Messaging is responsible for collecting and maintaining wireless user data, including the name, address, employer and occupation of specific wireless users. Revolution Messaging gathers this information through maintenance of the records that it processes regarding members of membership organizations with connected Federal political committees and supporters of nonconnected Federal political committees who have participated in the political committees mobile programs. It uses other various methods to collect and maintain wireless user data, including a mobile-friendly webform completed by the wireless user when opting in to receive text messages. Ensuring the accuracy of this data is an integral component of Revolution Messagings services. Contributions Aggregating More Than $50 Per Billing Cycle or $200 Per Calendar Year or Election Cycle Revolution Messaging proposes to process contributions by text message that aggregate in excess of $50 per month and $200 per calendar year (or, in the case of contributions to authorized committees of candidates, $200 per election cycle) for its political committee clients. Each political committee that receives contributions under the proposal will contract exclusively with Revolution Messaging, and Revolution Messaging will contract with a connection aggregator that has agreed to provide the factoring service approved by the Commission in Advisory Opinion 2012-17 (m-Qube I). When a contribution is initiated by a wireless user who texts a unique keyword to a short code, Revolution Messaging will generate an affirmation statement, which Revolution Messaging describes as containing the same information contained in the affirmation statement
1
A common short code is the five- or six-digit number to which a wireless user can send text messages to access mobile content, and a keyword is a word associated with a specific contribution amount and/or a specific recipient. For example, in the aftermath of the earthquake in Haiti, individuals pledged $10 donations to the Red Cross by texting the keyword HAITI to the short code 90999.
Application providers such as Revolution Messaging convert text messages received through common short codes into data that can be interpreted and used by content providers. Other commercial entities typically involved in text message transactions include The Common Short Code Administration, a component of CTIA The Wireless Association, which oversees the technical and operational aspects of common short codes and leases common short codes to content providers; content providers, which are entities, such as vendors, charitable organizations, and political committees, that use common short codes to disseminate content to, or collect information or funds from, wireless users; wireless service providers, which are the companies from which subscribers purchase their mobile phone service; and connection aggregators, which link content providers, service providers, application providers, and users together.
AO 2012-30 Page 3 proposed by m-Qube in AO 2012-17, Supplemental Information (June 6, 2012) at 4. Revolution Messaging provides the following example of an affirmation statement: Reply YES to give $20 to Shoemakers Federal PAC & certify ur 18+ & donating with own funds, not foreign national or Fed contractor, http://rev.ms/terms (Msg&Data Rates May Apply). If the wireless user responds in the affirmative, then the contribution will be processed by the wireless carrier, connection aggregator, and application provider. As the application provider, Revolution Messaging will send a confirmation text thanking and asking the contributor to provide the information required pursuant to the recordkeeping and reporting requirements of the Act and Commission regulations via a series of text messages or by completing a form on the website of Revolution Messaging. 3 The text message script and webform will include attestation statements similar to those proposed in Advisory Opinion 2010-23 (CTIA-I); 4 collect the contributor's name, address, employer name, occupation, and cellular telephone number; notify the contributor that the political committee recipient is required to use best efforts to collect the first four of these items of information in accordance with 11 CFR 104.7(b); and contain any necessary disclaimers. Revolution Messaging states that, as a general rule, it will already have the information required by the reporting and recordkeeping requirements of 2 U.S.C. 432(c) for text message contributors because of its ongoing work for and with political committee clients. Due to the $10 and $20 per transaction limitations imposed by wireless service providers (see Advisory Opinion 2012-17 (m-Qube I)), a wireless users initial contribution will not be permitted to exceed the threshold above which identifying information must be collected and, given this initial limitation, will be allowed to proceed even if the user does not provide the requested identifying information. Revolution Messaging will use the information provided on the webform or by text message and the information that it already has to identify wireless users. Revolution Messaging will allow users for whom it has, at a minimum, a name and address to make aggregate contributions exceeding $50 per monthly billing cycle and $200 or more per election cycle or calendar year (as applicable). Revolution Messaging will provide this information to its political committee clients. Revolution Messaging will work with the connection aggregator to block all
3
Revolution Messaging proposes the following language for its confirmation texts: (1) Thanks for contributing! To make best efforts to comply with fed law we need more info. Visit http://rev.ms/info or reply OK. (2) Thnx for contributing! Fed law reqs best effort 2 get&report name, address, employer&occupation 4 political contributions. Visit http://rev.ms/info or reply OK. The confirmation webform and text script will include the following: By checking this box, I confirm that the following statements are true and accurate: 1. Contributions made by text message from this wireless phone will be paid for with my personal, unreimbursed funds, and not those of another. 2. Contributions made by text message from this wireless phone will not be made by a corporation, labor organization, or other person paying my wireless bill. 3. I am not a Federal government contractor. 4. I am not a foreign national who lacks permanent resident status in the United States. 5. I am at least 18 years of age.
AO 2012-30 Page 4 contributions that aggregate more than $50 per billing cycle or $200 per election cycle or calendar year from any wireless user whose name and address Revolution Messaging does not have. Revolution Messaging will inform the wireless user, via text, that additional contributions are not permitted unless the user completes the webform or responds to the appropriate text message. Once the user completes the webform or text message script, Revolution Messaging will enable the user to make additional text message contributions. Revolution Messaging also will work with its political committee clients to combine contributor information obtained through text message contributions with information already in the committees possession to ensure that contributors whose contributions aggregate in excess of $200, whether made by text messaging or in other forms such as check or credit card, are properly disclosed on the political committees reports to the Commission. This will also enable the political committees to track contributors aggregate contributions (whether made by text messaging or in other forms) with respect to the contribution limits. Revolution Messaging represents that there will be more than sufficient time to merge text message contributor information with other contributor information for its political committee clients to file accurate and timely reports with the Commission and to ensure that a contributor does not make excessive contributions. Revolution Messaging will also block contributions aggregating in excess of $2,500 per election and $5,000 or $10,000 per calendar year, as applicable. Shared Premium Short Codes Revolution Messaging also proposes to offer a service that would allow multiple Federal political committees to share one premium short code for receiving contributions by text message. Wireless users pay a premium charge for premium short codes, usually on a monthly basis, in order to receive certain content. 5 Examples of premium messaging programs include those for the purchase of ringtones, wallpaper or screensavers, and for subscriptions to weather alerts, sports scores, daily horoscopes, and pornography. A premium short code must be used for receipt of message when contributions are made by text message. The additional capability of a premium short code results in increased costs to the entity leasing the short code, as well as the wireless user. Revolution Messaging estimates that the total cost of leasing, setting up, applying, connecting, programming, testing, and registering a premium short code ranges from $6,000 to $10,000. Premium short codes can also be timeconsuming to obtain. Revolution Messaging estimates that it takes eight to 12 weeks to obtain a premium short code, and states that campaigns will thus be unable to raise contributions by text messaging for a large part of the campaign cycle. Revolution Messaging posits that the time and cost associated with premium short codes reduce their effectiveness for all but major party presidential campaigns and national party committees.
5
Premium short codes are distinct from standard short codes. Standard short codes involve the imposition of a small charge to the wireless user to send or receive regular text messages, beyond a certain data limit included in the user's monthly plan. Typically, non-profit organizations and political committees use standard short codes to communicate with supporters or members who have opted into the text messaging program of the committee or organization.
AO 2012-30 Page 5 For a contribution via text message to be processed when a shared premium short code is utilized, it must use both a keyword and a short code in combination and include a reply to an exact keyword. Additional steps based on the keyword attached to a shared premium short code include (1) the use of a unique keyword to identify the political committee to which a contribution is to be attributed and the amount of the contribution; (2) a message to the contributor seeking confirmation that the contributor is eligible to make the contribution and verifying that funds will be charged to the contributors phone bill; and (3) a reply text message from the contributor confirming eligibility and acknowledging that the contribution will come from the contributors own funds. Under Revolution Messagings proposal, this full keyword and premium short code process and confirmation will be used for all contributions by text message. The wireless users message initially providing the keyword will be time- and datestamped for auditing purposes. To ensure that contributions are associated with only one political committee when a premium short code is shared, Revolution Messaging will assign each political committee one or more unique keywords. Keywords may be associated with specific contribution amounts and specific political committees sharing a common short code. For example, a wireless user may be asked to Text DONATE to 675309 to give $20 to the Shoemakers Federal PAC, where 675309 is the shared premium short code and DONATE is the unique keyword. Upon receiving the text from the wireless user, Revolution Messaging will immediately generate an affirmation statement, such as the one described above, that includes the amount of the contribution and the name of the recipient political committee based on the unique keyword. If the wireless user confirms the information, a charge will be added to the contributors wireless bill. Revolution Messaging and the connection aggregator receive this information in real time and will immediately assign each transaction to an individual political committees account based on the unique keyword. Revolution Messaging represents that it and connection aggregators regularly employ this funds-sorting mechanism for all of their customers to ensure that funds are properly accounted for and transmitted to their intended recipient. 6 Trailing payments made by the connection aggregator to a political committee, see Advisory Opinion 2012-17 (m-Qube I), will be determined based on the outcome of individual transactions associated with a unique keyword on a shared premium short code and not the short code itself. Revolution Messaging will also be able to use the unique keyword to block a phone number from making excessive contributions to a political committee, even if the political committee shares a premium short code. Questions Presented 1. Does the proposal to enable the processing of contributions by text message to a political committee in excess of $50 per billing cycle and $200 per calendar year or election cycle,
Revolution Messaging will sign exclusive contracts with each political committee client in order to be the only provider of text messaging fundraising services to that political committee. During any period in which a political committee engages in fundraising via Revolution Messagings services, it will not be permitted to contract with any other provider, including any aggregator or wireless service provider, for such services, and will not, as a practical matter, have access to any premium short code other than the one used by Revolution Messaging.
6
AO 2012-30 Page 6 as applicable, comply with the recordkeeping and reporting provisions of the Act and Commission regulations? 2. Does the proposal to use a shared premium short code by multiple Federal political committees to process contributions by text message comply with the Act and Commission regulations? Legal Analysis and Conclusion 1. Does the proposal to enable the processing of contributions by text message to a political committee in excess of $50 per billing cycle and $200 per calendar year or election cycle, as applicable, comply with the recordkeeping and reporting provisions of the Act and Commission regulations? Yes, the proposal to enable the processing of contributions by text message to a political committee in excess of $50 per billing cycle and $200 per calendar year or election cycle, as applicable, complies with the recordkeeping and reporting provisions of the Act and Commission regulations.
The Act and Commission regulations impose certain requirements on treasurers of political committees. A treasurer of a political committee must keep an account of (1) all contributions received by or on behalf of such political committee; (2) the name and address of any person who makes any contribution in excess of $50, together with the date and amount of such contribution by any person; [and] (3) the identification of any person who makes a contribution or contributions aggregating more than $200 during a calendar year, together with the date and amount of any such contribution. 2 U.S.C. 432(c)(1)-(3); see also 11 CFR 110.4(c). A political committee must also file regular reports with the Commission that include, among other information, the identification of each person who makes a contribution to the committee during the reporting period, whose contribution or contributions have an aggregate amount or value in excess of $200 within the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office) . . . together with the date and amount of any such contribution. 2 U.S.C. 434(b)(3)(A); see also 11 CFR 104.8(b). Treasurers of political committees must examin[e] all contributions received for evidence of illegality and for ascertaining whether contributions received, when aggregated with other contributions from the same contributor, exceed the [Acts] contribution limitations. 11 CFR 103.3(b). In Advisory Opinion 2012-17 (m-Qube I), the Commission concluded that the requestors proposal for processing contributions to political committees via text messages complied with the Act and Commission regulations. The m-Qube proposal limited aggregate contributions to $50 per month from each wireless user to each political committee. Although m-Qube, the connection aggregator, would not transmit contributor names and addresses to the political committee recipients, it would provide the 10-digit phone number associated with each contribution as well as (1) the amount and date of the contribution, (2) the fact that the contributor clicked YES or Y in response to a question regarding whether the contributor agreed to have the contribution charged to the contributors wireless bill, and (3) the fact that the contributor clicked YES or Y in response to an affirmation question indicating eligibility to contribute. m-Qube also represented that it could keep a running, real-time tally of the dollar amount of contributions made via text message from a
AO 2012-30 Page 7
particular telephone number. Recipient political committees would then have real-time secure access to the aggregators gateway where the contribution tally would be maintained, allowing political committees to identify phone numbers associated with contributions aggregating $200 or more. In approving the proposal, the Commission noted that other proposals could provide equally permissible methods of raising contributions through text messaging. Here, Revolution Messagings proposal would enable a wireless user to make aggregate contributions exceeding $50 per month and $200 per calendar year or election cycle to a single political committee, so long as the user provides to Revolution Messaging his or her name and address. Revolution Messaging will also request the users occupation and name of employer, which the recipient political committee may need to comply with the recordkeeping and reporting requirements of the Act and Commission regulations, as well as the users cellular telephone number. Revolution Messaging will then transmit this identifying information to the political committee. Although a wireless user may make initial contributions aggregating up to $50 per month to a political committee, any user failing to provide at least his or her name and address will be blocked by Revolution Messaging, working with the connection aggregator, from making any further contributions to the same political committee.
Revolution Messaging will also work with its political committee clients to combine the information that Revolution Messaging collects regarding contributions with the information that the political committee itself collects in connection with contributions made by means other than text message. Combining these two sources of information will enable political committees to disclose contributor information for all contributors whose contributions aggregate in excess of $200 per election cycle or per calendar year, as applicable, and to refuse or refund excessive contributions, regardless of the means of contribution. The Commission concludes, therefore, that the proposal described above complies with the recordkeeping and reporting provisions of the Act and Commission regulations. 2. Does the proposal to use a shared premium short code by multiple Federal political committees to process contributions by text message comply with the Act and Commission regulations? Yes, the proposal to use shared premium short codes by multiple Federal political committees to process contributions by text message complies with the Act and Commission regulations. In Advisory Opinion 2012-17 (m-Qube I), the Commission concluded that a connection aggregator using common short codes to track contributions made via text messages to political committees ensured that contributions would be properly accounted for and that the connection aggregators treasury funds would not be inadvertently transmitted to political committees. See Advisory Opinion 2012-17 (m-Qube I). There, the trailing payments that the connection aggregator proposed to receive from service providers and forward to political committees were linked to common short codes that were unique to each political committee. The proposal therefore satisfied the requirements of the Act and Commission regulations. Id.
