This Hybrid is Not a Car!

Candidate Hybrid Advertising - It's Money in the Bank, not the Tank!

Last week we talked about coordinated political activities. One of the types of coordinated activity that can occur is coordinated joint advertising, paid jointly by the candidate's campaign and the candidate's political party. With less than two weeks to go to Election Day of what may be the most expensive, not to mention most critical presidential races on record, we can predict that many candidates, except for Barack Obama, will be scrounging for money everywhere they can.

The Wall Street Journal Online reported that the Obama campaign had raised more than $150 million in September, shattering the previous record he had set in August when he drew $66 million in contributions. In contrast, the McCain campaign is financially handicapped. In exchange for $84 million in public funding, McCain stopped further fundraising in early September. With that kind of fundraising disadvantage, the McCain campaign will have to do something ... and indeed it has. It is trying to narrow the gap through aggressive joint fund-raising with the Republican National Committee and state Republican parties. According to the Journal, the McCain campaign reported that it had helped raise $87 million for the Republican Party for the quarter ended Sept. 30th.

With this and other money, the Republican National Committee is sharing the cost of McCain-Palin advertising. As explained by Marc Ambinder in his blog on the Atlantic "The ads are being financed by the Republican National Committee in conjunction with the campaign, an even split, actually, and the law -- McCain's campaign finance law -- allows this division if and only if other candidates are mentioned." LINK

The ads carry an sponsorship ID that explains their hybrid nature:

Paid for by McCain-Palin 2008 and the Republican National Committee, Approved by John McCain

Links to two of their hybrid ads may be found on Ambinder's blog page and are also here:

http://www.youtube.com/watch?v=fgNWc2mQ0ig

http://www.youtube.com/watch?v=Lk_zBZ-pjHs&e

McCain's hybrid ad strategy was also explained in a recent Washington Post online feature, The Trail - A Daily Diary of Campaign 2008.

LINK

We saw hybrid ads in the 2004 campaign and we're seeing even more in 2008. McCain-Palin is not alone; we should expect to see other campaign/political party advertising joint ventures from now until the election. The Washington Post link above contains an advertisement for the Jim Gilmore U.S. Senate campaign that is paid for partially by the Republican Party of Virginia.

So, if hybrid ads are a reality. Here's the big question for broadcasters and political media buyers.

WHAT'S THE COST? DOES LOWEST UNIT CHARGE APPLY? IF SO, HOW MUCH?

Lowest Unit Charge does apply, but only to the portion paid for by the candidate. LUC does not apply to expenditures of political parties, only to "uses" of the candidate. To determine how much of a hybrid spot is entitled to LUC, the station has a right to obtain an allocation from the time buyer revealing the proportion of the cost covered by the candidate's campaign and the amount covered by the party. Broadcasters can require the disclosure of this information and proof of compliance with Federal Election disclosure requirements before accepting the ad. While never having to rule on the question, informally, the FCC staff advised that allocating LUC to a pro-rata percentage of the ad paid for by the campaign is most likely the best way to deal with hybrid advertising.

The balance of the cost is not subject to LUC and can be charged at the station's regular rates and subject to its normal advertising policies.

Sounds simple, but the devil is in the math. Old theories of "how many spots do I get for my $100?" have to go out the window. Typically you would just divide the cost by the number of spots and charge at the stations LUC for the class of time in which each spot runs. But assume this example:

Candidate M makes a buy of 50 spots in multiple classes of time coordinated with the political party and paid for 50% by each of them. The normal rate for one of those classes is $150. The LUC for that class of time turns out to be $100. The candidate's 50% would be $50 or 50% of the LUC. The party's 50% cost would be $75 or 50% of the normal rate. So, even though each is paying for 50% of the ad, their costs are not 50% of the ad cost, which turns out to be $125. Easy, right?

Now, suppose that you have one buy of a coordinated ad that is 50% each and that includes four different classes of time at different normal rates and LUCs. Moreover, suppose that as we get closer to November 4th, the candidate funds run really low and the party decides to put more money into that candidate's race, so the ratio of contribution changes. I'm not even going to try to do that math, but it's a good idea to get ready.

Now suppose the broadcaster decides this is just all too complicated and to simply charge LUC to both the candidate and the party. Query, as the professors say in law school, would you be making an illegal in-kind contribution under the Federal Election Campaign Act? Well, that's a question for the FEC (Federal Election Commission), not the FCC. For those who remember the Missouri Broadcasters Association's attempt to get that type of issue clarified in the Kit Bond Senate Campaign of 2004, you'll recall that the FEC does not seem to want to tackle such issues. Generally, though, the FEC approach is to ascertain whether the rate charged is "commercially reasonable." If it is, then no contribution has occurred.

Any or all of this may happen to you ... on the way, I hope, to that bank.

But be careful! We don't want to see you headed for the tank!

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.