Implementation of the Democracy Protection Act
NY-ADR
11/14/18 N.Y. St. Reg. SBE-21-18-00047-A
NEW YORK STATE REGISTER
VOLUME XL, ISSUE 46
November 14, 2018
RULE MAKING ACTIVITIES
STATE BOARD OF ELECTIONS
NOTICE OF ADOPTION
I.D No. SBE-21-18-00047-A
Filing No. 1042
Filing Date. Oct. 29, 2018
Effective Date. Nov. 14, 2018
Implementation of the Democracy Protection Act
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Amendment of section 6200.10; and addition of section 6200.11 to Title 9 NYCRR.
Statutory authority:
Election Law, sections 14-107(5-a), 14-107-b and 3-102(17)
Subject:
Implementation of the Democracy Protection Act.
Purpose:
The rule effectuates the amendments to article 14 of the Election Law resulting from chapter 59 of the Laws of 2018.
Substance of final rule:
The proposed amendment to section 6200.10, and the addition of section 6200.11, implements changes in law resulting from the New York State Democracy Protection Act, Chapter 59 of the Laws of 2018, Part JJJ. The proposed regulation modifies current regulations as follows: a) Prohibits foreign entities from forming an independent expenditure committee and purchasing political ads in order to influence New York elections; b) Requires that internet and digital advertisements paid for by Independent Expenditure Committees and targeted to 50 or more members of the General Public Audience be subject to disclosure requirements; c) Requires all paid independent political online ads to clearly display that the ad was not authorized by any candidate and who actually paid for the ad; and d) Requires television or radio broadcast stations, provider of cable or satellite televisions, or online platforms to collect the registration documents of Independent Expenditure committees when such committees purchase purchases communications in the form of an independent expenditure.
Additionally, the proposed regulation defines “online platform” as follows: “An online platform means: (i) a public-facing Internet Web site, web application, web domain or digital application, including a social network or search engine, which sells political advertisements and has 70,000,000 or more unique monthly United States visitors or users for a majority of months during the preceding 12 months as measured by an independent digital ratings service accredited by the Media Ratings Council; or (ii) any Third-Party Advertising Vendor that has 30,000,000 or more unique monthly United States visitors in the aggregate on any advertisement space that it has sold or bought for a majority of months during the preceding 12 months as measured by an independent digital ratings service accredited by the Media Ratings Council.”
There are two nonsubstantive changes to the text of the rule since the last publication. The final rule clarifies that “Third-Party Advertising Vendors” are unaffiliated with the buyer or seller of advertisements. Additionally, the final rule exempts online platforms operated by magazines and other periodicals, along with newspapers, from collecting registration forms from independent expenditure committees.
Final rule as compared with last published rule:
Nonsubstantive changes were made in section 6200.10(b)(12) and (13).
Text of rule and any required statements and analyses may be obtained from:
Nicholas Cartagena, Esq., New York State Board of Election, 40 North Pearl Street, Suite 5, (518) 474-2064, email: [email protected]
Revised Regulatory Impact Statement
A revised Regulatory Impact Statement is not required because the changes made to the last published rule do not necessitate revision to the previously published document. The changes to the text still seek to implement the Democracy Protection Act in a way that accomplishes the goals highlighted in the Regulatory Impact Statement. These changes, while some of them are substantial, do not affect the meaning of any statements in the document.
Revised Regulatory Flexibility Analysis
A revised Regulatory Flexibility Analysis is not required because the changes made to the last published rule do not necessitate revision to the previously published document. The changes to the text still seek to implement the Democracy Protection Act in a way that accomplishes the goals highlighted in the Regulatory Flexibility Analysis. These changes, while some of them are substantial, do not affect the meaning of any statements in the document.
Revised Rural Area Flexibility Analysis
A revised Rural Area Flexibility Analysis Statement is not required because the changes made to the last published rule do not necessitate revision to the previously published document. The changes to the text still seek to implement the Democracy Protection Act in a way that accomplishes the goals highlighted in the Rural Area Flexibility Analysis Statement. These changes, while some of them are substantial, do not affect the meaning of any statements in the document.