AO 2012-30 Page 8 Like the requestor in Advisory Opinion 2012-17 (m-Qube I), Revolution Messaging proposes a mechanism to ensure that contributions will be properly accounted for and that corporate funds will not be inadvertently transmitted to political committees. Revolution Messaging will assign each of its political committee clients one or more unique keywords to ensure that each contribution will be associated with only one political committee. In order for a contribution to be completed, the wireless user must send an initiating text message to the correct shared common short code and include the political committees assigned keyword in the message. Revolution Messaging states that no funds will ever be drawn without this full keyword to short code process. Revolution Messaging and the aggregator receive the information about a contribution in real time, and immediately assign the transaction to a political committees account based on the unique keyword used. All contributions are thus attributed to their intended recipient political committees from the time they are made. Trailing payments made by the aggregator to the political committees will then be determined based on the unique keyword assigned to each political committee. The unique keywords assigned to individual political committees under Revolution Messagings proposal will perform the same function that unique short codes performed in the proposal considered in Advisory Opinion 2012-17 (m-Qube I). Accordingly, the Commission concludes that the proposal complies with the Act and Commission regulations. This response constitutes an advisory opinion concerning the application of the Act and Commission regulations to the specific transaction or activity set forth in your request. See 2 U.S.C. 437f. The Commission emphasizes that, if there is a change in any of the facts or assumptions presented, and such facts or assumptions are material to a conclusion presented in this advisory opinion, then the requestor may not rely on that conclusion as support for its proposed activity. Any person involved in any specific transaction or activity which is indistinguishable in all its material aspects from the transaction or activity with respect to which this advisory opinion is rendered may rely on this advisory opinion. See 2 U.S.C. 437f(c)(1)(B). Please note that the analysis or conclusions in this advisory opinion may be affected by subsequent developments in the law, including, but not limited to, statutes, regulations, advisory opinions, and case law. The cited advisory opinions are available on the Commissions website, www.fec.gov, or directly from the Commissions Advisory Opinion searchable database at http://www.fec.gov/searchao. On behalf of the Commission, (signed) Caroline C. Hunter Chair
SANDLER, REEFF, YOUNG &
Lmi^^^.^^^
August 6,2012 Via Email and First Class Mail Anthony Herman, Esq. General Counsel Federal Election Commission 999 E Street N.W. Washington, D.C. 20463 Re: Advisory Opinion Request
Dear Mr. Herman: Pursuant to 2 U.S.C. 437f and the Commission's rules, 11 C.F.R. 112.1, we are writing on behalf of our client, Revolution Messaging, LLC C'Revolution Messaging") to request an advisory opinion that certain transactions in which Revolution Messaging plans to engage, involving the solicitation and collection of contributions to federal conunittees through text messaging campaigns, will comply with the Federal Election Campaign Act of 1971 as amended ("FECA" or "the Act") and the Conunission's regulations. Speciilcally, Revolution Messaging, which is an application provider of text messaging services to progressive non-profit organizations, labor organizations and federal and non-federal political committees, seeks to arrange for the provision of text messaging transactions as described in Advisory Opinion 201217, except that (i) wireless users would be able to contribute more than $50 per billing cycle to a federal poiiticai committee; and (ii) multiple federal political committees would share a conmion premium short code. We further request that the Commission issue an opinion within 30 days of this request in accordance with its informal practice to expedite "certain highly significant time sensitive requests." See Advisory Opinion Procedure, 74 Fed. Reg. 32160, 32162 (July 7,2009). In AO 2012-17, the Commission recognized that, "While the Commission here is determining that m-Qube's particular proposal complies with the Act, the Commission anticipates that other proposals, by m-Qube or other vendors, would provide equally viable and compliant methods of raising campaign funds through text messaging." AO 2012-17 at 7 n. 11. Revolution Messaging is submitting such a modified proposal for the Commission's consideration. Revolution Messaging strongly believes that without the modifications set out in this request, the proposal approved by the Conunission in AO 2012-17 will not, as a practical matter, enable federal political committees to make widespread use of text messaging as a means of fundraising; and will not result in achieving the benefits of expanded grassroots fundraising, the expectation of which led to wide bipartisan support for the Advisory Opinion Request in that case.
1025 VERMONT AVENUE. N.W., SUITE 300 WASHINGTON. DC 20005 TEL: (202) 479-1111 FAX: (202) 479-1115
Anthony Herman, Esq. August 6,2012 Page 2 As general background on the mechanics of text messaging, Revolution Messaging relies on the description set forth in Advisory Opinions 2010-23 and 2012-17, except as otherwise set forth in this request. I. Revolution Messaging
Revolution Messaging, a District of Columbia limited liability company that has elected to b taxed as a partnership with the Internal Revenue Service, is a full-service digital technology e and strategy company, specializing in the provision of mobile communications strategies, content, and text messaging services to progressive non-profit organizations, labor organizations, and Democratic federal and state political conmiittees and organizations. Revolution Messaging coordinates mobile messaging on behalf of its clients, providing a proprietary web-based platform allowing clients to obtain an SMS short code and customized keyword associations; allowing individual wireless users to opt in toreceiveSMS messages from the client; allowing the client to send customized messages to such wireless users; and allowing the client to maintain, analyze and m n g data provided by wireless users and datarelatingto actions taken a ae by them in the course of the text messaging program. Revolution Messaging also advises its clients on, and helps create, the content of websites, mobile applications and outgoing text messages. For provision of text messaging services. Revolution Messaging contracts with an aggregator, which, as noted in AO 2012-17, "link application providers to wireless service providers' networks." AO 2012-17 at 2 n. 1 . II. Additional Background on Common Short Codes
In order to analyze the modified proposal being put forward by Revolution Messaging, s m additional background with respect to the typology of common short codes is o e required. CTIA - The Wireless Association ("CTIA") is an incorporated non-profit trade association thatrepresentsthe wireless communications industry. One of the m n services it ay offers to m m e s is the m n g m n of common short codes ("CSCs" or "short codes") used to e br a ae e t send text messages over wireless networks. CSCs are generally five-digit numbers that can be leased by anyone interested in interacting with wireless consumers. At one level, CSCs are classified as either "premium" or "standard." "Premium" short codes are ones for which the wireless user pays a premium charge, typically monthly, in order to receive certain content. Examples of premium messaging programs include purchase of ringtones, wallpaper or screensavers; subscription to weather alerts, sports scores or daily horoscopes; and subscriptions to pornography. Any program involving a wireless user making a contribution requires use of a premium short code to process the actual contribution, because of the additional costs involved for the wireless service provider and/or aggregator. Of course, this additional capability of a premium CSC also results in increased costs to the lessee.
Anthony Herman, Esq. August 6,2012 Page 3 "Standard" short codes involve imposition of a small charge to the wireless user to send or receive regular text messages, beyond a certain data limit included in the user's monthly plan. Typically, non-profit organizations and political committees use standard short codes to communicate with supporters or members who have opted into the text messaging program of the committee or organization. A common short code may also be either "dedicated" or "shared." A "dedicated" short code is one that is assigned to a single content provider. For example, if Save the Whales has a "dedicated" short code of 12345, no other organization will be sending messages from or receiving messages addressed to that short code. A "shared" short code is one that is shared by several content providers. In the case of a shared short code, the application provider limits the keywords to which the client has access. Once CTIA leases a premium CSC to a user, as noted in Advisory Opinion Request 2010-23 (CTIA), there are four categories of companies that work together to bring CSCs to wireless users: (1) content providers, (2) application providers, (3) aggregators, and (4) wireless service providers. For purposes of the facts and analysis below, it should be noted that any political committee receiving services under this proposal will contract exclusively with Revolution Messaging. Revolution Messaging then contracts exclusively with an aggregator and does not have any direct contractual relationship with the wireless service provider. III. Proposal for Accepting Contributions in Excess of Fifty Dollars
Revolution Messaging proposes to accept contributions by text message in excess of $50 per billing period and $200 per election cycle or calendar year (as applicable) using the same structure of transactions and factoring arrangement approved in AO 2012-17, except as described below. Revolution Messaging contracts with an aggregator, which, as noted in AO 2012-17, "link applications providers to wireless service providers' networks," AO 2012-17 at 2 n. 1, and has agreed to provide the approved factoring service. As an application provider, Revolution Messaging administers the mobile communications programs of various political committees. In this role. Revolution Messaging is responsible for collecting and maintaining wireless user data, including the name, address, employer and occupation of specific wireless number users. Indeed, as an application provider's ability to effectively communicate depends on the quality of this information, ensuring the accuracy of this data is an integral component of Revolution Messaging's services.
Anthony Herman, Esq. August 6,2012 Page 4 Revolution Messaging thus has the capability, through maintenance of the records that it possesses about (i) members of membership organizations that have connected federal PACs and (ii) supporters of non-connected federal PACs w o have participated in a committee's mobile h program, to gather allrequiredaffirmations and identifytiieactual contributor of all contributions in excess of $50 per billing cycle or $200 per election cycle or calendar year (as applicable). This process will be conducted independently of the wireless carriers. Revolution Messaging therefore has the capability to implement the s m safeguards against illegal a e contributions approved in Advisory Opinion 2012-17 and ensure complete compliance with all recordkeeping andreportingrequirements for contributions exceeding $50 per billing cycle or $200 per election cycle or calendar year as applicable. Revolution Messaging thus submits that, as to the proposal below, the concems addressed by the $50 monthly cap that the Commission approved in Advisory Opinion 2012-17 would be obviated and the cap itself would become unnecessary for complying with the Act and Commission regulations. Revolution Messaging engages various methods to collect and maintain wireless user data, including via a mobile-friendly webform completed by the wireless user when opting in to receive text messages. Therefore, as aresultof Revolution Messaging's current work for and with its political conunittee clients, as a general rule. Revolution Messaging will already possess the information required under the reporting and recordkeeping requirements of 2 U.S.C. 432(c) for text message contributors. As explained in m-Qube I, due torestrictionsimposed by wireless carriers ($10 or $20 per transaction limit), no wireless user's initial contribution willresultin a contribution which may not be treated as an anonymous contribution. Prior to reaching either the $50 per billing cycle cap or the $200 aggregate cap, a wireless user must have m d at least 2 previous text ae message contributions. To obtain contributor information, Revolution Messaging will, at a minimum, request all contributors to submit their information on a webform. When a contribution is initiated by a wireless user w o texts a unique keyword to a short code. Revolution Messaging will generate an h affirmation statement containing the s m information contained in the affirmation statement a e proposed by m-Qube in AO 2012-17, Supplemental Information (June 6,2012) at 4 (for example, "Reply YES to give $20 to Shoemakers Federal PAC & certify ur 1 + & donating with 8 ownftinds,not foreign national or Fed contractor, http://rev.ms/terms Msg&Data Rates May Apply). If the wireless user responds in the affirmative, the contribution will be appropriately processed by the wireless carrier, aggregator and application provider.
Anthony Herman, Esq. August 6,2012 Page 5 The application provider, here Revolution Messaging, will then send a confirmation text which will thank the contributor and request the contributor to provide the information required pursuant torecordkeepingandreportingrequirements of the FECA and Commission regulations via text message conversation or by completing a webform. Specifically, Revolution Messaging proposes the following language for the confirmation texts which are limited to 160 characters: Thanks for contributing! To m k best efforts to comply with fed law we need more info. Visit ae httD://rev.ms/info or reply OK. or Thnx for contributing! Fed lawreqsbest effort 2 get&report name, address, employer&occupation 4 political contributions. Visit littp://rev.ms/info or reply OK. Responses to a confirmation text will not subscribe the contributor to any list. Both the webform and the text message script will include the following attestation statements, very similar to those proposed by CTIA in 2010-23 (CTIA-Il): By checking this box, I confirm that the following statements are true and accurate: 1. Contributions m d by text message from this wireless phone will be paid for with ae my personal, unreimbursed funds, and not those of another. 2. Contributions m d by text message from this wireless phone will not be m d by a ae ae corporation, labor organization, or other person paying my wireless bill. 3.1 am not a Federal government contractor. 4.1 am not a foreign national who lacks permanent resident status in the United States. 5.1 am at least 18 years of age. In addition, the webform and text message script will collect the contributor's name, address, employer and occupation and cellular telephone number. In addition, the webform or text message script will notify the contributor that the committee isrequiredto collect this information in accordance with 11 C.F.R. 104.7(b) and will contain any other necessary disclaimers. See e.g.. 1 C.F.R. S 102.5(ay2y 1 Revolution Messaging proposes to use data provided on this webform or by text message and its existing data to identify contributors. Revolution Messaging will allow contributors for which it has, at minimum, contributor n m and address, to contribute in excess of $50 per a e billing cycle and $200 or more per election cycle or calendar year (as applicable). Revolution Messaging will then provide this information to its political committee customers.
Antiiony Herman* Esq. August 6,2012 Page 6 Revolution Messaging will work exclusively with the aggregator to block all contributions in excess of $50 per billing cycle of wireless carrier or of $200 or more during an election cycle or calendar year (as appropriate) for which Revolution Messaging does not have contributor nam and address. In response to an attempted contributionfiroma wireless number e which has not completed the form or text messaging script asrequestedand for which Revolution Messaging does not possess the contributor n m and address. Revolution Messaging a e will inform the wireless user, via text, that additional contributions are not permitted unless the contributor completes the webform orrespondto the appropriate text message. Once the contributor completes the webform or text message script. Revolution Messaging will immediately enable that wireless user to make additional text message contributions. In addition, Revolution Messaging will work with the political committee to quickly combine contributor information obtained through text contributions to ensure that contributors, whose contributions aggregate in excess of $200, whether by text messaging or other modes such as check or credit card, are properly disclosed on committee reports. Of course. Revolution Messaging will block contributions in excess of $2,500 per election and in excess of $5,000 or $10,000 per calendar year (as applicable). The proposals comply with therecordkeepingand reporting requirements established by the Commission and the FECA by ensuring that contributions to individual federal committees will be properly accounted for, correctly attributed to the contributor, and, if the contributor is unknown, capped at $50 per billing cycle and $200 per election cycle or calendar year (as applicable), and if the contributor is known, capped at the applicable contribution limit. Advisory Opinion 2012-17 (m-Qube I) (distinguishing the permissible m-Qube proposal from the impermissible CTIA proposal due to ' t e attestations, the $50 cap, and the factoring *h arrangement" offered by m-Qube). IV. Proposal for Use of Shared Premium Short Codes
The specific proposal by m-Quberequiredeach political committee client to agree to "operate one and only one short code exclusively for its contributions." Advisory Opinion Request 2012-17 (m-Qube I). Advisory Opinion 2012-17 noted that m-Qube proposes to add special terms to contracts with political committees, such as "each political committee customer mustreceivecontributions through a single short code per election, with m-Qube as the exclusive provider of services for that short c d , in other words, that each political committee o e" must obtain and use a dedicated premium short code. Thisrequirementwill m k it impossible, ae as a practical matter, for the vast majority of federal political committees to avail themselves of text messaging to receive contributions, for two basic reasons.
^ Revolution Messagingrepresentsthat there will b m r than sufllcicnt lime to m r e text m s a e contributor information with other e oe eg es g committee donor information tofileaccuratereportsrequiredby the Commission in a timely m n e and to ensure that any donor docs not m k a nr ae an excessive contribution to the committee. Sec 1 C.F.R. 103.3(b). 1
Anthony Herman, Esq. August 6,2012 7 First, obtaining a dedicated short code is extremely expensive. Short codes are leased for three month minimum periods, but commonly there is litde use during thefirstthree months until the code can be promoted. The typical lease cost is either $500 (code picked at random) or $1,000 (vanity) per month. In addition, the application provider (and thus its client) must pay an additional set-up fee to the carrier, of about $2,000. Aggregators and application providers also charge an additional $1,000 to $2,000 for the work involved in applying for the short code, connecting it, programming it, testing keywords and getting the coderegistered.In all, obtaining a dedicated short code can cost up to $10,000 or a minimum of $6,000. Second, obtaining a dedicated short code is time consuming. It typically takes anywhere from 8 to 1 weeks to apply for and obtain a dedicated short code. Campaigns that decide to 2 utilize text messaging to solicit contributions will thus be unable to do so for a large part of the campaign cycle. Thus, given the a o n of contributions likely to be received through text messaging, it mu t would simply not beremotelyworth the cost for any political committee other than, perhaps, a major party presidential campaign or national party committee, to obtain a dedicated short code in order to avail themselves of the contribution by text messaging system approved in AO 201217. Furthermore, the use of a unique short code does not play any significant role in ensuring that contributions are compliant, as the contribution process must consist of several steps that are based on keyword and short code to provide the necessary safeguards. In other words, as described below, in order for a contribution to be processed, it must use both a keyword and short code combination and have a reply to an exact kejrword as the only way possible to m k a ae contribution. This contribution process includes additional steps based on the keyword messaging attached to the short code including 1) the use of a keyword to identify the unique client that the contribution is to be attributed to and the amount of the donation; 2) a message out to the contributor seeking confirmation that they are eligible to m k the contribution, verifying ae thatfimdswill b charged to their phone bill andrequestingthat they visit a webform to provide e additional information or to provide the information through a text message script; and 3) a reply message from the contributor confirming their eligibility and that they acknowledge the contribution will comefi'omtheir phone bill. A transaction cannot occur and no funds will ever be drawn without this full keyword to short code process and confirmation. Additionally, the end user's response to a short code m s a in which they provide the initial ke3^ord will be e s ge time and date stamped for auditing purposes.
