Summary and Action Requested
This memo provides an overview of proposed amendments to the Ethics Commission’s regulations regarding the City’s campaign finance disclaimer requirements.
Staff recommends the Commission review, discuss, and approve the proposed regulation amendments as drafted in Attachment 1.
Background
In 2019, voters approved Proposition F, which amended the Campaign and Governmental Conduct Code (C&GCC) in several ways, including changes to the City’s disclaimer requirements for primarily formed independent expenditure committees. Prior to the passage of Proposition F, these committees were required to disclose their top three contributors of $10,000 or more on advertisements paid for by the committee. Proposition F lowered the dollar amount in this disclaimer requirement to $5,000, raised the font requirements from 12-point font, to bolded 14-point font, and established a new requirement that these committees also disclose their “secondary major contributors.”
Per Section 1.161 of the C&GCC, the secondary major contributors disclaimer rule requires that “if any of the top three major contributors is a committee, the disclaimer must also disclose both the name of and the dollar amount contributed by each of the top two major contributors of $5,000 or more to that committee.”
In January 2020, a group of plaintiffs called Yes on Prop B challenged the requirement to disclose secondary major contributors established through Proposition F. The plaintiff’s request for a preliminary injunction was granted in part and denied in part, by the Honorable Charles R. Breyer, District Court Judge for the Northern District of California; a copy of the court order is included below as Attachment 2. The court granted the preliminary injunction with respect to the disclosure of secondary major contributors on print advertisements that are “5″ by 5″ newspaper advertisements, smaller “ear” advertisements, and spoken disclaimers on digital or audio advertisements of thirty seconds or less.” The court upheld the other disclaimer requirements enacted through Proposition F.
In May 2022, another group of plaintiffs filed a lawsuit called No on E v. David Chiu that challenges the requirement to disclose secondary major contributors established through Proposition F. The plaintiffs filed a motion seeking preliminary injunctive relief, and Judge Breyer denied the motion. On appeal, the Ninth Circuit affirmed the denial of preliminary injunctive relief. The plaintiffs filed a Petition for a Writ of Certiorari before the United States Supreme Court, and the Supreme Court has distributed the case for consideration at its September 30, 2024 conference.
In December of 2022, the Ethics Commission voted to approve legislation amending Section 1.161, to include exceptions to the disclaimer requirement for small print advertisements and short audio and video advertisements. This legislation was subsequently approved by the Board of Supervisors in 2023 and is reflected in the current law.
The recently added exceptions to Section 1.161(a)(1)(A-B) narrowly address small print advertisements that are 25 square inches or smaller and short audio and video advertisements that are 30 seconds or less. In case there remains the potential for situations involving larger advertisements where the additional disclaimer requirements in local law could occupy a substantial portion of the total advertisements, the draft regulation in Attachment 1 seeks to remove that potential.
Proposed Regulation Regarding Campaign Finance Disclaimer Requirements
In Judge Breyer’s 2020 order, the Court considered the impact of the remaining local disclaimer requirements on the Yes on Prop B campaign, with the requirements on smaller ads enjoined. In the order, Judge Breyer stated that with the smaller ad requirements enjoined, the remaining disclaimers would “…not take up more than approximately 35% of any of Yes on Prop B’s proposed ads…[and that] [t]hat leaves almost two-thirds of the ad for Yes on Prop B’s pro-Prop-B messaging. The Court finds that this space is sufficient to communicate Prop B’s political message.” Judge Breyer further stated that “[w]hile the burden imposed by the disclaimer requirements is not insignificant, it is not inappropriate given the important governmental interest at stake.” (See Attachment 2)
Staff looked to the Court’s finding in 2020 that leaving “almost two-thirds” of an advertisement for the committee’s political messaging was sufficient when balancing the need for disclaimers when developing the proposed draft regulation in Attachment 1. As such, the proposed regulation only applies when complying with the City’s disclaimer requirements would result in more than one-third of the total advertisement being taken up by the disclaimer.
Draft Regulation 1.161-4 creates exceptions for the City’s disclaimer requirements, which can be gradually applied in situations where complying would result in more than one-third of the total advertisement being occupied with the disclaimer. The regulation gradually waives the local disclaimer requirements until either 1) the disclaimer takes up one-third or less of the total advertisement, or 2) the disclaimer requirements are waived to the point that they are comparable to the State’s existing requirements.
The following summarizes what the draft regulation would allow committees to do if an advertisement’s disclaimer were taking up more than one-third of the total advertisement.
- For print advertisements: Regulation 1.161-4(a)(1) allows the committee to first disregard the larger font requirements in local law and instead rely on the State’s font requirements. If after adjusting the font requirements, the disclaimer still takes up more than one-third of the total advertisement, the committee would be able to omit any information regarding secondary major contributors.
- For audio, radio, telephone, video, television, or electronic advertisements: Regulation 1.161-4(a)(2) allows the committee to omit any information regarding secondary major contributors from the spoken or visual components of the disclaimer.
This regulation would give committees the ability to omit secondary major contributor information when doing so would cause the required disclaimers to take up more than one-third of the total advertisement. This exception is intended to allow greater flexibility in the application of local disclaimer rules in a way that aligns with the rationale in Judge Breyer’s order. The regulation seeks to balance committee interests in maximizing space for their political messages with the public’s interest in robust disclaimer rules that aid transparency.
The recommended amendments in Attachment 1 were developed by the Policy Division based on feedback from, and in collaboration with, the Commission’s Engagement & Compliance Division and the Enforcement Division, and in consultation with City Attorney’s Office.
The draft regulations from Attachment 1 have been noticed to the public more than 10 days prior to the Commission’s August meeting, as required by Charter Section 4.104. Thus, the Commission may vote to adopt the proposed regulations during its August meeting if desired.
Recommended Next Steps
Staff recommends the Commission vote to approve the proposed regulations as drafted.
Attachments:
Attachment 1: Ethics Commission Campaign Finance Regulation Amendments – Noticed Publicly on 7/29/24
Attachment 2: Judge Breyer’s Order Dated February 20, 2020