Revised Job Impact Statement
A revised Job Impact Statement is not required because the changes made to the last published rule do not necessitate revision to the previously published document. The changes to the text still seek to implement the Democracy Protection Act in a way that accomplishes the goals highlighted in the Jobs Impact Statement. These changes, while some of them are substantial, do not affect the meaning of any statements in the document.
Initial Review of Rule
As a rule that requires a RFA, RAFA or JIS, this rule will be initially reviewed in the calendar year 2021, which is no later than the 3rd year after the year in which this rule is being adopted.
Assessment of Public Comment
The State Board received four public comments in response to its publication of Emergency Adoption and Revised Rulemaking I.D No. SBE-21-18-00047-ERP that amends section 6200.10 and adds section 6200.11 to Title 9 NYCRR. The Board received comments from the following entities:
A trade association for newspapers;
A trade association for broadcasters;
A trade association for magazines; and
A nonprofit organization that described itself as "dedicated to protecting and strengthening the democratic process across all levels of government."
Summaries of the comments on the proposal and the Department’s responses thereto are as follows:
Comment: The newspaper association, magazine association, and broadcasters association all believe that the exemption of "newspapers" from the definition of "online platform" is too narrow. The regulations define “newspaper” as the same as New York General Construction Law. These associations believe that magazines should be included in this definition because § 14-124(1) of the Election Law provides that Article 14 of the Election Law shall not apply to "any person, association or corporation engaged in the publication or distribution of any newspaper or other publication issued at regular intervals in respect to the ordinary conduct of such business" (emphasis added). The newspaper and magazine associations believe that "other publications" term would include publications such as magazines. The broadcasters association believes that on-line electronic news sites should be excluded based in the First Amendment.
Conversely, the nonprofit organization believes that newspapers should not be exempt from the definition of "online platform." The nonprofit argues that, per the language of the statute, § 14-124(1) of the Election Law exempts newspapers from Article 14 only to the extent that the activity is " in respect to the ordinary conduct of such business" (See Elec. Law § 14-124(1)). The nonprofit organization suggests that the standard should be whether the regulation would "infringe the papers’ journalistic and editorial independence in any way." The nonprofit suggests that obligations in the regulation are modest and would not impose on the journalistic and editorial independence of the newspaper.
Response: Given the broad language in Election Law § 14-124(1), the State Board feels compelled to continue the exemption of newspapers to the definition of an online platform. Further, given the "other publication" language in statute, the State Board agrees that the exemption should be extended to magazines. The State Board is not inclined to exclude online news sites from the regulation. The exemption of newspaper and magazines is based on Election Law § 14-124(1), not the First Amendment. The State Board believes that Election Law § 14-124(1) does not cover online news organizations.
Comment: The newspaper association argues that the "proposed language fails to clarify that a Third-Party Advertising Vendor does not include the placement operations of a news organization which assists advertisers in reaching readers of other news organizations." Specifically, the newspaper association argues that newspapers should be exempt from the definition of " Third-Party Advertising Vendor" because some newspaper companies also provide advertising design and placement services to other news companies."
Response: The State Board does not believe that Election Law § 14-124(1) applies when a newspaper company is buying or selling advertisement space on another platform on behalf of a third party. Again, Election Law § 14-124(1) provides that Article 14 of the Election Law shall not apply to "any person, association or corporation engaged in the publication or distribution of any newspaper or other publication issued at regular intervals in respect to the ordinary conduct of such business" (emphasis added). It is the State Board's position that buying and selling digital advertisements on another platform on behalf of a third party falls outside this scope.
Comment: The Broadcasters argue that the definition of "Third-Party Advertising Vendor" would include "wholly owned" subsidiaries of companies whose sole purpose is to buy and sell advertising on behalf of its parent company. The Broadcasters argue that the definition of "Third-Party Vendor" should be modified to clarify where the third-party vendor is a "completely independent advertising agenc(y)."
Response: The revised rule adds language making this clarification.
Comment: Both the Broadcasters and the Newspaper association express concern that the 30 million unique visitor on any advertisement space standard applies to "all" advertisements rather than just "political" advertisements.