Anthony Herman, Esq. August 6,2012 Page 8 For thisreason,Revolution Messaging proposes to offer a service that would allow multiple federal political conunittees to share one premium short code for purposes of processing contribution transactions. It is common practice for content providers and aggregators to offer this sharing arrangement to other similar entities, such as non-profit organizations. However, under this proposal, no entities other than federal political committees would b allowed to share e the one premium short code. In addition. Revolution Messaging will notify all federal committees that the premium short code is being shared with other federal committees.^ It is not necessary for each political committee to use its own dedicated short code in order to ensure that, as required by AO 2012-17, trailing payments are associated with a particular political committee or to ensure that contributions are segregatedfiomcorporate treasuryfimds.(AO 2012-17 at 5). To ensure that contributions can be associated with a single political committee, when a shared short code is utilized. Revolution Messaging will assign each committee sharing a short code one or more unique keywords. Keywords m y be associated with specific contribution a amounts and specific individual committees sharing a short code. For instance, a wireless user may text GIVESHOE to 675309 to contribute $10 totiieShoemakers' Union federal PAC and DONATEWHALES to 675309 to contribute $20 totiieSavetiieWhales federal PAC. CTL\ references this ability to link short codes to particular committees in their most recent Advisory Opinion Request, AOR 2012-28 at 3 ( t e [mobile-originated] text message include[s] a "h keyword that is linked to a specific text message campaign"). It should be noted that an essential element of this proposal- and a key element that makes it affordable and practical for federal campaigns and c m it e is that the outgoing o mte s messagefioma federal political committee to a supporter or m m e may be transmitted from e br either a dedicated or shared standard short code. That message would then ask the wireless user to "Text DONATE to 675309 to give $20 totiieShoemakers Federal PAC," where 675309 is the shared premium short code. An affirmation statement, such as the one proposed by m-Qube in AO 2012-17 Supplemental Information (June 4,2012) at 4, containing the amount of the contribution and the n m of the recipient committee will be immediately generated by Revolution Messaging based a e on the unique keyword. If the contributor confirms therecipientinformation, a charge will be added to the contributor's wireless bill. Revolution Messaging and the aggregator receive this information in real-time and will inunediately assign this transaction to an individual political committee's account based on the unique keyword. This funds-sorting mechanism, which the aggregator and Revolution Messagingregularlyemploy with all of their customers' fimds, will ensure that political contributions are properly accounted for and that neither the aggregator's nor Revolution Messaging's treasury funds will b inadvertently transmitted to political e committees.
' Revolution Messaging expects to sign a exclusive contract with political committee so that it is the only provider of text messaging n s fundraising services to t e committee. Therefore, during any period w e e a comminee e g g s in fundraising via Revolution Messaging's h hr nae services, it will not b permitted to contract with any other provider, including any aggregator or wireless service provider for such services. e Therefore, the committee would nol, a a practical matter, have access to any premium short code other than the one being utilized by Revolution s
Antiiony Herman, Esq. August 6,2012 Page 9 Further, the trailing payments m d by the aggregator will b determined based on the ae e outcome of individual transactions associated with a unique keyword on a shared short code and not the short code itself. In essence, a unique keyword also ensures compHance with the segregation andrecordkeepingrequirements. With this compliance information, and unique keywords. Revolution Messaging will also b able to block a phone number from making contributions in excess of the appropriate limits to e a specific committee, even if that committee shares a premium short code. Limiting each shared short code to b shared only by federal political committees ensures e that contributions will be segregatedfromcorporate treasury funds, to the exact s m extent as in a e the proposal approved in AO 2012-17. For thesereasons.Revolution Messaging requests confirmation that use of a shared premium short code for receiving contributions by multiple federal political committees will comply with the Act and the Commission's rules. For the reasons set forth above, the Commission should conclude that the proposals provided by Revolution Messaging comply with the Act and the Commission's rules and issue an advisory opinion approving these proposals. Sincei$l5^ours,
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Joseph E. Sandler Neil P. Reiff Elizabeth L. Howard Attorneys for Revolution Messaging, LLC.
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RE: Advisory Opinion Request Neil P. Reifif to: TLutz@fec.gov 08/07/2012 05:37 PM Cc: "kdeeley@fec.gov", "ARothstein@fec.gov" Hide Details From: "Neil P. ReifP' <reiff@sandlerreiff.com> To: "TLutz@fec.gov" <TLutz@fec.gov>, Cc: "kdeeley@fec.gov" <kdeeley@fec.gov>, "ARothstein@fec.gov" <ARothstein@fec.gov> Your understanding of our questions is correct. Neil P. Reiff Sandler, Reiff, Young & Lamb, P.G. 1025 Vermont Ave., NW Suite 300 Washington, D.C. 20005 w. (202)479 - 1111 f. (202)479 - 1115 This message is intended only for the use of the individual or entity to which it is addressed and may contain information that is privileged, confidential and exempt from disclosure. If the reader of this message is not the intended recipient or any employee or agent responsible for delivering the message to the intended recipient, you are hereby notified that any dissemination, distribution, or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by email. Thank you for your cooperation. IRS Circular 230 Disclosure: To ensure compliance vyn'th requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
From: TLutz@fec.gov rmailto:TLutz@fec.aovl Sent: Tuesday, August 07, 2012 5:28 PM To: Neil P. Reiff Cc: kdeeley@fec.gov; ARothstein@fec.gov Subject: Advisory Opinion Request Dear Mr. Reiff In our recent telephone conversation, you provided additional information regarding your August 6, 2012, letter on behalf of Revolution Messaging, LLC. We have set out below our understanding of the information provided during the conversation. Please either confirm the accuracy of this statement or correct any misperceptions. Revolution Messaging requests an advisory opinion from the Federal Election Commission as to two questions: 1. Does the proposal to enable the processing of contributions by text message to a political committee in
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excess of $50 per billing cycle and $200 per calendar year or election cycle, as applicable, comply with the recordkeeping and reporting provisions of the Act and Commission regulations? 2. Does the proposal to use a shared premium short code by multiple Federal political committees to process contributions by text message comply with the Act and Commission regulations? Please respond by email. Your response may be treated as a supplement to your letter requesting an advisory opinion; as such, it may be placed on the public record. Thank you for your cooperation.
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August 14, 2012 CERTIFIED MAIL RETURN RECEIPT REQUESTED ADVISORY OPINION 2012-28 Jan Witold Baran, Esq. Caleb P. Burns, Esq. Wiley Rein LLP 1776 K Street NW Washington, DC 20006 Dear Messrs. Baran and Burns: We are responding to your advisory opinion request on behalf of CTIA The Wireless Association (CTIA) and its member wireless service providers, concerning the application of the Federal Election Campaign Act (the Act) and Commission regulations to the proposal to process contributions by text message. The Commission concludes that the proposal is consistent with the Act and Commission regulations. Background The facts presented in this advisory opinion are based on your letter received on July 3, 2012, the supplement that you provided on July 26, 2012, and the comment you submitted on August 13, 2012. Certain facts have also been incorporated from Advisory Opinion 2012-17 (Red Blue T LLC, ArmourMedia, Inc., and m-Qube, Inc.) (m-Qube I), Advisory Opinion 2012-26 (Cooper for Congress, ArmourMedia, Inc., and m-Qube, Inc.) (m-Qube II), and Advisory Opinion 2010-23 (CTIA The Wireless Association) (CTIA I), as well as the supplements and comments received in connection with Commission consideration of those requests. CTIA is an incorporated nonprofit trade association that represents the wireless communications industry. Members of CTIA include wireless service providers and their suppliers, as well as providers and manufacturers of wireless data services and products.
AO 2012-28 Page 2 CTIA, through its Common Short Code Administration (the Code Administration), manages and oversees the technical and operational aspects of common short codes. 1 The Code Administration leases short codes, administers their registration, and maintains a public database of short codes, available at www.USShortCodes.com. The Code Administration also works with wireless service providers, connection aggregators, application providers, and content providers to enable use of short codes. Wireless service providers are the companies from which customers purchase their mobile phone service. Content providers are organizations that use short codes to disseminate content to, or collect information or funds from, mobile phone users. Application providers convert text messages received through the code into data that can be interpreted and used by content providers. Connection aggregators link content providers, service providers, application providers, and users together. Current and Proposed Practices CTIA and the wireless service providers intend to follow their normal and usual commercial practices for issuing and administering short codes for use by political committees and for processing political contributions. 2 To lease a short code, a prospective code holder must first establish an account at www.USShortCodes.com and apply for a short code. Account holders are often connection aggregators and application providers who lease short codes on behalf of their content provider clients. The application for a short code must include several pieces of information, such as the identities of the content provider, connection aggregator, and service provider conducting the campaign; a description of the campaign, such as whether it is charitable or political; estimated message volumes; and samples of marketing materials. The Code Administration reviews each application to make sure it includes all necessary information and confirms the identity of the content provider. The Code Administration does not, however, organize or process a content providers identity as an individual, corporation, or other type of organization or entity, or by the content providers nationality (U.S. or foreign). Nor does the Code Administration have a way to determine whether an applicant for a short code will use a factoring arrangement. 3 CTIA does not monitor whether content providers register multiple short codes.
A common short code is a five- or six-digit number to which wireless users can send text messages to access mobile content.
CTIA incorporates by reference the facts of Advisory Opinion 2010-23 (CTIA The Wireless Association) and Advisory Opinion 2012-17 (m-Qube I). CTIA and the wireless service providers are examining how they may permit contributions by text message consistent with their current business practices and those advisory opinions. The Commission approved the use of factoring arrangements for contributions by text message in Advisory Opinion 2012-17 (m-Qube I). Factoring is a financial transaction in which an entity (such as a political committee) sells its accounts receivable to a third party (such as a connection aggregator) at a discount in exchange for receiving a percentage (or factor) of its outpayment on an expedited basis. More information on factoring appears in Advisory Opinion 2012-17 (m-Qube I).
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AO 2012-28 Page 3 Once the Code Administration issues a short code, the short code is included in a text message campaign proposal that is submitted to wireless service providers for their review and approval. This process is known as provisioning. 4 Wireless service providers determine whether to accept a text message proposal by measuring it against their own established business requirements, and they propose to establish objective business criteria that are specific to political contribution text messaging campaigns. The wireless service providers may decide, due to commercial considerations, to accept proposals from some political committees and not others. Alternatively, the wireless service providers may decide that it would not be in their commercial interest to participate in the political fundraising process and refuse participation by all political committees. If a wireless service provider approves a proposed text messaging campaign, the wireless service provider and the connection aggregator serving the content provider enter into a contract that governs that text message campaigns rates and terms. 5 Although the rates and terms in these agreements are confidential, the wireless service providers plan to charge political committees their normal and usual commercial rate. These rates are determined by commercial factors, including, among other things, the dollar amounts of the transactions and the number of transactions made. Wireless service providers also incorporate into their agreements with connection aggregators industry standards for consumer best practices and each wireless service providers own consumer protection standards. CTIA and wireless service providers monitor compliance with these contracts throughout the course of a text message campaign. CTIA and wireless service providers intend to use these same standards and requirements in connection with text message campaigns used to process political contributions and not to deviate from those standards. 6 In a typical mobile-originated short code transaction, a wireless user who wishes to initiate a transaction texts a predetermined word or phrase to a short code. For example, in the aftermath of the 2010 earthquake in Haiti, individuals pledged $10 donations to the Red Cross by texting HAITI to code 90999. The connection aggregator sends a reply text message to the wireless user, requesting confirmation that the user wishes to engage in the transaction. Once a user has confirmed his or her intent to conduct the transaction, the user has completed the optin process, and the users wireless service provider will place a charge on the next bill associated with that users phone number.
Similar to the process for leasing short codes, application providers and connection aggregators, rather than content providers, take the lead in monitoring a proposals progress during provisioning. A connection aggregator typically enters into a single contract with each service provider that governs many or all of the text message campaigns that the aggregator services. CTIA monitors text message campaigns compliance with the industrys consumer best practice standards. It reviews advertising materials used by content providers to promote their campaigns and also signs up for text messaging campaigns to review the text messages themselves. If it discovers that a campaign has failed to comply with these standards, CTIA issues a Program Violation Notice to the connection aggregator and content provider. If unresolved, CTIA may freeze the campaigns account. Wireless service providers also monitor compliance with industry standards and their own contracts.
AO 2012-28 Page 4 Some of CTIAs member wireless service providers plan to enter into agreements with connection aggregators that plan to operate consistent with the plan of mQube set forth in Advisory Opinion 2012-17. Because wireless service providers propose to use only their customary business practices, they cannot guarantee that users will contribute only $50 or less per month to a single political committee or otherwise account for mobile phone numbers that have incurred $200 in charges to a political committee in a calendar year. Moreover, although wireless service providers maintain records of their subscribers names, addresses, and the phone numbers of the wireless users associated with each account, they do not organize or process subscriber information based on a subscribers status as an individual, corporation, or other type of organization or entity, or by the subscribers nationality. Wireless service providers do not propose to alter these business practices when processing contributions made by text message because, they assert, doing so would not be practicable or workable. Wireless service providers typically forward payments to connection aggregators about seven to ten days after receiving payments from subscribers. Connection aggregators accumulate all funds designated for a specific recipient from all wireless service providers over a 30-day period before forwarding the collected funds to the content providers. Wireless service providers and connection aggregators deduct fees from these payments; thus, the amount ultimately received by content providers is smaller than the amount paid by the wireless subscriber. In general, wireless service providers and connection aggregators reconcile their accounts with each other every 30 days. Each financial transaction is associated with the mobile phone number that completed the opt-in resulting in the charge. During the reconciliation process, wireless service providers deduct fees owed to them by connection aggregators and any refunds that the wireless service providers may have made to their subscribers. 7 A wireless service provider may also delay or suspend a disbursement to a connection aggregator for commercial reasons provided for in its contract with the connection aggregator. Once a wireless service provider disburses funds, the connection aggregator will have access to information detailing the amounts associated with the reconciliation of each financial transaction and the accompanying mobile phone number. Questions Presented 1. Who is responsible for determining the eligibility of a contributor? 2. Who is responsible for ensuring compliance with (1) the $50 monthly limit on contributions; (2) the recordkeeping obligations for contributions in excess $200; (3) the limitation of one short code per campaign? 3. Would deviations from normal business practices constitute in-kind political contributions?
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Wireless service providers typically maintain liberal repudiation policies and may refund payments as business reasons warrant (e.g., claim that a payment was not properly authorized by the wireless subscriber). Advisory Opinion 2012-17 (m-Qube I).
AO 2012-28 Page 5 4. May wireless service providers establish criteria for determining eligibility for these campaigns or are wireless service providers obligated to make these programs available to every political candidate and/or committee? 5. Does anything in Advisory Opinion 2012-17 (m-Qube I) require changes in the way wireless service providers process payments to connection aggregators? Legal Analysis and Conclusions 1. Who is responsible for determining the eligibility of a contributor? 2. Who is responsible for ensuring compliance with (1) the $50 monthly limit on contributions; (2) the recordkeeping obligations for contributions in excess of $200; (3) the limitation of one short code per campaign? CTIA and the wireless service providers are not responsible for determining the eligibility of a contributor or for ensuring compliance with (1) the $50 monthly limit on contributions; (2) the recordkeeping obligations for contributions in excess of $200; or (3) the limitation of one short code per campaign. Such responsibilities rest with political committees. The Act and Commission regulations impose certain requirements on treasurers of political committees. A treasurer of a political committee must keep an account of (1) all contributions received by or on behalf of such political committee; (2) the name and address of any person who makes any contribution in excess of $50, together with the date and amount of such contribution by any person; [and] (3) the identification of any person who makes a contribution or contributions aggregating more than $200 during a calendar year, together with the date and amount of any such contribution. 2 U.S.C. 432(c)(1)-(3); see also 11 CFR 110.4(c). Commission regulations also state that [t]he treasurer shall be responsible for examining all contributions received for evidence of illegality and for ascertaining whether contributions received, when aggregated with other contributions from the same contributor, exceed the [Acts] contribution limitations. 11 CFR 103.3(b). The Act and Commission regulations impose comparatively fewer obligations on persons who receive and forward political contributions than on political committees. Compare 2 U.S.C. 432(b) (requiring persons who receive contributions for political committees to forward the contributions and certain information to the political committees treasurers within either ten or 30 days) with 2 U.S.C. 432(c) (recordkeeping requirements) and 2 U.S.C. 433 (filing requirements) and 2 U.S.C. 434(a)-(b) (reporting requirements). The connection aggregator in Advisory Opinion 2012-17 (m-Qube I) planned to (1) limit contributions to the political committee from any mobile phone number to $50 per month, (2) provide each political committee with access to information that would permit it to identify phone numbers associated with contributions aggregating $200 or more, and (3) require the political committee to agree to receive contributions through a single short code per election cycle.
