Campaign Finance Laws and the Rupert Murdoch Problem
Hasen, Richard L., Texas Law Review
We live in an era of corporate "synergy," where large corporations use vertical integration and product tie-ins to promote their various products and services. One unusual tie-in occurred in the recent film Independence Day1 by Rupert Murdoch's 20th Century Fox subsidiary. There, viewers were treated to fictional press reports of an incoming alien invasion broadcast by "Sky News." Though American viewers may have believed the Sky News entity to be fictional, it is another of Murdoch's subsidiaries, based in Britain and broadcasting in Europe, Asia, and Africa.2 The Columbia Journalism Review noted that "Independence Day may be the first movie to treat a news broadcast as just another 'product' to be `placed,"'3 much like Reese's Pieces appeared in the movie E. T4
The last fifteen years have seen an ever-increasing pace of media consolidation, which has affected the news media in profound ways. Ben Bagdikian, who has counted the number of large media corporations, began with a list of fifty corporations in 1984;5 his current list has ten names.6 It is hardly news to anyone that General Electric owns NBC, CNBC, and half of MSNBC (the other half being owned by Microsoft);7 Time-Warner owns Time magazine, the Cable News Network (CNN), numerous cable systems, and several media companies;8 Disney owns ABC, ESPN, newspapers, and magazines;9 and Rupert Murdoch's News Corporation owns FOX News, 20th Century Fox film and television, a host of FOXaffiliated local television stations and cable stations, HarperCollins books, the New York Post and the Weekly Standard.10 These changes alone justify a critical look at current and proposed laws that exempt news media from otherwise applicable campaign finance regulations.
Current federal law prohibits corporations from spending corporate funds directly to promote or oppose a candidate for federal office.11 Instead, a corporation can set up an indirect funding mechanism subject to a number of restrictions on the source, use, and disclosure of funds.12 The prohibition on direct corporate spending, however, does not always apply to media corporations. If the New York Times Corporation, through the New York Times, or Time-Warner, through Time or CNN, endorses or opposes a candidate for federal office, federal law does not consider this a corporate campaign-related expenditure, instead considering it to be exempt from regulation.13 A number of states have a similar media exception to their campaign finance laws.14
Recent campaign finance reform proposals aimed at promoting political equality have also included media exceptions.15 My own prior work in this area is typical: I have proposed a plan that would replace all private funding of federal elections with vouchers distributed to all voters for use in federal elections.16 The plan allows for only a few exceptions to the ban on private money, including one for media coverage and endorsements of federal candidates.17
Though media consolidation and the inherent power that consolidation brings to any industry alone justifies examination of the media exception, a second compelling reason for taking a close look is the exception's role in the broader debate over campaign finance reform. Skeptics and critics of campaign finance reform point to the media exception as a potent argument against equality-based reform and even against current campaign finance laws.18 They argue that equality cannot be achieved when the media are given an even more preeminent place than they already have in shaping public attitudes toward federal candidates, especially, as some argue, given the media's supposed liberal bias19 and the possible First Amendment problems they claim prevent eliminating the media exception.
Arthur Eisenberg poses the issue most directly. After stating that even the "sharpest critics" of current campaign finance jurisprudence would likely concede that a limitation on the right of newspapers to advocate the election or defeat of a candidate "would violate the First Amendment," Eisenberg continues:
If it is a First Amendment violation to tell Rupert Murdoch that he cannot publish an editorial in the New York Post supporting or opposing a candidate, by what logic is it permissible or even appropriate to tell Murdoch's next door neighbor that she cannot purchase an advertisement in the New York Times in order to express support for or opposition to a candidate? …