Supreme Court Ruling in Austin V. Michigan Chamber of Commerce

In Austin v. Michigan Chamber of Commerce, the Supreme Court held that governments may restrict the right of corporations to make independent expenditures on behalf of political candidates. The Austin Court articulated a new constitutional standard for evaluating campaign finance regulation. Such regulation, the Court held, is constitutionally justified because of the distorting effects of corporate wealth on the marketplace of ideas. The Court’s decision to permit regulation on the basis of a speaker’s wealth and corporate form constitutes a significant departure from previous campaign finance jurisprudence and may well spark efforts to regulate other forms of speech on similar grounds.

In 1985 leaders of the Michigan Chamber of Commerce, a nonprofit corporation, decided to use funds from the Chamber’s general treasury to place a newspaper advertisement urging voters to support a particular candidate in an upcoming special election to the Michigan State House. The advertisement would have violated Michigan campaign finance laws prohibiting the expenditures of corporate funds in state candidate elections. Arguing that these restrictions were unconstitutional under the first and fourteenth amendments, the Chamber brought suit seeking injunctive relief against enforcement of the law in federal district court. The district court upheld the statute, but the Sixth Circuit Court of Appeals reversed on the ground that the restrictions violated the first amendment.

A divided Supreme Court reversed the appellate court, holding the statute constitutional under both the first and fourteenth amendments. Justice Marshall, writing for a six-member majority, found that although the statute burdened political expression, it was constitutional because it was “narrowly tailored to further a compelling state interest.” Finally, the majority addressed the fourteenth amendment challenge to the statute. The Court noted that the same compelling state interests that supported the statute’s constitutionality under the first amendment applied to any equal protection analysis as well. Thus, Justice Marshall again rejected arguments that the statute’s restrictions were underinclusive in omitting unincorporated associations such as labor unions. Justice Marshall also dismissed arguments that the statute’s exemption for media organizations violated the equal protection clause.

The new contribution and expenditure limitations, and other provisions of the Federal Election Campaign Act, were challenged in the landmark Supreme Court case, Buckley v. Valeo. In Buckley as elaborated above, the Court struck down substantial portions of the new regulatory scheme as unconstitutional constraints on first amendment freedoms of speech and association. In particular, the Buckley Court found that while government interests in campaign finance regulation justify limitations on campaign contributions, similar restrictions on independent expenditures do not outweigh individual and societal interests in free speech and the unimpeded exchange of political ideas. The rationale behind the Buckley Court’s distinction between contributions and independent expenditures was twofold. First, though firmly stating that all campaign-connected spending constitutes protected speech, the Court asserted that restrictions on independent expenditures “necessarily reduce[ ] the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached.”” In contrast, the Court classified contributions as a significantly more symbolic form of speech, the limitation of which entails only marginal restrictions upon the contributor’s ability to communicate.

The Court concluded that “although the Act’s contribution and expenditure limitations both implicate fundamental First Amendment interests, its expenditure ceilings impose significantly more severe restrictions on protected freedoms of political expression and association than do its limitations on financial contributions.” By far the more significant aspect of the Court’s analysis is its exploration of government interests that might justify limitations on campaign spending. Concerning restrictions on contributions, the Court had little trouble upholding the statute on the basis of its “primary purpose,” that of “limit[ing] the actuality and appearance of corruption. “The Court reasoned that large contributions” given to secure a political quid pro quo from current and potential office holders” clearly threaten the integrity of representative democracy. Additionally, the Court expressed serious concern for “the impact of the appearance of corruption stemming from public awareness of the opportunities for abuse inherent in a regime of large individual financial contributions. The Court found these governmental interests insufficient to support the restrictions on independent expenditures, however. These limitations, the Court held, constrain political expression “’at the core of our electoral process and of the First Amendment freedoms.” Moreover, the Court reasoned that the potential difficulty in coordinating independent expenditures with the candidate’s campaign would hamper the effectiveness of these expenditures, which might, in fact, prove counterproductive. For these reasons and others, the Court concluded, “the governmental interest in preventing corruption and the appearance of corruption is inadequate to justify [the] ceiling on independent expenditures.” The Court also rejected arguments that the government interest in equalizing the relative ability of individuals and groups to influence elections could justify the statute. Such a concept, the Court held, “is wholly foreign to the First Amendment.”” Though the Buckley decision did not address regulation of campaign spending by corporations specifically, it laid the groundwork for consideration of the corporate spending question in the Court’s next major campaign finance decision, First National Bank v. Bellotti. The Court noted that the first amendment protects corporate speech if its impairment would undermine society’s interest in free and open discussion. Holding that the expression barred by the Massachusetts law was clearly “the type of speech indispensable to decision-making in a democracy,” the Court concluded that the statute offended the first amendment.

Further, the Court noted that Massachusetts could not deny corporations this protection merely on the basis that as creatures of statute, the corporations possess only rights granted them by the state. The Bellotti Court rejected arguments that Massachusetts had a compelling state interest in protecting the rights of shareholders who disagree with views expressed by the corporation. The statute, the Court concluded, was underinclusive for this purpose because it did not bar other forms of corporate political expression, such as lobbying or discussion of public concerns not connected with a particular election.