AO 2012-28 Page 6 CTIA and the wireless service providers do not propose to monitor the activity of connection aggregators to ensure that such activity conforms to Advisory Opinion 2012-17 (mQube I). Instead, CTIA proposes to issue short codes for use by political committees just as it assigns short codes for use in comparable commercial text message campaigns. The wireless service providers also propose to use their normal and usual commercial practices when processing political contributions by text message. These practices do not include organizing or processing subscriber information based on a subscribers status as an individual, corporation, or other type of organization or entity, or by the subscribers nationality. Nor do they enable wireless service providers to guarantee that mobile phone users will not contribute to a political committee more than $50 per month or $200 or more in a calendar year or election cycle. The Commission has considered similar plans in prior advisory opinions. Advisory Opinion 1978-68 (Seith for Senate Committee), for example, was the first advisory opinion in which the Commission concluded that contributions by credit card are permissible under the Act. 8 The Commission predicated its conclusion on two explicit assumptions: first, that the credit card issuers will follow their usual and normal collection procedures with respect to obtaining payment from persons who used their credit cards to make political contributions; and second, that the credit card issuers would render their services in the ordinary course of business and receiv[e] the usual and normal charge for their services. Advisory Opinion 1978-68 (Seith for Senate Committee). More recently, in Advisory Opinion 2009-32 (Jorgensen), the Commission concluded that a vendor could provide emails to political committees to use in fundraising without making a contribution, so long as the vendor performed the service at a commercially reasonable rate. Although the vendor provided the political committees with the means to raise contributions, the vendor was not responsible for ensuring that the political committee complied with the Act and Commission regulations when doing so. The Commission stated that the political committee will bear the burden of ensuring that solicitation emails are not sent to prohibited sources, such as foreign nationals, corporations, labor organizations, or federal contractors, and that all required disclaimers are included in the text of the emails. Advisory Opinion 2009-32 (Jorgensen) (emphasis added). Even when the vendor collected contributions on behalf of the political committee, the Commission concluded that the political committee, not the vendor, is responsible for determining the legality of contributions, as well as determining whether contributions, when aggregated with other contributions from the same contributors, exceed the contribution limit. Id. The Commission stated in Advisory Opinion 2010-23 (CTIA I) that wireless service providers had certain responsibilities for ensuring the permissibility of contributions made by text message, such as the responsibility to forward to a recipient political committee the information required by 2 U.S.C. 432(b) and (c) to ensure that the political committee could meet its obligations under the Act and Commission regulations if evidence in the wireless subscribers monthly bill contradicted the users certification of eligibility to make contributions. The Commission determines here that these requirements do not apply when contributions by text
The processing of contributions by text message for political committees is similar to how credit card contributions are handled. Advisory Opinion 2012-17 (m-Qube I).
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AO 2012-28 Page 7 message are processed by a connection aggregator pursuant to the terms of Advisory Opinion 2012-17 (m-Qube I). See also Advisory Opinion 2012-26 (m-Qube II) (As between m-Qube [a connection aggregator], the [wireless] carriers, and the Committee [an authorized committee receiving contributions via text message under contract with m-Qube], the Committee is solely responsible for determining the eligibility of its contributors.). In sum, CTIA and the wireless service providers provide political committees with the means to raise contributions by text messaging, but it is the political committees that are solely responsible for ensuring that the contributions are lawful under the Act and Commission regulations. CTIA and the wireless service providers are therefore not responsible for determining the eligibility of a contributor or for ensuring compliance with (1) the $50 monthly limit on contributions; (2) the recordkeeping obligations for contributions in excess of $200; and (3) the limitation of one short code per campaign. 3. Would deviations from normal business practices constitute in-kind political contributions? Yes, deviations from normal business practices could constitute in-kind contributions, where CTIA and the wireless service providers provide such a discount to a political committee as a result of preferential treatment outside of a business relationship; CTIA and the wireless service providers proposal, however, would not result in their making an in-kind contribution. The Act and Commission regulations prohibit corporations from making a contribution in connection with a Federal election. See 2 U.S.C. 441b(a); 11 CFR 114.2(b)(1). A contribution includes any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office. 2 U.S.C. 431(8)(A)(i); 11 CFR 100.52(a); see also 2 U.S.C. 441b(b)(2); 11 CFR 114.2(b)(1). Anything of value includes all in-kind contributions, including the provision of goods or services without charge or at a charge that is less than the usual and normal charge. See 11 CFR 100.52(d)(1). Usual and normal charge is defined as the price of goods in the market from which they ordinarily would have been purchased at the time of the contribution, or the commercially reasonable rate prevailing at the time the services were rendered. See 11 CFR 100.52(d)(2). Each wireless service provider determines the rate it will charge to process payments made in text messaging campaigns based on its own usual and normal commercial criteria. These factors can include, for example, the dollar amounts of the transactions and the number of transactions made. Wireless service providers intend to charge their normal and usual commercial rates when processing political contributions by text message and not to deviate from those rates. Wireless service providers also incorporate in their agreements with connection aggregators the industry standards for consumer best practices and other consumer protection requirements. CTIA monitors compliance with these standards. CTIA and the wireless service providers intend to enforce the same standards and requirements against text message campaigns used to process political contributions and not to deviate from those standards.
AO 2012-28 Page 8 The Commission concludes that the requestors proposal to charge their usual and normal commercial rates for processing contributions by text message would not result in the provision of services at less than the usual and normal charge or the provision of a gift . . . of . . . anything of value to political committees that receive contributions by text message. The Commission reaches the same conclusion with respect to the requestors proposal to apply and enforce the same standards and requirements against political committees that they apply and enforce against other commercial campaigns. A change in business practices or rates would not necessarily result in an in-kind contribution. A political committees purchase of goods or services at a discount does not result in a contribution if the discounted or complimentary goods were available to others on equal terms or as part of a pre-existing business relationship. Advisory Opinion 1994-10 (Franklin National Bank); see also Advisory Opinion 2006-01 (Pac for a Change) (approving a bulk purchase of books at a discount because the items [were] made available in the ordinary course of business and on the same terms and conditions offered to the vendors other customers that are not political committees). A corporation may not, however, provide a discount to a political committee where a political committee [is] accorded preferential treatment different from other customers, or the treatment [is] outside of a business relationship. Advisory Opinion 1994-10 (Franklin National Bank); see also Advisory Opinion 1991-23 (Retail Druggists) (corporation may not provide a car for a political committee to use as a raffle prize because doing so would violate 2 U.S.C. 441b). 4. May wireless service providers establish criteria for determining eligibility for these campaigns or are wireless service providers obligated to make these programs available to every political candidate and/or committee? The eligibility criteria proposed by the wireless service providers are consistent with the Act and Commission regulations. Wireless service providers propose to establish objective business criteria that are specific to political contribution text messaging campaigns. They may decide, for commercial reasons, to accept only proposals from some political committees and not others. A vendor may establish and apply eligibility criteria to political committees in order to protect the commercial viability of the vendors program. In Advisory Opinion 2006-34 (Working Assets, Inc.), the Commission approved an affinity program that a corporate vendor proposed to make available subject to each particular programs commercial viability, determined by common commercial principles, including, for example, size of membership and hence number of potential customers, potential for long-term customer commitment, strength of trademark, and credit rating of membership. Further, in finding the program to be commercially reasonable, the Commission assume[d] that the commercial viability of the vendors relationship with each political committee would stand or fall on its own, and thus that the vendor would not depend on profitability from its relationship with other [non-political committee] clients to sustain the arrangement with a particular [political] committee sponsor. Id. (emphasis added).
AO 2012-28 Page 9 Similarly, just as in Advisory Opinion 2006-34 (Working Assets, Inc.), where Working Assets proposed to develop eligibility criteria based upon common commercial principles, CTIA and the wireless service providers also propose to develop eligibility criteria based upon commercial considerations. Accordingly, the Commission concludes that the wireless service providers may establish such commercial eligibility requirements. 5. Does anything in Advisory Opinion 2012-17 (m-Qube I) require changes in the way wireless service providers process payments to connection aggregators? No, nothing in Advisory Opinion 2012-17 (m-Qube I) requires changes in the way that wireless service providers process payments to connection aggregators. In their ordinary course of business, wireless service providers typically issue refunds to wireless service subscribers if business reasons warrant (such as if the subscriber disputes a charge on a bill), and these refunds may reduce the service providers payments to connection aggregators. Wireless service providers may also terminate, delay or suspend payments to enforce their agreements with connection aggregators. In Advisory Opinion 2012-17 (m-Qube I), the Commission acknowledged that wireless service providers have liberal repudiation policies for text message charges disputed by their subscribers, and could adjust (reduce) their payments to aggregators after the aggregators have made factored payments to political committees. The Commission nonetheless approved m-Qubes proposal to make factored payments to a political committee, because of the safeguards against corporate contributions that m-Qube had built into its business model. Id. The Commission sees no reason to reconsider that determination here. Thus, nothing in Advisory Opinion 2012-17 (m-Qube I) requires wireless service providers to change the way that they process payments to connection aggregators including when aggregators employ factoring arrangements with participating political committees. See also Advisory Opinion 1978-68 (Seith for Senate Committee). This response constitutes an advisory opinion concerning the application of the Act and Commission regulations to the specific transaction or activity set forth in your request. See 2 U.S.C. 437f. The Commission emphasizes that, if there is a change in any of the facts or assumptions presented, and such facts or assumptions are material to a conclusion presented in this advisory opinion, then the requestors may not rely on that conclusion as support for its proposed activity. Any person involved in any specific transaction or activity which is indistinguishable in all its material aspects from the transaction or activity with respect to which this advisory opinion is rendered may rely on this advisory opinion. See 2 U.S.C. 437f(c)(1)(B). Please note that the analysis or conclusions in this advisory opinion may be affected by subsequent developments in the law, including, but not limited to, statutes, regulations, advisory
AO 2012-28 Page 10 opinions, and case law. The cited advisory opinions are available on the Commissions website, www.fec.gov, or directly from the Commissions Advisory Opinion searchable database at http://www.fec.gov/searchao. On behalf of the Commission, (signed) Caroline C. Hunter Chair
August 14, 2012 CERTIFIED MAIL RETURN RECEIPT REQUESTED ADVISORY OPINION 2012-26 Craig Engle, Esq. Brett G. Kappel, Esq. Arent Fox LLP 1050 Connecticut Avenue, NW Washington, DC 20036-5339 Mr. Robert A. Davidson, Treasurer Cooper for Congress 223 Rosa L. Parks Blvd. #206 Nashville, TN 37203 Dear Messrs. Engle, Kappel & Davidson: We are responding to your advisory opinion request on behalf of Cooper for Congress (the Committee), m-Qube, Inc. (m-Qube), and ArmourMedia, Inc., concerning the application of the Federal Election Campaign Act (the Act) and Commission regulations to the proposed receipt and processing of contributions by text message. The Commission concludes that the proposal is consistent with the Act and Commission regulations. Background The facts presented in this advisory opinion are based on your letter received on July 18, 2012 and supplemental information that you provided on July 24 and August 2, 2012. Certain facts have also been incorporated from Advisory Opinion 2012-28 (CTIA The Wireless Association) (CTIA II), Advisory Opinion 2012-17 (Red Blue T LLC, ArmourMedia, Inc., and m-Qube, Inc.) (m-Qube I) and Advisory Opinion 2010-23 (CTIA The Wireless Association) (CTIA I), as well as supplements and comments received in connection with Commission consideration of those requests. The Committee is the principal campaign committee of Representative Jim Cooper. Representative Cooper is a candidate in his partys August 2, 2012, primary election to represent Tennessees Fifth Congressional District. The Committee intends to receive contributions by
AO 2012-26 Page 2 text message for the primary and general elections. M-Qube is an aggregator of business-toconsumer messaging and merchant billing for public wireless service providers. ArmourMedia is a political and media consulting firm that advises and represents political committees. 1. Industry Overview Text message transactions typically involve a number of commercial entities. The Common Short Code Administration (the Code Administration), a component of CTIA The Wireless Association, oversees the technical and operational aspects of short codes. 1 The Code Administration leases short codes, administers their registration, and maintains a public database of short codes, available at www.usshortcodes.com. As part of its leasing process, the Code Administration requires that applicants provide identity information. CTIA commonly reviews applicants to verify that an applicants corporate address and leadership match those in incorporation documents and searches for any adverse regulatory or litigation history. 2 In addition to leasing short codes through the Code Administration, CTIA is also responsible for compiling and publishing industry best practices designed to protect consumers from deceptive marketing and to preserve its members business interests. CTIA also assists in monitoring compliance with these standards. Wireless service providers 3 are the companies from which subscribers purchase their mobile phone service. Content providers, such as the Committee, are typically vendors that use short codes to disseminate content to, or collect information or funds from, wireless users. Connection aggregators, such as m-Qube, link content providers, service providers, and users together. M-Qube operates direct interconnection gateways with all of the nations major public wireless service providers. Typically, a wireless user initiates a text message transaction by texting a predetermined word or phrase to a short code. For example, in the aftermath of the 2010 earthquake in Haiti, individuals texted the word HAITI to Code 90999 to make ten dollar donations to the Red Cross. The connection aggregator then sends a reply text message that asks the user to confirm his or her desire to engage in the specific transaction. Once confirmation has been received, the user has completed the opt-in process and a charge will appear on the next wireless bill associated with that wireless users phone number. A wireless service provider will generally forward payment to the connection aggregator about seven to ten days after receiving it. A connection aggregator generally accumulates all funds designated for a specific content provider from all wireless service providers over a 30-day period before forwarding the accumulated funds to the content provider in this example Red Cross. Both the wireless service provider
1
A common short code is a five- or six-digit number to which wireless users can send text messages to access mobile content. The requestors expect that, in the case of political committees, CTIA will review Commission records to verify committee treasurers and addresses and search for adverse regulatory history. The requestors also expect that, in the course of reviewing the Committees application for a short code, CTIA may contact the Committees treasurer, rather than directly contact Representative Cooper. The Commission understands the terms wireless service providers, wireless carriers, carriers, and network operators as used in the request to refer to wireless service providers.
AO 2012-26 Page 3 and the connection aggregator deduct fees from the payment; thus, the amount received by the content provider is less than the amount paid by the wireless subscriber. Wireless service providers maintain records of their wireless subscribers names and addresses and the phone numbers of the wireless users associated with each subscribers account. 2. Service Order Between m-Qube and the Committee The Committee intends to enter into a service order with m-Qube to enable the Committee to receive contributions by text message. The terms of the service order will be consistent with those approved by the Commission in Advisory Opinion 2012-17 (m-Qube I): The Committee must be registered and in good standing with the Commission and relevant State authorities; the Committee may register only one short code; no mobile phone number may make contributions exceeding $50 per month to the Committee; and contributors must certify their eligibility to make a contribution under the Act and Commission regulations. Because common short codes are country-specific, only users who obtain service through U.S.-based wireless service providers will be able to use a short code to complete an opt-in. Also consistent with the Commissions determination in Advisory Opinion 2012-17 (mQube I), m-Qube will require the Committee to use m-Qubes factoring service. Factoring is a financial transaction in which an entity (here, the Committee) sells its accounts receivable to a third party (here, m-Qube) at a discount in exchange for receiving a percentage (or factor) of its outpayment on an expedited basis. 4 m-Qube currently offers factoring as an optional service in exchange for a fee to customers who wish to receive a portion of their outpayments more quickly than the normal industry practice would allow and has stated that it will make factoring mandatory for political committees. Additional information on m-Qubes factoring practices appears in Advisory Opinion 2012-17 (m-Qube I). M-Qube does not propose to identify any of the wireless users whose opt-ins it analyzes as part of the factoring process or to transmit their names and addresses to the Committee, consistent with its current practice for customers that are not political committees. M-Qube will, however, provide the Committee with the ten-digit phone number associated with each contribution, as well as (1) the amount and date of the contribution, (2) confirmation that the contributor affirmatively consented to charge the contribution to his or her wireless bill, and (3) confirmation that the contributor certified his or her eligibility to make a contribution under the Act and Commission regulations. M-Qube will also give the Committee access to a running, real-time tally of the dollar amount of contributions made via text message from each phone number and will configure its gateway to inform the Committee if contributions from any one phone number equal or exceed $200 in a calendar year. Once alerted, the Committee will collect the contributors identifying information via text message by texting the contributor a web form to complete, or by other
4
An outpayment is the total amount that a recipient content provider is entitled to receive after all fees have been deducted by the wireless service providers and connection aggregators. A factor is a reduced percentage of the outpayment.
