Facebook's Brewing Legal Battle With States and Cities

Last week, Seattle became the first city to crack down on the secrecy surrounding online political ads. Experts say it likely won't be the last.
by | February 12, 2018
Some of the Facebook and Instagram ads linked to Russians. (AP/Jon Elswick)

In early December last year, a reporter for The Stranger walked into the Seattle offices of Facebook, printouts of the city code in hand, to ask for detailed information about online ad purchases for the city's 2017 elections.

Two months later, the city is on the brink of fining Facebook for failing to turn over the requested information. It’s the first attempt by any state or locality to enforce its political advertising disclosure laws on a social media company. Facebook is facing a $5,000 penalty per ad.

According to experts in campaign finance and advertising disclosure, this is likely just the beginning of states and cities' attempts to crack down on the secrecy surrounding political ads on the internet.

“Part of the reason we haven’t seen anything like [the Seattle case] before is because digital political ads are a relatively new phenomenon,” says Brendan Fischer, director of Federal and FEC Reform at the Campaign Legal Center.

Fischer points to the massive jumps in political ad spending in just the last few election cycles: from $22.3 million in 2008 to $159.8 million in 2012, all the way to $1.4 billion in 2016.

“[Digital political advertising] is growing exponentially,” he says. “So I would suspect that we will see more states and municipalities requiring transparency from digital advertisers.”

According to Michael Malbin, executive director of the Campaign Finance Institute, 39 states require some form of disclosure of sponsors within the body of the ad, but it’s not clear which of them -- if any -- could be applied to online media companies.

Online political ads became a hot-button issue shortly after the 2016 election, when Facebook revealed that a shadowy Russian company connected to the Kremlin had purchased $100,000 worth of ads. The disclosure laid bare a large and growing blindspot in federal campaign finance policy: The law that regulates ad disclosures for broadcasters does not apply to tech companies like Facebook, Google and Twitter.

In Seattle, though, state and local law polices what federal law doesn't.

Both Seattle and Washington state's campaign finance laws require any entity accepting and disseminating political ads to disclose the names and addresses of the people providing the ads, the amount of money paid for them and “the exact nature and extent of the advertising services rendered.” Unlike federal law, Seattle and Washington's apply not just to broadcasters but to any “means of mass communication." Advertisers must keep “books of account for the public to inspect,” says Kim Bradford, a spokesperson for the Washington State Public Disclosure Commission (PDC).

She says that the PDC’s staff has come to believe state law, like Seattle’s local ordinance, is applicable to online media companies. The state has yet to make any requests of Facebook, but “we are watching what’s going on in Seattle,” says Bradford.

Until last month, no one in the state appeared to realize the law applied to tech companies -- or at least no one realized they weren’t complying. It wasn’t until Eli Sanders, a reporter for The Stranger, requested the information from Facebook, Google and Twitter that their noncompliance came to the attention of the Seattle Ethics and Elections Commission. Facebook and Google responded to Sanders' emails but rejected his requests. But Twitter, according to candidate campaign disclosures, did not receive any political ad money for last year’s city elections, which has exempted the company from the current controversy.

On Dec. 12, a few days after Sanders’ story published, Wayne Barnett, executive director of the disclosure commission, sent letters to Facebook and Google asking them to comply with the city’s advertising disclosure law before Jan. 2. Both companies later received a 30-day extension.

Google has requested another extension, which Barnett says is pending. Facebook, meanwhile, submitted a spreadsheet of information that includes the amounts paid for ads, Barnett says, but does not include anything on “the exact nature and extent” of the ads, as required by law. (Moreover, Sanders wrote last week that the spreadsheet is full of inconsistencies.)

“This is not adequate, so the next step is either an enforcement action or some further opportunity for them to comply,” Barnett says. “We first made this request in early December, so it’s been a long time already. I’m not sure it makes sense to provide them with additional time.”

For its part, Facebook believes it has done its duty.

“Facebook is a strong supporter of transparency in political advertising. In response to a request from the Seattle Ethics and Elections Commission, we were able to provide relevant information,” Will Castleberry, a Facebook vice president, told Reuters.

At the federal level, legislators have been debating how to modernize campaign laws since the extent of Russian meddling in the 2016 election became apparent. In both the Senate and the House, a bipartisan bill called the Honest Ads Act would bring Facebook, Google and other online ad hosts under federal regulations like those that apply to broadcasters. But the bill has been inching along slowly and is still awaiting a committee vote in both chambers.

The Federal Elections Commission also recently said it will begin drafting rules about political ads on social media -- but only for ads for specific candidates, excluding so-called “issues ads” involving specific issues like gun control or abortion. That’s significant because many of the ads bought by Russians in 2016 were issues ads.

While most of the discussion about election meddling has focused on federal campaigns, Fischer says he wouldn’t rule out the possibility of foreign nationals trying to use their money to influence outcomes in state and local races. He points to a case in San Diego, where a wealthy Mexican businessman was illegally donating money to city candidates he thought might be friendly to his development schemes.

Events like these, and the growing power and influence of digital political advertisements, mean that states and localities have a vested interest in increasing transparency, Fischer says.

“Local governments are going to realize there are transparency gaps in the law,” he says. “There are many opportunities for state and local governments to step in here.”