REQUESTED BY: James R. Ritzman, President, Arjay Advertising
QUESTION: Is the provider or seller of advertising specialty items to a candidate committee acting on behalf of that committee thus requiring the provider or seller to disclose certain expenditures to the candidate committee?
You indicate that you are an advertising specialty distributor. In your business you sell such items as bumper stickers, campaign buttons, streamers, et cetera. Items such as these are often sold to political candidates or candidate committees and many of these items are personalized. Certain items you maintain in stock and others are specially ordered by you from the manufacturer when the need arises. When a candidate committee is seeking to purchase a specialized or personalized item (such as bumper stickers containing the candidate's name) you are aware that there are several companies from which you can procure this item. You do not discuss these companies with your customer. In fact, you state that the customer is not able to make purchases directly from these companies. You quote a price to the customer decides to proceed you contact one of the companies which can provide the item. This company would ship the item to you and bill you. It does not bill your customer. You are the one that bills your customer. In the past you have been asked to provide the names of companies with which you deal as well as the amounts which you spend with these companies when you acquire items from them for candidate committees.
Section 49-1455 states:
An expenditure shall not be made, other than for overhead or normal operating expenses, by an agent or an independent contractor, including an advertising agency, on behalf or for the benefit of a person unless the expenditure is reported by the committee as if the expenditure were made directly by the committee, or unless the agent or independent contractor files a report of independent expenditure as provided in Section 49-1467. The agent or independent contractor shall make known to the committee all information required to be reported by the committee.
The campaign statement of a committee . . . shall contain the following information: (7) the full name and street address of each person to whom expenditures totaling more than one hundred dollars were made, together with the amount of each separate expenditure to each such person during the period covered by the campaign statement; the purpose of the expenditure; and the full name and street address of the person providing the consideration for which any expenditure was made if different from the payee; . . .
Initially, we need to determine whether or not an advertising specialty distributor is "an agent or independent contractor" of a candidate committee. We conclude that it is not. The relationship between Arjay and the candidate committees is that of vendor and buyer. The vendor is not transacting business in the name of the buyer as in an agent/principal relationship. The vendor is not supplying services or skills as would normally be the case in a situation involving an independent contractor. The vendor is merely supplying goods for a price. Thus, the vendor is the "person providing consideration" for the expenditure made under the provisions of Section 49-1455(7).
It is apparent from the face of this statute that its purpose was to prevent the use of certain entities as shields which prevent the disclosure of the actual expenditures of a candidate committee. For example, a committee may hire an advertising agency which may act as a broker of sorts to purchase television and radio air time, newspaper and magazine advertising, and even advertising specialty items. It does not serve the disclosure philosophy of the Nebraska Political Accountability and Disclosure Act to have thousands of dollars worth of goods and services purchased while having the Campaign Statement merely reflect one lump sum payment to a single advertising agency. Therefore, the advertising agency is required to disclose its expenditures on behalf of the committee so that the committee ultimately paying the bill may reveal on its Campaign Statements what its money was actually used for. It is not consistent with the philosophy of the Act to require the revelation of every manufacturer and material man in the economic chain of distribution.
In taking this position, the Commission notes the positions taken by the states of California and Michigan with statutes substantially similar to Nebraska's Section 49-1478. See Section 169.243, Michigan Compiled Laws Annotated and California Government Code Section 84303. Michigan has interpreted its version of Section 49-1478 to mean that a committee must report an expenditure by an agent or independent contractor if "the expenditure is one that the committee would have made itself". Volume 6, section 1, Michigan Campaign Finance Reporting Bulletin dated January, 1982. Title 2, section 18431 of the California Fair Political Practices Commission provides that expenditures made by an agent or independent contractor must be reported if that person is to furnish "the candidate committee with products or services which show how the campaign is conducted." This section goes on to include "campaign paraphernalia". If the Michigan rationale is used, an advertising specialty distributor would not have to disclose the sources of his products to the candidate committee. This is because the candidate committee (at least according to Arjay) does not have the ability to deal directly with the manufacturer. Therefore it could not make an expenditure to the manufacturer itself. If the California rationale is adopted, an advertising specialty distributor would not have to disclose the source of its products because such disclosure would not "show how the campaign is conducted". At least, it would not provide any more of an indication as to how the campaign is being run than would a disclosure by the committee that it had spent a certain number of dollars for novelty items purchased through an advertising specialty distributor.
The purchase by a candidate of these "campaign novelty items" from an advertising specialty distributor is an expenditure which must be reported. The purchase by an agent of the candidate committee of these "campaign novelty items" from an advertising specialty distributor is an expenditure which must be reported by the candidate committee based upon information which must be supplied by the agent. The wholesalers or manufacturers of the "campaign novelty items" from which the advertising specialty distributor procures these items, need not be listed on a campaign report under the facts described above.