AO 2012-26 Page 4 legally permitted methods. The Committee will receive further contributions via text message from that phone number only after it has obtained the contributors identifying information. If that information is not provided by the contributor, then the Committee will take steps to refund any contribution over $200 and prevent that number from making additional contributions via text messaging. Further, if the Committee receives information about a contributor indicating that the contributor is a prohibited source, the Committee will take steps to refund the contribution and block the number from texting any further contributions. The Committee will take these steps based only on the information that m-Qube makes available to the Committee in m-Qubes ordinary course of business and without receiving any information from, or entering into any contractual relationships with, wireless service providers. 3. Agreements Between Wireless Service Providers, m-Qube, and the Committee
After the Committee receives its short code and completes a service order with m-Qube, m-Qube will work with the wireless service providers to gain access to their networks to communicate with mobile phone users. Even after CTIA has leased a short code to the Committee, the wireless service providers may permit or prohibit any type of text message program, and the wireless service providers may establish the conditions or rules that govern the manner in which a text message program may be operated. The requestors expect that the wireless service providers will establish commercially reasonable eligibility criteria for determining whether to permit or prohibit the use of a text message program. The Committee will have no direct contractual relationship with the wireless service providers. Rather, m-Qube maintains its own contractual relationships with the wireless service providers, and any agreement between m-Qube and a wireless service provider would be an amendment to the standing master agreement between m-Qube and the wireless service provider. Due to trade secret concerns and antitrust regulations, the rates in these agreements are confidential and are not disclosed, including to the Committee. The requestors also represent that, aside from charitable programs where service is provided for free, wireless service providers do not offer different rates for specific types of text message programs. Questions Presented 1. As between m-Qube, the carriers and the Committee, does the Committee bear the responsibility to determine its contributors eligibility, which it would do by adopting the necessary safeguards? 2. If the Committee performs several of its own tasks and employs several of its own safeguards regarding the $50 monthly limit on contributions; the recordkeeping obligations for contributions that tally in excess of $200; and the limitation of one short code per campaign: will the Committee have fulfilled all the responsibilities for compliance under the Act without any additional action by any carrier or aggregator other than those set forth in this request?
AO 2012-26 Page 5 3. a. i. If any given carrier offering this service is not offering a discount on these services as provided in the ordinary course of business to all customers, is it correct that if m-Qube received a special discount from a carrier for political committees, and passed that savings on to the Committee, that the Committee could be seen as receiving an in-kind contribution, since the discount was not usual and normal? ii. If any given carrier concludes that it could offer m-Qube a discount consistent with its ordinary course business practices, and m-Qube passed that savings on to the affected political committees, would the Committee be safe in receiving those savings without being viewed as having accepted an in-kind corporate contribution? b. Please confirm the Treasurer will not be receiving an impermissible in-kind contribution from the carriers when the carriers follow their normal business practices with respect to administering premium SMS programs, and that if any changes are made it is because normal practices are not relevant to, or are impracticable for, political committees. 4. Can the Committee avoid receiving an in-kind contribution if it or any other political committee is subject to commercial eligibility requirements established by the aggregators and the wireless carriers for determining whether a committee may participate in a text messaging contribution campaign? 5. Please confirm that nothing in Advisory Opinion 2012-17 (m-Qube I) prevents treasurers from being subject to the methods wireless service providers normally process payments to connection aggregators. Legal Analysis and Conclusions 1. As between m-Qube, the carriers and the Committee, does the Committee bear the responsibility to determine its contributors eligibility, which it would do by adopting the necessary safeguards? 2. If the Committee performs several of its own tasks and employs several of its own safeguards regarding the $50 monthly limit on contributions; the recordkeeping obligations for contributions that tally in excess of $200; and the limitation of one short code per campaign: will the Committee have fulfilled all the responsibilities for compliance under the Act without any additional action by any carrier or aggregator other than those set forth in this request?
AO 2012-26 Page 6 Yes, the Committee is solely responsible for determining the eligibility of its contributors. The Committee will satisfy its responsibilities under the Act by employing the safeguards described below. The Act and Commission regulations impose certain requirements on treasurers of political committees. A treasurer of a political committee must keep an account of (1) all contributions received by or on behalf of such political committee; (2) the name and address of any person who makes any contribution in excess of $50, together with the date and amount of such contribution by any person; [and] (3) the identification of any person who makes a contribution or contributions aggregating more than $200 during a calendar year, together with the date and amount of any such contribution. 2 U.S.C. 432(c)(1)-(3); see also 11 CFR 110.4(c). Commission regulations also state that [t]he treasurer shall be responsible for examining all contributions received for evidence of illegality and for ascertaining whether contributions received, when aggregated with other contributions from the same contributor, exceed the [Acts] contribution limitations. 11 CFR 103.3(b). In Advisory Opinion 2012-17 (m-Qube I), the Commission approved a proposal very similar to the one proposed here. 5 As in that advisory opinion, the requestors propose to enter into a service order that will require: (1) the Committee to register only one short code; (2) a monthly limit of $50 for contributions to the Committee from any single mobile phone number; 6 (3) contributors to certify their eligibility to make a contribution under the Act and Commission regulations; (4) the Committee to have real time access to m-Qubes running tally of contributions made from mobile phone numbers; and (5) the Committee to use m-Qubes factoring services. In addition, only wireless users who obtain service through U.S.-based wireless service providers will be able to complete an opt-in. The Committee will take additional steps to comply with the Acts reporting and recordkeeping provisions if the Committee receives information that a contributor has made contributions aggregating in excess of $200 in a calendar year. 7 Under this proposal, the m-Qube gateway will alert the Committee when the value of contributions made from any one mobile phone number meets or exceeds $200, which will prompt the political committee to collect the information necessary to identify the contributor before accepting additional contributions. The Commission determines that all of
Because no political committee was a party to that request, the Commission did not comment as to political committees recordkeeping and reporting requirements. As explained further in the text, the $50 monthly limit on contributions ensures that the requirement in 2 U.S.C. 432(b) and 11 CFR 102.8(a) to forward to the Committee the contributors name and address and the date of receipt of the contribution will not be triggered.
m-Qubes agreement with the Committee will include all of the terms discussed in Advisory Opinion 2012-17 (mQube I). The Committee will thus also be required to refund to m-Qube any factored contributions that it receives in excess of the amounts later received by m-Qube from wireless service providers, to post deposits to guard against such overpayments, or to have any overpayments offset against future factored payments. See Advisory Opinion 2012-17 (m-Qube I).
AO 2012-26 Page 7 these safeguards, taken together, will enable the Committee to satisfy its requirements under the Act and Commission regulations. 8 As compared to political committees, the Act and Commission regulations impose comparatively fewer obligations on persons who receive and forward political contributions. Compare 2 U.S.C. 432(b) (requiring persons who receive contributions for political committees to forward the contributions and certain other information to the political committees treasurers within either ten or 30 days) with 2 U.S.C. 432(c) (recordkeeping requirements) and 2 U.S.C. 433 (filing requirements) and 2 U.S.C. 434(a)-(b) (reporting requirements). See also Advisory Opinion 2009-32 (Jorgensen) (Contributions from foreign nationals, corporations, labor organizations, and [F]ederal contractors are prohibited. The political committee, not the vendor, is responsible for determining the legality of contributions.) (emphasis added). 9 Although persons who receive and forward contributions in excess of $50 to political committees must also forward the contributors names, addresses, and other identifying information, 2 U.S.C. 432(b); 11 CFR 102.8(a), (b), none of the contributions under the proposal here will exceed $50. The Commission determined in Advisory Opinion 2012-17 (m-Qube I) that on these facts, contributions will be made when the user completes an opt-in. Because of the $50 monthly cap, no single opt-in will exceed $50. Therefore, the obligation under 2 U.S.C. 432(b)(1)-(2) to forward the contributors names, addresses, and other identifying information to the Committee will not be triggered. The Committee, however, will be able to satisfy its obligations under 2 U.S.C. 432(c)(3) regarding persons who will make a contribution aggregating more than $200 during a calendar year. Accordingly, for the reasons stated above, the Committee will have fulfilled the responsibilities for compliance under the Act and Commission regulations. 3. a. i. If any given carrier offering this service is not offering a discount on these services as provided in the ordinary course of business to all customers, is it correct that if m-Qube received a special discount from a carrier for political committees, and passed that savings on to the Committee, that the Committee could be seen as receiving an in-kind contribution, since the discount was not usual and normal?
This conclusion does not relieve the Committee of the obligation to return or refund any contributions that it receives if it subsequently learns that they came from a prohibited source. See generally 11 CFR 103.3(b), 110.20(a)(4), (g). Similarly, in Advisory Opinion 1978-68 (Seith for Senate), the Commission premised its conclusion that contributions by credit card were permissible on the assum[ption] that the credit card issuers (BankAmericard and Master Charge) will follow their usual and normal collection procedures with respect to obtaining payment from persons who used their credit cards to make political contributions to the Committee. Id.
AO 2012-26 Page 8 ii. If any given carrier concludes that it could offer m-Qube a discount consistent with its ordinary course business practices, and m-Qube passed that savings on to the affected political committees, would the Committee be safe in receiving those savings without being viewed as having accepted an in-kind corporate contribution? The Act and Commission regulations prohibit corporations from making a contribution in connection with a Federal election. See 2 U.S.C. 441b(a); 11 CFR 114.2(b)(1). A contribution includes any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office. 2 U.S.C. 431(8)(A)(i); 11 CFR 100.52(a); see also 2 U.S.C. 441b(b)(2); 11 CFR 114.2(b)(1). Anything of value includes all in-kind contributions, including the provision of goods or services without charge or at a charge that is less than the usual and normal charge. See 11 CFR 100.52(d)(1). Usual and normal charge is defined as the price of goods in the market from which they ordinarily would have been purchased at the time of the contribution, or the commercially reasonable rate prevailing at the time the services were rendered. See 11 CFR 100.52(d)(2). The requestors represent that wireless service providers base their text message program rates on commercial considerations, such as volume of messages, refund rates, customer satisfaction, and technical level of effort. As a general matter, the requestors state that, aside from charitable programs where services are provided for free, wireless service providers do not differentiate their rates among text message programs. The requestors, however, also represent that m-Qube may attempt to negotiate special rates for its political committee program when it amends its master agreements with wireless service providers, and to pass any savings on to the Committee. The Commission has previously determined that a political committees purchase of goods or services at a discount does not result in a contribution if the discounted or complimentary goods were available to others on equal terms or as part of a pre-existing business relationship. Advisory Opinion 1994-10 (Franklin National Bank); see also Advisory Opinion 2006-01 (PAC for a Change) (approving a bulk purchase of books at a discount because the items [were] made available in the ordinary course of business and on the same terms and conditions offered to the vendors other customers that are not political committees). The Commission has also found, however, that a corporation may not provide a discount to a political committee where a political committee [is] accorded preferential treatment different from other customers, or the treatment [is] outside of a business relationship. Advisory Opinion 1994-10 (Franklin National Bank) (emphasis added); see also Advisory Opinion 1991-23 (Retail Druggists) (corporation may not provide a car for a political committee to use as a raffle prize because doing so would violate 2 U.S.C. 441b). M-Qube, therefore, may pass on discounts that it negotiates with wireless service providers to the Committee as part of m-Qubes plan for all committees on an equal, nonpartisan basis without the amount of discounts constituting corporate in-kind contributions to the Committee if: (1) m-Qube receives discounts from wireless service providers for their services in processing contributions by text message that are consistent with the discounts that m-Qube receives from wireless service providers in connection with similar services rendered to
AO 2012-26 Page 9 customers that are not political committees; or (2) the discounts otherwise reflect commercial considerations, such as volume of messages, refund rates, customer satisfaction, and technical level of effort, and do not reflect considerations outside of a business relationship. 10 b. Please confirm the Treasurer will not be receiving an impermissible in-kind contribution from the carriers when the carriers follow their normal business practices with respect to administering premium SMS programs, and that if any changes are made it is because normal practices are not relevant to, or are impracticable for, political committees. As discussed above, the definition of contribution includes any gift . . . of . . . anything of value made by any person for the purpose of influencing any election for Federal office. 2 U.S.C. 431(8)(A)(i); 11 CFR 100.52(a); see also 2 U.S.C. 441b(b)(2); 11 CFR 114.2(b)(1). Anything of value includes all in-kind contributions. 11 CFR 100.52(d)(1). The requestors represent that CTIA and the wireless service providers adhere to routine business practices when administering text message programs. Before leasing a short code, CTIA vets content providers. It does this by reviewing publicly available incorporation documents, contacting the content providers corporate leadership by phone and email, and searching for any adverse regulatory actions or litigation history. Wireless service providers also engage in a diligence review of content providers before entering into agreements with aggregators that represent the content providers. Furthermore, CTIA maintains industry best practice standards to protect consumers from deceptive marketing, and, upon the implementation of a text message program, CTIA monitors compliance with these standards. While the requestors expect CTIA and wireless service providers to conform to these normal business practices in connection with the Committees text message program, the requestors also note that the Committee is different from content providers with which CTIA and the wireless service providers have previously done business. Specifically, the Committee is regulated under the Act and Commission regulations, and public documents pertaining to the Committee may facilitate the vetting process. The requestors expect, therefore, that CTIA and the wireless service providers may tailor their business practices accordingly. CTIA and the wireless service providers may, for example, search the Commissions website for available information on the Committee and contact the Committees treasurer, rather than directly contacting Representative Cooper. The Commission concludes that the Committee would not receive a gift . . . of . . . anything of value from CTIA and wireless service providers that engage in these business practices when reviewing and administering the Committees text message program. Nor would the Committee receive a gift . . . of . . . anything of value from CTIA and wireless service providers that use publicly available information about the Committee to vet the Committee before issuing a short code or approving the Committees proposal.
In reaching this conclusion, the Commission assumes that m-Qubes normal commercial practice is to pass negotiated discounts to its customers that are not political committees or that passing on such a discount reflects commercial considerations and not considerations outside of a business relationship.
10
AO 2012-26 Page 10 Accordingly, the Committee will not receive an impermissible in-kind contribution when CTIA or the wireless service providers apply their normal business practices in their administration of the Committees text message program. 4. Can the Committee avoid receiving an in-kind contribution if it or any other political committee is subject to commercial eligibility requirements established by the aggregators and the wireless carriers for determining whether a committee may participate in a text messaging contribution campaign? Yes, the Committee can avoid receiving an in-kind contribution if it and other political committees are subject to commercial eligibility requirements established by aggregators and wireless service providers for determining whether a political committee may participate in a text messaging contribution campaign. 11 This answer is not altered if the application of those eligibility requirements results in the Committee being able to receive contributions via text message and other political committees not being able to do so. A vendor may establish and apply eligibility criteria to political committees in order to protect the commercial viability of the vendors program. In Advisory Opinion 2006-34 (Working Assets), for example, the Commission approved an affinity program that a corporate vendor proposed to make available to any political party committee and nonconnected committee that asked to participate, subject to each particular programs commercial viability, determined by common commercial principles, including, for example, size of membership and hence number of potential customers, potential for long-term customer commitment, strength of trademark, and credit rating of membership. Further, in finding the program to be commercially reasonable, the Commission assume[d] that the commercial viability of the vendors relationship with each political committee would stand or fall on its own, and thus that the vendor would not depend on profitability from its relationship with other [non-political committee] clients to sustain the arrangement with a particular [political] committee sponsor. Id. (emphasis added). Similarly, here, the Committee represents that its participation in text message fundraising programs will be subject to objective and to commercially reasonable 12 criteria established by the wireless service providers for determining the eligibility of political committees to participate in text message fundraising programs. Just as Working Assets could develop eligibility criteria for political committees to participate in an affinity program based on common commercial principles without conferring a contribution on the political committee that met its criteria, so too the Committee would not receive an in-kind contribution if it participates in text message fundraising programs as described in the request.
