AO 2010-06: Political affinity accounts for revenue-generating web platform
Famos LLC, a for-profit limited liability company marketing a webbased platform (Famos Platform) that allows users to receive compensation from personal endorsements of products and services, may allow political committees to obtain a political affinity account and receive contributions from other individual platform users without making a prohibited corporate contribution.
Background
The Famos Platform will allow users to receive compensation from personal endorsements of products. For example, if a Famos account holder sends an email to a friend recommending a movie, the Famos Platform may direct the friend to a website selling tickets for that movie. When Famos receives a commission from that website for directing the account holder’s friend to purchase a movie ticket, Famos will share some of that revenue with the account holder.
The Famos Platform, like nearly all contemporary web-based marketing platforms, will be offered free of charge to prospective account holders. Famos and its account holders may earn and share revenue from three types of transactions: web searches, web shopping and online referrals. Famos plans to keep twenty percent of any revenue generated in the three types of transactions, with the remaining eighty percent shared by the rest of the “referral path.” Famos plans to offer the Famos Platform to political committees, including authorized committees, nonconnected committees and party committees, but excluding separate segregated funds. Famos will offer its platform to political affinity account holders on much the same terms as to other account holders: free of charge, with a $200 per hour customization rate for non-standard customizations to their Famos Platform. Political affinity account holders will need to make certain non-standard customizations to comply with the Federal Election Campaign Act (the Act).
Famos account holders will be able to keep their share of revenue or direct it (or any portion of it) to a charity or non-profit organization that also holds a Famos account. Famos will not distribute revenue shares to account holders or designated non-profit entities until their account balance is above ten dollars. Political affinity account holders will be removed from the revenue generating chain, with any revenue generated being passed down to the next account holder or entity in the referral path.
Famos account holders may have their share directed to political affinity account holders, just as they can to other non-profit or charity account holders. Famos account holders will have to make the following certifications as described in AO 1995-09: that they are making the contribution from their own funds and not those of another; that the contributions are not from the general treasury funds of a corporation, labor organization or national bank; and that contributors are not federal government contractors or foreign nationals who lack permanent resident status in the United States.
Famos account holders will be informed that federal law requires the political affinity account holders to use their best efforts to collect and report the name, mailing address, occupation and name of employer of each individual whose contributions exceed $200 in a calendar year.
Famos asks if it may enter into the proposed program with political committees without making prohibited corporate contributions.
Analysis
Famos may enter into the proposed program because it would not violate the prohibition against corporate contributions. In prior advisory opinions, the Commission has examined a number of business arrangements between political committees and service providers that were either affinity programs or similar to affinity programs. In these advisory opinions, the Commission indicated that the Act permits corporations to offer affinity programs and enter into affinity-type business arrangements so long as the corporation and political committee enter into a commercially reasonable transaction in which the political committee pays the usual and normal charge for any services provided, and the amounts contributed to political committees via rebates or rewards are from individual customers’ funds and not corporate funds. AOs 2006-34, 2003-16 and 2002-07.
Because nearly all web-based platforms now offered in the marketplace are made available free of charge, Famos may provide its basic platform free of charge to political affinity account holders as part of its standard practice. In exchange, Famos would receive the value of the political affinity account holders’ marketing services. Because each additional user of the Famos Platform may potentially produce revenue for Famos as well as generate possible future contributions for the political affinity account holder, the provision of the Famos Platform in exchange for the political affinity account holder’s promotion of the Famos Platform would represent a commercially reasonable transaction made in the ordinary course of business. AOs 2007-04, 2004-19, 1995-34 and 1994-33.
Political affinity account holders would be required to pay the usual and normal charge for any customization of the platform, an “industry rate” charged to other Famos account holders of $200 per hour for customization beyond the basic options provided as part of the political affinity account holders’ setup and administrative page. Because Famos will not provide necessary customizations for free or at a reduced rate, the provision of those services will not result in a prohibited in-kind contribution. 11 CFR 100.52(d)(1).
The Commission has concluded in previous advisory opinions that any contributions from rebates or rewards must be made by individuals from their own funds and not by the corporate service provider. In general, the Commission has concluded that affinity programs in which a corporation transfers to a political committee a portion of the revenue collected result in a prohibited corporate contribution. AOs 2008-18 and 2003-16. However, the Commission has concluded that it is permissible for affinity programs to generate revenue in the form of rebates or rewards to individuals, who may then choose to pass their earned revenue to political committees who are affinity partners. AOs 2006-34 and 2003-16. Because the revenue in these programs was offered to individuals in the ordinary course of business, the revenue was the property of the customer or individual who controlled the direction of the revenue.
The remittances at issue in this instance would be offered in the ordinary course of business, with individual Famos account holders directing the disposition of their revenue shares. Famos will inform account holders of the appropriate requirements of the Act, requiring the certifications described in AO 1995-09. Additionally, Famos’s plan to credit account holder-confirmed contributions to political committees through an automated clearinghouse transaction on the last day of each month in which the remittance is earned complies with the requirement that any person who receives a contribution of $50 or less for a political committee must forward the contribution to the political committee within thirty days of receipt. 2 U.S.C. § 432(b)(2)(A); 11 CFR 102.8(b)(1). Because the account holder does not make a contribution until Famos sends a separate confirmation note to the account holder that Famos intends to distribute to the political affinity account holder, the plan complies with the requirement that contributions to authorized political committees be forwarded, along with any required information, no later than ten days after receiving the contribution. 2 U.S.C. §432(b) (1); 11 CFR 102.8(a). Finally, Famos’s proposal to transmit the contributor’s name, address, occupation and employer to the receiving political committee within ten days of the transfer of funds conforms with 11 CFR 102.8(b)(2). Thus, the proposed program does not violate the Act’s prohibition against corporate contributions under the conditions set forth in this opinion.
AO 2010-06: Date issued: May 27, 2010; Length: 9 pages