Response: The revised rule provides that an online platform means: "any Third-Party Advertising Vendor that has 30,000,000 or more unique monthly United States visitors in the aggregate on any advertisement space that it has sold or bought for a majority of months during the preceding 12 months as measured by an independent digital ratings service accredited by the Media Ratings Council" (emphasis added). The State Board is unaware of any digital ratings service that measures the number of visitors to "political" advertisements. As such, setting the standard to monthly visitors of "political" advertisement space would render the Third-Party Vendor portion of the regulation meaningless as there is no viable way to measure such a metric.
Comment: The Broadcasters believe that account executives who are in "small upstate market(s)," but work for larger advertising companies should be exempt from the definition of "Third-Party Vendor" because "the small upstate office may have not have information on the national reach of the entire company." The Broadcasters advocate that "(a) more appropriate standard would be to simply consider the reach … of the local office in which the advertising is purchased."
Response: The State Board does not believe it is sound policy to exclude certain branches or employees of an online platform from the regulation. Additionally, digital rating services do not measure unique visitors of advertisement space by branch; rather, it is measured by the agency as a whole. As such, the State Board believes that the 30 million standard should not be amended.
Comment: The Broadcasters express concern that small advertiser would be considered "Third-Party Vendors" if they place advertisements on large platforms, such as Twitter, Facebook, and Google. The Broadcasters believe that the 30 million threshold should be interpreted as to count only the volume of advertising placed by the Third-Party Advertising.
Response: The revised rule provides that an online platform means: "any Third-Party Advertising Vendor that has 30,000,000 or more unique monthly United States visitors in the aggregate on any advertisement space that it has sold or bought for a majority of months during the preceding 12 months"(emphasis added). The 30,000,000 is measured by the number of visitors to the advertisements the vendors have placed. If a vendor places an advertisement on Facebook, it does not automatically become defined as an "online platform" for purposes of this regulation because Facebook gets more than 30 million unique visitors.
Comment: The Broadcasters believe that only "demand side" Third-Party Vendors should be considered "Online Platforms" and that "(t)he Third-Party Advertising Vendor rules should not apply to media companies that are already subject to the 70 million standard(.)"
Response: The State Board disagrees that media companies, who also act as Third-Party Vendors, should be exempt from the 30 million standard. The Board believes that media companies that engage in the buying and selling of digital ads to unaffiliated third parties should be treated the same as advertising agencies.
Comment: The nonprofit organization argued that Third-Party Vendor status should be determined on a case-by-case basis because "much of the public information about traffic to third party-vendors’ ad inventories is self-reported. As a result, the State Board would lack a verifiably objective method to determine whether a particular third party vendor has, in fact, exceeded the threshold for 'online platform' status." The nonprofit further states: "This approach would give the final regulation greater adaptability to future developments in digital marketing tactics."
Response: As noted in the previous assessment of public comments, the Board concedes that regulating programmatic advertising and ad networks is complicated; however, not addressing the issue directly risks leaving a large regulatory loophole. While many of these processes may become obsolete in the coming years, the Board is obligated to initially review this regulation within three years, and subsequently review this regulation every five years. This will give the board ample opportunity to modernize this regulation as needed. Additionally, the Board believes that the risk of vendors underreporting its traffic is negligible. Vendors rely on its market share and reach to attract new customers. Underreporting traffic would be contrary to the vendor's interests.
Comment: The Broadcasters advocate that the regulations should only apply to online platforms that meet the 70 million or more unique visitor threshold "preceding August 8, 2018" and not apply to any online platform that reaches this threshold after August 8, 2018. The Broadcasters reason that a "one-time application of the standard" is appropriate because the online marketplace is changing and dynamic and the State Board needs some level of certainty in evaluating the regulations in the next three years.
Response: If the State Board made the suggested amendment, online platforms that become popular and exceed the 70 million threshold sometime in the future would not be subject to this regulation, while online platforms that are no longer be relevant in the marketplace would still be subject to the regulation because, in the past, it met the 70 million threshold. The State Board believes that this would be arbitrary and contrary to public policy.
Comment: The Broadcasters advocate for a retention date for the independent expenditure forms. The Broadcasters suggest that broadcasters and online platforms be able to dispose of the IE forms they collect 90 days after the election.
Response: The State Board does not believe it is necessary to specify a retention date in order to implement this regulation.
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