See Advisory Opinion 2012-28 (CTIA II) (Wireless service providers propose to establish objective business criteria that are specific to political contribution text messaging campaigns. They may decide, for commercial reasons, to accept only proposals from some political committees and not others.)
12
11
Supplement to Advisory Opinion Request 2012-26 (m-Qube II) (August 2, 2012).
AO 2012-26 Page 11 5. Please confirm that nothing in Advisory Opinion 2012-17(m-Qube I) prevents treasurers from being subject to the methods wireless service providers normally process payments to connection aggregators. In Advisory Opinion 2012-17 (m-Qube I) the Commission approved m-Qubes proposal to process contributions by text message for political committees. To the extent the proposal here is indistinguishable in all its material aspects, 2 U.S.C. 437f(c), from that proposal, the Committees treasurer may rely upon it when accepting contributions by text message. See also Advisory Opinion 1978-68 (Seith for Senate), supra n.7. To the extent the proposal here differs, none of those changes affects the permissibility of m-Qubes planned payment arrangements with the wireless service providers. This response constitutes an advisory opinion concerning the application of the Act and Commission regulations to the specific transaction or activity set forth in your request. See 2 U.S.C. 437f. The Commission emphasizes that, if there is a change in any of the facts or assumptions presented, and such facts or assumptions are material to a conclusion presented in this advisory opinion, then the requestor may not rely on that conclusion as support for its proposed activity. Any person involved in any specific transaction or activity which is indistinguishable in all its material aspects from the transaction or activity with respect to which this advisory opinion is rendered may rely on this advisory opinion. See 2 U.S.C. 437f(c)(1)(B). Please note that the analysis or conclusions in this advisory opinion may be affected by subsequent developments in the law, including, but not limited to, statutes, regulations, advisory opinions, and case law. The cited advisory opinions are available on the Commissions website, www.fec.gov, or directly from the Commissions Advisory Opinion searchable database at http://www.fec.gov/searchao. On behalf of the Commission, (signed) Caroline C. Hunter Chair
FEDERAL ELECTION COMMISSION

WASHINGTON, D.C. 20463
June 11,2012 CERTIFIED MAIL RETURN RECEIPT REQUESTED
ADVISORY OPINION 2012-17 Craig Engle, Esq. Brett G. Kappel, Esq. Arent Fox LLP 1050 Connecticut Avenue, NW Washington, DC 20036-5339
Dear Messrs. Engle & Kappel: We are responding to your advisory opinion request on behalf of Red Blue T LLC ("Red Blue T"), AnnourMedia, Inc. ("AnnourMedia"), and m-Qube, Inc. ("m-Qube"), concerning the application of the Federal Election Campaign Act of 1971, as amended (the "Act"), and Commission regulations to their proposal to use text messaging to raise funds for political committees. The requestors ask whether the proposal (1) satisfies the recordkeeping and reporting requirements of2 U.S.C. 432(c); (2) confonns to the prohibition on corporate contributions at 2 U.S.C. 441 b; (3) complies with the forwarding requirements of2 U.S.C. 432(b), when m-Qube makes factored payments to political committees; and (4) satisfies the segregation requirements for commercial vendors that process political contributions. The Commission concludes that the proposal is consistent with the recordkeeping and reporting requirements of2 U.S.c. 432(c); confonns to the prohibition on corporate contributions at 2 U.S.C. 441 b; does not implicate the forwarding requirements of 2 U.S.c. 432(b), when factored payments are made; and satisfies the segregation requirements for commercial vendors that process political contributions.
AO 2012-17 Page 2
Background
The facts presented in this advisory opinion are based on your letter received on April 6, your emails of April 11, May 21, June 4, June 6 and June 7,2012, information presented at the May 24,2012 and June 7, 2012 open sessions, your letter sent on June 7, 2012, and publicly available information. Red Blue T and ArmourMedia are political and media consulting firms that advise and represent political committees, including candidates and candidate committees. m-Qube is a corporate aggregator of business-to-consumer messaging and merchant billing for public wireless service providers. It operates direct interconnection gateways with all of the nation's major public wireless service providers. l m-Qube proposes to enter into agreements with political committees, under which it would provide its services as an aggregator to process contributions made to the political committees via text messaging. The proposal envisions the use of text messaging to make contributions in two ways. In the first method, a wireless user2 would text a pre-determined message to a common short code 3 registered to a political committee. m-Qube, as the connection aggregator, will respond to the user via text message and require the user to respond with his or her own text message to (1) confirm the user's intent to engage in the transaction, and (2) certify the user's eligibility to make a contribution under the Act and Commission regulations. Under the second proposed method, a user would enter his or her mobile phone number on a political committee's website in lieu of a credit card number. Before submitting the phone number, the user will be required to certify his or her eligibility to make a contribution under the Act. After the user makes the certification and submits the phone number, m-Qube will transmit to the user's mobile phone a text message that
I The requestors rely on the description of the mechanics of the wireless industry in Advisory Opinion 2010-23 (CTIA - The Wireless Association). As presented in that advisory opinion, content providers, application providers, connection aggregators, and wireless service providers work together to enable wireless users to access content through the use of mobile phone text messages. Content providers (such as the Red Cross) disseminate content to, or collect information or pledges from, wireless users. Application providers convert the text messages received into data that can be interpreted and used by content providers. Connection aggregators link application providers to wireless service providers' networks. Wireless service operators are the companies from which wireless subscribers purchase their mobile phone service.
2 In Advisory Opinion 20 I0-23 (CTIA - The Wireless Association), the Commission distinguished between the terms "wireless subscriber" and "wireless user." A "wireless subscriber" refers to an individual who a wireless service provider bills; a "wireless user" refers to a broader category of individuals, who are included in the subscriber's billing plan, including, for example, a family or group plan and therefore are not directly responsible for payment to the "wireless service provider."
3 A common short code is a five- or six-digit number to which wireless users can send text messages to access mobile content.
AO 2012-17 Page 3 includes a PIN. The user will enter the PIN on the political committee's website to confirm the transaction. Both of these methods require a wireless user to (1) confirm that the user intends to engage in the transaction, and (2) certify that the user is eligible to make contributions under the Act and Commission regulations. 4 Once the user has completed both of these steps, the user has completed the "opt-in" process and a charge is placed on the account associated with the user's wireless number. Aggregators regularly process charges up to $20, but m-Qube can limit individual charges to $10. Also, because common short codes are "country-specific," only users that obtain service through U.S.-based wireless service providers will be able use a short code to complete an opt-in process. m-Qube proposes to enter into service orders with political committee customers, the basic terms of which are the same as those it offers to customers other than political committees in the ordinary course of its business. In addition, for political committee customers, m-Qube proposes to add special terms to the service order that would include the following requirements: each political committee customer must be registered "and in good standing" with the Commission and relevant State authorities; each political committee customer must receive contributions through a single short code per election, with m-Qube as the exclusive provider of services for that short code; no mobile phone number may be billed more than $50 per month for contributions to anyone political committee customer; 5 each political committee customer must obtain certifications from wireless users that the users are eligible to make contributions under the Act and Commission regulations; and each political committee customer must use m-Qube's "factoring" service. The requestors describe "factoring" as a financial transaction in which an entity (here, a political committee) sells its accounts receivable to a third party (here, m-Qube) at a discount in exchange for receiving a percentage (or "factor") of its outpayment on an expedited basis. 6 m-Qube currently offers factoring as an optional service in exchange
The substance of the attestations would be consistent with that approved in prior advisory opinions. See Advisory Opinion 2011-13 (DSCC). When users initiate the opt-in process by the use of a short code, however, it may be necessary to transmit the certification language in 160 characters or less, and m-Qube provides two examples of how it could do so: Reply YES to give $20 to Romney & certify ur 18+ & donating with own funds, not foreign national or Fed contractor. Terms m-qube.com/r Msg&Data Rates may Apply Reply YES to give $20 to Obama & certify ur 18+ & donating with own funds, not foreign national or Fed contractor. Terms m-qube.com/o Msg&Data Rates May Apply The hyperlinks that m-Qube will transmit within the certifications, when opened by users on their smartphones, will send users to a webpage that includes the unabbreviated attestation. The webpage would also explain terms such as "foreign national" and "Federal contractor."
4
m-Qube represents that it is not possible to apply the $50 monthly limit to a single subscriber.
An "outpayment" is the total amount that a recipient content provider is entitled to receive after all fees have been deducted by the wireless service providers and connection aggregators. A "factor" is a reduced percentage of the outpayment. A typical outpayment will range between 50 and 70 percent of the consumer charges, and a typical factor will range between 50 and 90 percent of the total outpayment.
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A02012-17 Page 4 for a fee to customers that wish to receive a portion of their outpayments more quickly than the normal industry payment process would allow.? For political committee customers, factoring would be required. The factoring process begins with an assessment by m-Qube of the transaction data that it has received on a daily basis, and a calculation of the net amount of funds that will eventually be collected from the mobile service providers. m-Qube takes into account certain variables "in [the] ordinary course of business ... including perceived risk on liabilities associated with the programs, and the availability of funds to provide the factored donations" to arrive at an appropriate factored payment amount. m-Qube states that it will calculate and transmit a "conservative" factor to political committees to protect against overpayments. Under its service order as currently drafted, m-Qube may suspend or terminate factored payments at any time, with or without notice to its customers, and may require its customers to provide a security deposit to guard against overpayments before restarting the payments. 8 If a customer receives factored payments that exceed the amount of outpayments due to it, the customer may not terminate the service order or transfer services, programs, or short codes from m-Qube until it has repaid m-Qube. m-Qube may require that its political committee customers refund to m-Qube any overpayment that results from a higher than expected number of subscribers refusing to pay text message charges on their bills. Similarly, ifm-Qube is charged an adjustment by a "Network Operator" that exceeds the total amount owed by m-Qube to its customer, m-Qube may require the customer to repay the factored payment to m-Qube. m-Qube proposes to adhere to these standard terms for its political committee customers. m-Qube plans to transmit factored payments to political committee customers on a weekly basis. 9 For example, m-Qube would assess all of the opt-ins that it received between Day 1 and Day 7 and, based on that data, transmit a factored payment on Day 10. m-Qube does not propose to identify any of the wireless users whose opt-ins it analyzes as part of the factoring process or to transmit their names and addresses to
Advisory Opinion 20 10-23 (CTIA - The Wireless Association) describes the usual billing process in the wireless industry when connection aggregators are used to enable access to mobile content. Each wireless service provider transmits payments from wireless subscribers to connection aggregators seven to ten days after receipt by the wireless service providers. The connection aggregators then collect all funds flagged for a particular recipient from all the wireless service providers over a 30-day period and transmit those funds to recipient content providers.
7
8 An overpayment may result from unexpected numbers of consumers disputing charges for third party content, such as contributions initiated through short codes. "Technical inconsistencies" between wireless service providers and aggregators can also result in overpayments.
9 The request states that a "committee will receive its share of its mobile phone contributions on a weekly basis of those texts being made." The request also states that committees will "typically ... opt to receive weekly payments and could therefore expect to receive payment within one to ten days of mobile pledges being made." The Commission understands these statements to mean that m-Qube will transmit factored payments each week.
AO 2012-17 Page 5 political committee customers, consistent with its current practice for customers that are not political committees. After m-Qube receives payment from wireless service providers, m-Qube's current practice is to reconcile the amount that it has provided to its customers as factored payments and the actual outpayment that each customer is entitled to receive. Typically, m-Qube transmits these "trailing payments" within 30 days after it receives payment from the wireless service providers, but m-Qube proposes to transmit trailing payments to its political committee customers within ten days after receipt. Consistent with its current practice for customers that are not political committees, m-Qube does not propose to establish a segregated account for the trailing payments to political committee customers; trailing payments will be made from its general corporate treasury funds. The trailing payments, however, will be linked to a short code associated with a particular political committee, and m-Qube represents that this link, in conjunction with the requirement that each political committee only register one short code, ensures that contributions are segregated from corporate treasury funds. Also, while m-Qube does not propose to provide the contributor names and addresses to political committee customers, m-Qube will provide the ten-digit phone number associated with the contribution as well as (l) the amount and date of the contribution, (2) the fact that the contributor clicked "YES" or "Y" in response to the question regarding whether they agreed to have the contribution charged to their wireless bill and (3) the fact that the contributor clicked "YES" or "Y" in response to the affirmation question indicating their eligibility to contribute. m-Qube also represents that it can keep a running, real-time tally of the dollar amount of contributions made via text message from a particular telephone number. Because m-Qube keeps a running tally each month in order to enforce the aforementioned $50 cap, m-Qube can also continue the tally past each billing cycle. m-Qube represents that recipient political committees will have real-time secure access to the m-Qube gateway where the tally of contributions will be maintained, allowing committees to identify phone numbers that are associated with contribution totals of $200 or more. m-Qube represents that either it or its political committee customers can block text message contributions from phone numbers associated with pre-paid carriers and any other phone number at any time for any reason by using the m-Qube gateway.
Questions Presented 1. Is the proposal described above consistent with the recordkeeping and reporting requirements of 2 US C. 432(c)? 2. Does the proposed commercial transaction offactoring ofpolitical contributions, when it is performed by an aggregator in its ordinary course ofbusiness, conform with the requirements of2 USc. 441b? 3.
If the answer to Question 2 is "yes, " does the proposed method offactoring
comply with theforwarding requirements of2 USc. 432(b)?
AO 2012-17 Page 6
4. Does the proposal described above satisfy the segregation requirements the Commission has placed on commercial vendors that process political contributions? Legal Analysis and Conclusions
1. Is the proposal described above consistent with the recordkeeping and reporting requirements of 2 Us.c. 432(c)?
Yes, the proposal described above is consistent with the recordkeeping and reporting requirements of2 U.S.c. 432(c).10 The Act and Commission regulations impose certain requirements on treasurers of political committees. A treasurer ofa political committee must "keep an account of (1) all contributions received by or on behalf of such political committee; (2) the name and address of any person who makes any contribution in excess of $50, together with the date and amount of such contribution by any person; [and] (3) the identification of any person who makes a contribution or contributions aggregating more than $200 during a calendar year, together with the date and amount of any such contribution." 2 U.S.C. 432(c)(1)-(3); see also 11 CFR 110.4(c). Commission regulations also require that treasurers of political committees "examin[e] all contributions received for evidence of illegality and for ascertaining whether contributions received, when aggregated with other contributions from the same contributor, exceed the [Act's] contribution limitations ...." 11 CFR 103.3(b). m-Qube's proposal is materially distinguishable from the proposal considered in Advisory Opinion 2010-23 (CTIA - The Wireless Association). There, the Commission concluded the proposal would not satisfy the recordkeeping and reporting requirements in part because it could not ensure that the contributions would not aggregate in excess of $50. Under m-Qube's proposed factoring arrangement, which is similar to how credit card contributions are handled, the Commission considers the contributions to be received at the time of the opt-in, as opposed to when the bill is paid (as was the case in CTIA). See Advisory Opinion 1990-04 (American Veterinary Medical Association) ("Contributions by credit card are considered as received upon the date that AVMA receives the member's authorization to charge his or her ... contribution to the member's credit card account."). In Advisory Opinion 2010-23 (CTIA - The Wireless Association), the Commission also expressed concerns that a foreign national could circumvent the prohibition on contributions from foreign nationals or that, in the context of group or
10 The Commission does not comment as to the particulars of political committees' recordkeeping and reporting requirements under the Act or Commission regulations.
A02012-17 Page 7 family plans, a single subscriber could pay charges incurred by multiple users on a single bill. Id. Here, however, the Commission's concerns as to foreign nationals and group plans are adequately addressed by the attestations, the $50 cap, and the factoring arrangement. Moreover, under m-Qube's proposal, only users that obtain service through U.S.-based service providers will be able to use a short code to complete an opt-in because short codes are country-specific. This limitation ensures that persons who access wireless services through foreign service providers cannot initiate opt-ins via text message. Accordingly, the proposal described above is consistent with the recordkeeping and reporting requirements of2 U.S.C. 432(c)Y
2. Does the proposed commercial transaction offactoring ofpolitical contributions, when it is performed by an aggregator in its ordinary course ofbusiness, conform with the requirements of2 Us.c. 441b?
