Revised E&J for agent
On January 23, 2006, the Commission approved a revised Explanation and Justification (E&J) for the definitions of agent used in its regulations on coordinated and independent expenditures and its regulations regarding nonfederal funds. The revisions respond to the district court decision in Shays v. FEC.
Background
In its September 18, 2004 decision in Shays, the U.S. District Court for the District of Columbia held that the Commission had not adequately explained its decision to include in its definitions of agent those with “actual authority,” but not “persons acting only with apparent authority.” Having concluded that the Commission’s inadequate explanation violated the reasoned analysis requirement of the Administrative Procedure Act (APA), the court remanded the definitions to the agency for further action consistent with its opinion.
In response, the Commission approved a Notice of Proposed Rulemaking (NPRM) on January 27, 2005 requesting comments on several alternatives, including possible changes to the definitions of agent used in its regulations. On May 1, 2005, the Commission held a public hearing to receive testimony on the proposed rules. For more information on the public hearing, see the July 2005 Record, page 6.
Revised E&J
After considering public comments and testimony, the Commission decided to retain the current definitions of agent in 11 CFR 109.3 and 300.2(b), but to explain more fully its decision to exclude “apparent authority.” In short, the Commission believes that the current definitions, which include “actual authority,” either express or implied, best reflect the intent and purposes of the statute.
Furthermore, after examining its pre- and post-BCRA enforcement record, the Commission has determined that excluding “apparent authority” from the definitions of agent has not allowed circumvention of the Act nor led to actual or apparent corruption. The current definitions cover individuals engaged in a broad range of activities specifically related to BCRA-regulated conduct, rather than only to expenditures. This has dramatically increased the number of individuals and type of conduct subject to the Act, especially when compared to the Commission’s pre-BCRA definition of agent.
Similarly, the Commission believes including “apparent authority” in the definitions of agent is not necessary in order to implement BCRA or the Act. “Actual authority,” either express or implied, is a broad concept that covers the wide range of activities prohibited by the statute. This not only provides committees with appropriate incentives for compliance, but also protects core political activity that could otherwise be restricted or subject to Commission investigation under an apparent authority standard. The revised E&J also provides analysis of several specific hypothetical situations raised by commenters to illustrate how “actual authority” sufficiently addresses behavior.
Finally, the E&J concludes that liability premised on “actual authority” is best suited for the political context. Although “apparent authority” is applicable in commercial contexts, BCRA does not affect individuals who have been defrauded or have suffered economic loss due to their detrimental reliance on unauthorized representations.
Applying “apparent authority” concepts developed to remedy fraud and economic loss to the electoral arena could restrict permissible electoral activity where there is no corruption or the appearance thereof.
The revised Explanation and Justification was published in the January 31, 2006, Federal Register (71 FR 4975) and is available on the FEC website.