Yes, the proposed commercial transaction of factoring of political contributions, when it is performed by an aggregator in its ordinary course of business, conforms with the requirements of2 U.S.C. 441b. The Act and Commission regulations prohibit corporations from making a contribution in connection with a Federal election. See 2 U.S.C. 441b(a); 11 CFR 114.2(b)(1). A contribution includes "any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office." 2 U.S.C. 431(8)(A)(i); 11 CFR 100.52(a); see also 2 U.S.C. 441b(b)(2); 11 CFR 114.2(b)(1). "Anything of value" includes all in-kind contributions, including the provision of goods or services without charge or at a charge that is less than the usual and normal charge. See 11 CFR 100.52(d)(1). "Usual and normal charge" is defined as "the price of goods in the market from which they ordinarily would have been purchased at the time of the contribution, or the commercially reasonable rate prevailing at the time the services were rendered." See 11 CFR 100.52(d)(2). After wireless users have completed an opt-in to pledge funds to a political committee, but prior to any receipt of a contribution, m-Qube will transmit funds from its corporate treasury to the political committee. m-Qube proposes to recoup its funds once subscribers have paid their bills and the wireless service providers have transmitted those payments, net of fees, to m-Qube. m-Qube's proposal to make factored payments is not an exclusive service for its political committee customers; rather, m-Qube offers the same service on the same terms to its non-political customers, except that, unlike non-political committee customers who may elect not to avail themselves of factoring, factoring would be mandatory for political committee customers.
II While the Commission here is determining that m-Qube's particular proposal complies with the Act, the Commission anticipates that other proposals, by m-Qube or other vendors, would provide equally viable and compliant methods of raising campaign funds through text messaging.
AO 2012-17 Page 8
As m-Qube does with its non-political customers, it would employ extensive safeguards to avoid making excessive factored payments. m-Qube will calculate and transmit a "conservative" factor to political committees, and it will reevaluate the potential risks of making factored payments on a weekly basis. Under the terms of its service order, m-Qube may suspend or terminate factored payments at any time, with or without notice to its customers, and may require its customers to provide a security deposit to guard against overpayments before restarting the payments. m-Qube may also require customers that receive overpayments to reimburse m-Qube. If a customer receives factored payments that exceed the amount of outpayments due to it, the customer may not terminate the service order or transfer services, programs, or short codes from mQube until it has repaid m-Qube. Similarly, if m-Qube is charged an adjustment by a Network Operator that exceeds the total amount owed by m-Qube to its customer, mQube may require the customer to repay the factored payment to m-Qube. The Commission concludes that m-Qube's proposal to make factored payments to its political committee customers on the same terms that it regularly offers to its commercial customers would be a permissible extension of credit by m-Qube in the ordinary course of business. Under the Act and Commission regulations, an incorporated commercial vendor may extend credit to political committees under terms substantially similar to those the vendor offers nonpolitical debtors. See 11 CFR 116.3(b), (c). mQube is a "commercial vendor" because its usual and normal business involves the provision of the same services that it proposes to provide to political committees. 11 CFR 116.1(c). An "extension of credit" includes, but is not limited to, "[a]ny agreement between the creditor and political committee that full payment is not due until after the creditor provides goods or services to the political committee." 11 CFR 116.1(e).12
12 The distinction between a purchase of assets and otherwise providing financing through a loan or extension of credit is not always readily apparent. See generally Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co., 336 F.3d 410, 416 (5th Cir. 2003) (the lines between these transactions "can be blurred"). When addressing such questions, courts have tended to engage in higWy fact- and transaction-specific analyses to determine whether the creditor or debtor has assumed the risk of non-payment. See, e.g., Nickey Gregory Co. v. Agricap, LLC, 597 F.3d 591,600-03 (4th Cir. 2010) (holding that a transaction was not a true purchase of accounts receivable because the "substantive aspects of the transaction are inconsistent with an outright sale of the assets"); Endico Potatoes, Inc. v. CIT Grp., 67 F.3d 1063, 1068 (2nd Cir. 1995) (analyzing "the substance of the transaction," rather than "the label attached to the transaction"). Here, the recipient political committees appear to assume the risk of nonpayment because the factoring agreement gives m-Qube broad discretion to suspend or terminate factored payments, to require deposits and to determine their amounts, to withhold overpayments, and to demand repayment from political committees when it is charged an adjustment by service providers or unexpected numbers of subscribers do not make payments. m-Qube's factoring proposal is thus an extension of credit from mQube to the recipient political committees rather than a sale of accounts receivable from the committees to m-Qube.
AO 2012-17 Page 9 The Commission approved a proposal similar to m-Qube's factoring proposal in the 900-line advisory opinionsY In Advisory Opinion 1990-14 (AT&T), for example, the Commission considered whether a proposal under which contributors would call a 900-line to make contributions to political committees, and AT&T would provide funds to the political committees (through a service bureau) before the contributors paid their phone bills, would "implicate [AT&T] in making an unlawful advance of corporate funds to a political committee." The Commission concluded that it would not, stating that, "[a]s long as AT&T, or any other company providing service to AT&T in connection with its ... service, provides its usual and normal services at its usual and normal charges it will not, in most circumstances, have made a prohibited corporate contribution." To guard against making an unlawful advance of corporate funds, the Commission stated that AT&T "should not remit funds ... if it appears that, because of an adverse event, callers may refuse to make payments." The Commission explained that this precaution was consistent with AT&T's service agreements, in which AT&T reserved the right to terminate the agreement or billing services "if it determines, in its sole discretion, that its image would be adversely affected or its reputation or goodwill damaged by the continued offer of billing services." Id. Similarly, in Advisory Opinion 1979-36 (Fauntroy), the Commission approved a proposal in which an incorporated direct mail fundraising firm would incur initial expenses in implementing a direct mail fundraising program for a political committee. Funds generated by the direct mail campaign would be deposited in the political committee's account, and the political committee would use those funds to pay the corporation for its costs and fees. Id. If the campaign was less successful than anticipated, the political committee would not be entitled to any funds until the corporation had recouped its costs and fees. Id. The Commission approved the proposal, provided that the financial agreement between the corporation and the political committee "is of a type which is normal industry practice and contains the type of credit which is extended in the ordinary course of [the corporation's] business with terms which are substantially similar to those given to nonpolitical, as well as political, debtors of similar risk and size of obligation," and the costs charged by the corporation to the political committee "are at least the normal charge for services of that type." Id. Accordingly, because m-Qube's factored payments will be extensions of credit under 11 CFR part 116 and otherwise consistent with prior Commission interpretations of 2 U.S.C. 441 b, the proposed commercial transaction of factoring of political contributions, when as here it is performed by an aggregator in its ordinary course of business, conforms with the requirements of 2 U.S.c. 441 b.
13 Advisory Opinion 1990-14 (AT&T) is part of a line of advisory opinions that analyzed the use of 900lines for raising contributions for political committees. These advisory opinions involved complex transactions between corporations and political committees. See, e.g., Advisory Opinion 1990-01 (Digital Corrections). Generally, political committees contracted with service bureaus to provide 900-line services. Callers dialed a 900-line number maintained by the service bureau. The service bureaus, in tum, contracted with telephone common carriers, such as AT&T, to receive access to telephone circuits and billing services. !d.
AO 2012-17 Page 10
3.
If the answer to Question 2 is
"yes, " does the proposed method offactoring comply with theforwarding requirements of2 US.c. 432(b)?
The proposed method of factoring does not implicate the forwarding requirements of2 U.S.c. 432(b) because factoring does not involve the forwarding of contributions. Any person who receives a contribution for an authorized political committee must forward the contribution to the political committee's treasurer within ten days of receipt. 2 U.S.c. 432(b)(1); 11 CFR 102.8(a). Any person who receives a contribution for a political committee that is not an authorized committee must forward the contribution to the political committee within 30 days of receipt if the contribution is $50 or less, and within ten days of receipt if the contribution is in excess of$50. 2 U.S.C. 432(b)(2)(A); 11 CFR 102.8(b); see, e.g., Advisory Opinion 2010-23 (CTIA - The Wireless Association); Advisory Opinion 2009-32 (Jorgensen). Any person who receives a contribution in excess of $50 for a political committee must also forward to the recipient political committee the name and address of the contributor and the date of the contribution. 2 U.S.c. 432(b)(1), (b)(2); 11 CFR 102.8(a), (b). The requirements of2 U.S.c. 432(b) apply to any person that receives a contribution for a political committee. Because, as explained in response to Question 2, the factored payments are extensions of credit by m-Qube in the ordinary course of business and are not contributions that m-Qube has received and forwarded, the factored payments do not trigger the forwarding requirements of2 U.S.C. 432(b) and 11 CFR 102.8. Moreover, although the proposed trailing payments may not necessarily be made within the 30-day forwarding requirement, 14 the Commission views the trailing payments as (the reconciliation) part of the same transaction as the extension of credit for the factored payments. Thus, for the same reasons discussed above, the trailing payments do not implicate the forwarding requirements of the Act and Commission regulations. Accordingly, for the reasons stated above, the proposed method of factoring does not implicate the requirements of2 U.S.c. 432(b).
4. Does the proposal described above satisfy the segregation requirements that the Commission has placed on commercial vendors that process political contributions?
m-Qube's proposal satisfies the requirements ofthe Act and Commission regulations. In previous advisory opinions, the Commission has required vendors to maintain separate accounts for political contributions that are to be transmitted to candidates. See, e.g., Advisory Opinion 2010-23 (CTIA - The Wireless Association). The Commission explained that this requirement is rooted in the Act's prohibition on contributions by corporations and labor organizations. See 2 U.S.C. 44lb; 11 CFR 114.2(b); Advisory
14 The request represents that the trailing payments will be made within 10 days after receipt of payment from the wireless subscriber, which may be in addition to up to 30 days of a billing cycle from when a contribution pledge is made.
AO 2012-17 Page 11 Opinion 2010-23 (CTIA - The Wireless Association). The use of separate accounts by a corporation that forwards contributions to political committees prevents a "commingling of corporate funds and campaign funds prohibited by [2 U.S.C.] 441 b." Advisory Opinion 1999-22 (Aristotle Publishing). m-Qube's proposal ensures that corporate funds will not be transmitted to political committees. Because, as explained in response to Question 2, the factored payments are extensions of credit by m-Qube in the ordinary course of business and are not contributions that m-Qube has received and forwarded, the factored payments do not trigger the requirement that vendors maintain separate accounts for political contributions that are to be transmitted to candidates. The manner in which m-Qube proposes to receive and transmit the trailing payments also satisfies the segregation requirement. The trailing payments that m-Qube will receive from service providers and forward to political committees will be linked to a common short code that is unique to each political committee. This mechanism, which m-Qube regularly employs with all of its customers' funds, ensures that political contributions are properly accounted for and that m-Qube's treasury funds will not be inadvertently transmitted to political committees. Indeed, m-Qube's entire business model depends upon its ability to use the short codes to ensure that it transmits the proper funds to its customers. Because m-Qube proposes to apply these same processes to political committees, m-Qube's proposal satisfies the requirements of the Act and Commission regulations. IS This response constitutes an advisory opinion concerning the application of the Act and Commission regulations to the specific transaction or activity set forth in your request. See 2 U.S.c. 437f. The Commission emphasizes that, if there is a change in any of the facts or assumptions presented, and such facts or assumptions are material to a conclusion presented in this advisory opinion, then the requestor may not rely on that conclusion as support for its proposed activity. Any person involved in any specific transaction or activity which is indistinguishable in all its material aspects from the transaction or activity with respect to which this advisory opinion is rendered may rely on this advisory opinion. See 2 U.S.C. 437f(c)(l)(B). Please note that the analysis or conclusions in this advisory opinion may be affected by subsequent developments in the law, including, but not limited to, statutes, regulations, advisory opinions, and case law.
15 To the extent that this conclusion supersedes prior Commission advisory opinions, those advisory opinions are now superseded.
AO 2012-17 Page 12 The cited advisory opinions are available on the Commission's website, www.fec.gov, or directly from the Commission's Advisory Opinion searchable database at http://www.fec.gov/searchao. On behalf of the Commission,
Caroline C. Hunter Chair
November 19, 2010 CERTIFIED MAIL RETURN RECEIPT REQUESTED ADVISORY OPINION 2010-23 Jan Witold Baran, Esq. Caleb P. Burns, Esq. Wiley Rein, LLP 1776 K Street NW Washington, DC 20006 Dear Messrs. Baran and Burns: We are responding to your advisory opinion request on behalf of CTIA The Wireless Association (CTIA), concerning the application of the Federal Election Campaign Act of 1971, as amended (the Act), and Commission regulations to the pledging of contributions to Federal candidates, political parties, and other political committees (collectively political committees) by sending text messages to Common Short Codes (Codes) over wireless networks. The Commission concludes that CTIAs proposal for wireless service providers and connection aggregators to proceed under their current business practices to process contributions to political committees would not be permissible under the Act and Commission regulations. Background The facts presented in this advisory opinion are based on your letter received on September 10, 2010. CTIA is an incorporated nonprofit trade association that represents the wireless communications industry. Members of CTIA include wireless service providers and their suppliers, as well as providers and manufacturers of wireless data services and products. CTIA, through its Common Short Code Administration (Code Administration), manages the Codes. The Codes are five- or six-digit numbers to which wireless users can send text messages to access mobile content. The Code Administration oversees the technical and operational aspects of Code functions and maintains a single database of Codes. The Code Administration leases Codes to entities, who use them for a variety of purposes, including sweepstakes, opinion polling, mobile coupons, and charitable donations. A prominent example of the use of Codes was the Red Crosss utilization of a
AO 2010-23 Page 2 Code to allow wireless users 1 to pledge ten-dollar donations to the organizations earthquake relief efforts in Haiti in 2010. Content providers, application providers, connection aggregators, and wireless service providers work together to enable wireless subscribers use of Codes. Content providers (such as the Red Cross) are the organizations that use Codes to disseminate content to, or collect information or pledges from, wireless users. Application providers convert the text messages received through Codes into data that can be interpreted and used by content providers. Connection aggregators link application providers to wireless service providers networks. Wireless service providers are the companies from which wireless subscribers purchase their mobile phone service. A wireless user who wishes to pledge a donation to an organization initiates the transaction by texting a predetermined word or phrase to a Code. 2 As a security precaution, the connection aggregator sends a reply text message to the wireless user, requesting confirmation of the pledge. If the wireless user confirms the pledge by sending a reply text, then the pledge is complete and the charge will appear on the next wireless bill associated with that wireless users phone number. CTIA indicates that it is standard business practice in the wireless industry for the wireless service provider to forward the payment to the connection aggregator about seven to ten days after the wireless service provider receives payment from the wireless subscriber. The connection aggregator accumulates all funds designated for a specific recipient from all wireless service providers over a 30-day period, and then forwards all those collected funds to the appropriate content provider(s). Both the wireless service provider and the connection aggregator deduct fees from the payment; thus, the amount ultimately received by the content provider will be smaller than the amount paid by the wireless subscriber. It is also the wireless industrys standard business practice to impose limits on pledges made through Codes. Wireless service providers set a ten-dollar ceiling per transaction, and most 3 wireless service providers impose an aggregate monthly cap of $100 on all Code-initiated transactions per phone number. These limits reflect the concern of wireless service providers that wireless subscribers who pay one bill for multiple phone numbers (such as a family plan) or who pay for a phone number that they do not themselves use (such as a parent paying a childs wireless bill) would not pay their bills if the wireless user incurred large Code charges. Wireless providers have the
1
The Commission distinguishes between the terms wireless user and wireless subscriber. A wireless subscriber refers to an individual who a wireless service provider would bill. By contrast, a wireless user refers to a broader category of individuals, who, for example, may be on a family or group plan and therefore not directly responsible for payment to the wireless service provider. For example, in the aftermath of the earthquake in Haiti, individuals pledged ten-dollar donations to the Red Cross by texting HAITI to the Code 90999. CTIA does not specify which wireless service providers impose the caps.
AO 2010-23 Page 3 capability to impose these limits on a per-phone-number basis only, rather than upon the entire account, which may include several phone numbers. The wireless service providers maintain records of their wireless subscribers names, addresses, and the phone numbers of the wireless users associated with that account. However, wireless service providers may not know if their subscribers or users are foreign nationals. A wireless subscribers address, as provided by the wireless subscriber, is the only information that wireless service providers may have regarding nationality. CTIA proposes to issue Codes so that wireless users may pledge contributions to political committees through the above-described process. Only those wireless industry participants who agree to CTIAs proposal would be eligible to lease Codes from the Code Administration. The transaction fees charged to the political committees by wireless service providers and connection aggregators under CTIAs proposal would be the usual and normal fees for such transactions. When forwarding contributions to political committees, the wireless service providers and connection aggregators would follow the same business practices that they use in collecting and forwarding other funds generated through Codes. Thus, the wireless service providers would send political contributions generated by the Codes to the connection aggregators seven to ten days after receiving payment. The connection aggregators would collect political contributions from all wireless service providers over a 30-day period and then forward the contributions on to political committees. The wireless service providers and connection aggregators would not transmit the political contributions through separate merchant accounts. Also, wireless service providers and connection aggregators would not forward contributors names and addresses to recipient political committees. The connection aggregators could send text messages to wireless users to certify their compliance with the Act before accepting a wireless users pledge. The messages would read: 1. Thank you for interest in contributing. Reply Y (YES) to proceed with the required legal certifications. Reply N (NO) if you do not wish to proceed. 2. I certify that I will make this contribution by paying my wireless bill with my personal, unreimbursed funds. Reply Y or N to proceed. 3. I certify that this contribution will not be made by a corporation, labor organization, or other person paying my wireless bill. Reply Y or N to proceed. 4. I certify that I am not a foreign national or government contractor. Reply Y or N to proceed. 5. I certify that my total contributions by text message to this recipient will not exceed $50 this calendar year. Reply Y or N to proceed.
AO 2010-23 Page 4 6. Contributions to political committees are not tax deductible. Please reply Y to initiate your contribution which will appear on your next wireless bill. A wireless user would be required to respond affirmatively to each statement to make the pledge. CTIA asserts that technological limitations and cost considerations could constrain CTIAs ability to require the wireless service providers and connection aggregators to adopt the following measures when implementing the proposed program: 1. Require through the confirming text message process that the wireless user supply his or her name and address to the connection aggregator to submit to the recipient Federal candidate, party, or political committee to monitor compliance with the Acts contribution limitations and prohibitions. 2. Include certification language along the following lines with each wireless subscribers bill: Contributions to political committees are not tax deductible. By proceeding with this contribution, I certify that all contributions by text message are: (1) made from personal, unreimbursed funds of a U.S. citizen, and (2) do not exceed $50 in total to any recipient this calendar year. 3. Require wireless service providers and connection aggregators to refuse contributions from wireless subscribers with Inc. or Corp. or some other clearly identifiable reference in the subscribers name indicating that the wireless subscriber is a corporation. 4. Require wireless service providers and connection aggregators to refuse contributions from wireless subscribers with foreign addresses. 5. Impose an aggregate monthly cap on contributions from each wireless subscriber to ensure that contributions do not exceed the Federal contribution limits. Questions Presented 1. May CTIA establish the program described above to enable the wireless service providers and connection aggregators to process contributions to political committees by Code? 2. Will the proposed services be provided in the ordinary course of business for the normal and usual charge? 3. Must CTIA require that the wireless service providers and connection aggregators forward contributions by Codes to Federal candidate, party, and political committee
AO 2010-23 Page 5 treasurers within ten or 30 days through separate merchant accounts or may they follow their ordinary business practices? 4. Does the ten-dollar approximate per transaction limit satisfy the $50 anonymous contribution limit? If not, must CTIA ensure that wireless service providers and connection aggregators develop a means to ensure that the contributions are not from impermissible sources and do not aggregate in excess of the $50 limit? If so, do the proposed confirming text message certifications satisfy these obligations? Legal Analysis and Conclusions 1. May CTIA establish the program described above to enable the wireless service providers and connection aggregators to process contributions to political committees by Code? No, CTIA may not establish the program as it is described above to enable wireless service providers and connection aggregators to process contributions to political committees by Code. As explained below, the program would not comply with the tenand 30-day contribution forwarding requirements of 2 U.S.C. 432 and would not separate corporate funds from political contributions in a manner approved by earlier advisory opinions. 2. Will the proposed services be provided in the ordinary course of business for the normal and usual charge? Yes, the proposed services will be provided in the ordinary course of business for the normal and usual charge. The Act and Commission regulations prohibit corporations from making contributions in connection with Federal elections. 2 U.S.C. 441b(a); 11 CFR 114.2(b). A contribution includes any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office. 2 U.S.C. 431(8)(A)(i); 11 CFR 100.52(a); see also 2 U.S.C. 441b(b)(2); 11 CFR 114.2(b)(1). Anything of value includes all in-kind contributions, including the provision of any goods or services without charge or at a charge that is less than the usual and normal charge. See 11 CFR 100.52(d)(1). Usual and normal charge is defined as the price of those goods in the market from which they ordinarily would have been purchased at the time of the contribution; and usual and normal charge for any services, other than those provided by an unpaid volunteer, means the hourly or piecework charge for the services at a commercially reasonable rate prevailing at the time the services were rendered. See 11 CFR 100.52(d)(2). A corporation does not make contributions if it provides goods or services in the ordinary course of business as a commercial vendor at the usual and normal charge. 11 CFR 114.2(f)(1). A commercial vendor is any person providing goods or services
AO 2010-23 Page 6 to a candidate or political committee whose usual and normal business involves the sale, rental, lease, or provision of those goods or services. 11 CFR 116.1(c). The Commission concludes that the proposed services would be rendered to the political committee in the ordinary course of business for the usual and normal charge. CTIA currently administers the Code Administration to enable wireless service providers and connection aggregators to process charitable donations via Code. CTIAs proposal would establish a new program in which political committees would pay the usual and normal charge to become content providers. Further, the wireless service providers and connection aggregators will deduct fees from the contributions transmitted to political committees based 4 on amounts charged for processing non-political funds. Therefore, the Commission concludes that CTIAs proposed services would be rendered in the ordinary course of business for the usual and normal charge. See Advisory Opinions 2010-21 (ReCellular), 2010-06 (Famos), 2004-19 (DollarVote), and 2002-07 (Careau). 3. Must CTIA require that the wireless service providers and connection aggregators forward contributions by Codes to Federal candidate, party, and political committee treasurers within ten or 30 days through separate merchant accounts or may they follow their ordinary business practices? Yes, CTIA must require that the wireless service providers and connection aggregators forward contributions by Code to political committee treasurers within ten or 30 days through a separate merchant account. a. Forwarding Requirements of 2 U.S.C. 432(b) The Act and Commission regulations state that all persons who receive a contribution for an authorized political committee must forward the contribution to the political committees treasurer within ten days of receipt. 2 U.S.C. 432(b)(1); 11 CFR 102.8(a). The Act and Commission regulations also require that all persons who receive a contribution for a political committee that is not an authorized committee must forward the contribution to the political committee within 30 days of receipt, if the contribution is $50 or less, and within ten days of receipt, if the contribution is in excess
CTIA notes that the fees charged to political committees would not be based entirely on the charitable donation model because that model can at times include waivers of fees.
AO 2010-23 Page 7 of $50. 5 2 U.S.C. 432(b)(2)(A); 11 CFR 102.8(b); see, e.g., Advisory Opinion 2009-32 (Jorgensen). Under CTIAs proposal, a contribution would be made at the time that a wireless subscriber pays a bill that includes a charge resulting from a Code-initiated pledge to contribute not at the time a pledge is made. The wireless service provider would forward that contribution to a connection aggregator approximately seven to ten days after receiving the payment. Next, over a 30-day period, the connection aggregator would collect all contributions for a particular political committee from all wireless service providers. The connection aggregator would then forward the contributions to the recipient political committee. Thus, 40 days could lapse before a political committee received a contribution made by a wireless subscriber. Therefore, because CTIAs proposal would not require wireless service providers and connection aggregators to forward contributions to recipient political committees within the applicable statutory and regulatory timeframes, this aspect of CTIAs proposal would not comply with the Act and Commission regulations. b. The Use of Separate Merchant Accounts CTIAs proposal does not envision the segregation of political contributions from the corporate funds of either the wireless service provider or the connection aggregators. In previous advisory opinions, the Commission has required that vendors maintain separate accounts for political contributions that are to be dispersed to candidates. The Commission has based this requirement in the Acts prohibition on corporate and labor organization contributions. See 2 U.S.C. 441b; 11 CFR 114.2(b); Advisory Opinions 2007-04 (Atlatl), 2006-34 (Working Assets), 2004-19 (DollarVote), 2002-07 (Careau), and 1999-22 (Aristotle Publishing). The Supreme Court has interpreted this prohibition to require a strict segregation between general treasury funds and political contributions. Pipefitters Local Union No. 562 v. United States, 407 U.S. 385, 414 (1972). The use of separate accounts by a corporation that forwards contributions to political committees prevents a commingling of corporate funds and campaign funds
5
The circumstances in this advisory opinion are distinguishable from those in Advisory Opinions 2006-30 (ActBlue) and 2003-23 (WE LEAD). In Advisory Opinion 2006-30 (ActBlue), the Commission approved a proposal for a nonconnected political committee to collect earmarked contributions for prospective candidates before those individuals had registered their authorized committees with the Commission, on the condition that the political committee forward the contributions to the candidates committees within ten days after the candidates committees filing their statements of organization. Similarly, in Advisory Opinion 2003-23 (WE LEAD), the Commission approved a proposal for a nonconnected political committee that sought to raise money for the presumptive nominee of the Democratic Party, on the condition that the political committee forward the contributions within ten days after the presumptive nominee is identified. Here, by contrast, CTIAs proposal envisions forwarding contributions only for existing political committees. See also Advisory Opinions 2006-08 (Brooks), 1998-25 (Mason Tenders), and 1982-23 (Westchester Citizens for Good Government).
AO 2010-23 Page 8 prohibited by [2 U.S.C.] 441b. Advisory Opinion 1999-22 (Aristotle Publishing). While the creation of a separate account for contributions to each individual recipient political committee is no longer required, the Commission has consistently required the use of at least one separate account to segregate corporate general treasury funds from contributions. See Advisory Opinions 2007-04 (Atlatl), 2004-19 (DollarVote), 2002-07 (Careau), 1999-22 (Aristotle Publishing), and 1991-20 (Call Interactive). 4. Does the ten-dollar approximate per transaction limit satisfy the $50 anonymous contribution limit? If not, must CTIA ensure that wireless service providers and connection aggregators develop a means to ensure that the contributions are not from impermissible sources and do not aggregate in excess of the $50 limit? If so, do the proposed confirming text message certifications satisfy these obligations? No, the ten-dollar approximate per transaction limit, on its own, does not satisfy the $50 anonymous contribution limit in all circumstances. CTIA must ensure that wireless service providers and connection aggregators use a means to ensure that contributions are not from impermissible sources and, if in excess of $50, are forwarded together with the requisite information in a timely manner. CTIAs proposed certifications may satisfy these obligations in many circumstances. If, despite the certifications, however, a subscriber makes pledges in excess of $50 in one billing cycle or has a corporate or foreign address, the wireless service providers would need to take additional measures. The Act and Commission regulations require that any person who receives a contribution in excess of $50 for a political committee must forward to the recipient political committee the name and address of the contributor and the date of the contribution. 2 U.S.C. 432(b)(1) and (b)(2); 11 CFR 102.8(a) and (b). Further, treasurers of political committees must keep an account of (1) all contributions received by or on behalf of such political committee; (2) the name and address of any person who makes any contribution in excess of $50, together with the date and amount of such contribution by any person; [and] the identification of any person who makes a contribution or contributions aggregating more than $200 during a calendar year, together with the date and amount of any such contribution[.] 2 U.S.C. 432(c)(1)-(3); see also 11 CFR 110.4(c). Commission regulations also require that treasurers of political committees examin[e] all contributions received for evidence of illegality and for ascertaining whether contributions received, when aggregated with other contributions from the same contributor, exceed the [Acts] contribution limitations . . . . 11 CFR 103.3(b). According to the proposal, while each of the pledged contributions would total approximately ten dollars, the contribution is not made until the wireless subscriber pays the bill. A wireless user may make repeated pledges to the same political committee within a single billing cycle, resulting in the wireless subscriber making a contribution more than $50 when paying the monthly bill, thereby triggering the requirements of 2 U.S.C. 432(b) and (c). Moreover within the context of family and group plans, several users could each pledge to make a contribution. CTIAs proposal does not satisfactorily
AO 2010-23 Page 9 address these concerns. Further, the individual pledge limit does not provide any safeguard against the prohibitions on contributions from foreign nationals and corporations, despite the fact that the wireless service providers will know that particular wireless subscribers have foreign addresses or are corporations. CTIA also states, however, that it could require wireless service providers and connection aggregators to use screening procedures that consist of a series of inquiries by text messages, to which a wireless user pledging a contribution must affirmatively respond. In prior advisory opinions, the Commission has approved a number of arrangements designed to ensure that corporations do not forward illegal contributions to political committees and thereby enable treasurers to comply with the Commissions regulations. See 11 CFR 103.3(b); Advisory Opinions 2009-32 (Jorgensen), 2007-04 (Atlatl), 2004-19 (DollarVote), and 2002-07 (Careau). For example, in Advisory Opinion 2004-19 (DollarVote), the Commission approved screening procedures that relied on contributor certifications as to the legality of the contributions, identified individual contributors, and compared residential and billing addresses to guard against corporate contributions. In Advisory Opinion 2007-04 (Atlatl), the Commission approved procedures that entailed certifications as to the legality of contributions and that forwarded contributor identification information to recipient political committees. CTIAs alternative safeguard is similar to those approved by the Commission in prior advisory opinions. See Advisory Opinions 2010-21 (ReCellular), 2010-06 (Famos), 2007-04 (Atlatl), 2006-34 (Working Assets), 2004-19 (DollarVote), 2002-07 (Careau), 1995-09 (NewtWatch). Accordingly, CTIAs proposed certifications may satisfy this obligation in many, but not all, circumstances. CTIAs proposed certification language requires the individual making the pledge to certify that he or she will be utilizing his or her own funds, not those of a corporation or labor organization, that he or she is not a foreign national, and that he or she will not make contributions via text message in excess of $50 in the calendar year. As noted previously, however, it will be possible for a wireless subscriber to make repeated pledges to the same political committee within a single billing cycle, resulting in the wireless subscriber making a contribution more than $50 when paying the monthly bill. Similarly, the subscribers bill may indicate that the subscriber is a corporation or has a foreign address. In any of these circumstances, where the certification is contradicted by evidence contained in the monthly bill, the wireless service providers would not be able to rely upon the certification and would be required to forward to the recipient committee the information required by 2 U.S.C. 432(b) and (c). As the Commission has previously explained, although it is ultimately the responsibility of the political committee to obtain the identity of contributors and to prevent excessive and prohibited contributions, Advisory Opinion 1991-20 (Call Interactive), when presented with information raising questions as to the legality of a contribution, to ensure the committee can meet its obligations, it is incumbent upon the service provider to forward the appropriate information. Advisory Opinion 1991-26 (Versatel).
AO 2010-23 Page 10 This response constitutes an advisory opinion concerning the application of the Act and Commission regulations to the specific transaction or activity set forth in your request. See 2 U.S.C. 437f. The Commission emphasizes that, if there is a change in any of the facts or assumptions presented, and such facts or assumptions are material to a conclusion presented in this advisory opinion, then the requestor may not rely on that conclusion as support for its proposed activity. Any person involved in any specific transaction or activity which is indistinguishable in all its material aspects from the transaction or activity with respect to which this advisory opinion is rendered may rely on this advisory opinion. See 2 U.S.C. 437f(c)(1)(B). Please note that the analysis or conclusions in this advisory opinion may be affected by subsequent developments in the law, including, but not limited to, statutes, regulations, advisory opinions, and case law. The cited advisory opinions are available on the Commissions website, www.fec.gov, or directly from the Commissions Advisory Opinion searchable database at http://saos.nictusa.com/saos/searchao. On behalf of the Commission, (signed) Matthew S. Petersen Chairman

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AOR - Harris County Republicans

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