New Advisory Opinion Extends FARA To Online Networks And Service Providers - Inward/ Foreign Investment

In an advisory opinion released last week by the U.S. Department of Justice (DOJ) Foreign Agents Registration Act (FARA) Unit, DOJ adopts a potentially expansive interpretation of FARA that could require online networks, social media platforms, and other online service providers to register as foreign agents if they provide certain enhanced services. Specifically, these companies could be required to register under FARA if they provide tailored support to maintain or enhance the public presence of certain non-U.S. customers, particularly non-U.S. governments. The opinion suggests that the FARA Unit may be analyzing the services of social media platforms and other providers of online networks for activities as a form of public relations activity—which may presage significant changes in FARA enforcement practice. The opinion also appears to narrow the commercial exemption to FARA, which could impact an even wider group of industries and potential registrants.

A FARA Refresher

FARA requires individuals, companies, or entities who engage in certain enumerated activities at the direction of a non-U.S. entity (a "foreign principal") to register with DOJ and make periodic public disclosures, unless an exemption applies. Chief among those activities are "political activities"—which includes attempts to influence the U.S. public or government. But the statute also requires registration for simply distributing information for a foreign principal, even without an explicit attempt to influence. This could include:

A "publicity agent" includes any person who, directly or indirectly, engages "in the publication or dissemination of oral, visual, graphic, written, or pictorial information or matter of any kind," on behalf of a foreign principal, including through books, articles, lectures, video, or otherwise.
An agent acts as an "information-service employee" by "furnishing, disseminating, or publishing" information or data regarding "the political, industrial, employment, economic, social, cultural, or other benefits, advantages, facts, or conditions of" a foreign principal.
A "public-relations counsel" includes any person who, directly or indirectly, informs, advises, or represents a foreign principal "in any public relations matter pertaining to [its] political or public interests, policies, or relations."

One of the most frequently used exemptions from a registration obligation is the commercial exemption. For an agent that does not engage in political activities, the exemption is available if the activities (i) are in furtherance of bona fide trade or commerce (i.e., "exchange, transfer, purchase, or sale of commodities, services, or property") and (ii) "do not directly promote the public or political interests of a foreign government." Activities conducted on behalf of a foreign government often do not fit within this exemption.

Company, Agency, and "Virtual Presence"

The opinion was sought on behalf of an unnamed U.S. company ("Company") that develops and operates a "custom software platform" as a service available to individuals or organizations who subscribe ("Subscribers"). Company also develops profiles for Subscribers on its platforms, which Subscribers may "claim and manage... as a form of virtual or digital presence." These profiles are accessible only to other Subscribers and contain, at minimum, factual data about the Subscribers. Other services offered by Company are redacted from the published opinion.

Company was contemplating entering into an agreement with a foreign government agency ("Agency") to "create a virtual entity presence" for Agency and to provide "additional tailored support." These services, in the eyes of DOJ, constituted acting as an "information-service employee," a "publicity agent," and potentially even "public-relations counsel," and thus would require registration, unless an exemption applied. Company argued that its activities were covered by the commercial exemption.

DOJ rejected Company's exemption argument. DOJ found that the first prong of the commercial exemption was unavailable because, while Agency may be seeking to promote commercial activity by private companies, Agency itself was not engaging in commercial activity (i.e., the exchange, purchase, or sale of goods or services). The second prong of the commercial exemption was also unavailable because Agency's "mission" serves the public interest of the government of Agency's country. Therefore, Company would be required to register if it entered into the contemplated agreement.

What Does It Mean?

Although some of the underlying details are redacted, there are a few critical takeaways that can be extracted from the opinion:

Social Media Platforms and Online Service Providers May Be Obligated to Register.A broad range of online products and services now include social functionality where users can view or interact with other accounts. This opinion appears to suggest that providers of these services may incur a registration obligation if they provide additional tailored services to non-U.S. entities, especially government entities, that involve assistance or counseling on how to create a profile.
Disseminating Information Alone—Even Without an Intent to Influence—Can Trigger Registration Obligations. In prior opinions and guidance, DOJ has connected "publicity agent" with engaging in "political activities." (Indeed, DOJ has narrowed other capacious portions of the statute by tethering them to "political activities.") But this opinion includes no such reference to activity intended to influence the U.S. public or government. While we don't know if this presages further reliance on mere dissemination of information as the basis for registration, it should sound a note of caution for entities engaging in such activity.
Narrowing of the Commercial Exemption.Even though Agency's mission appears to have been related to advancing commercial activity, that was not enough to benefit from the commercial exemption. DOJ has been generally reticent on the scope of "bona fide trade or commerce," so signals like this opinion merit close inspection. Here, it suggests that the exemption requires more than a general relationship to commercial activity.

FARA Enforcement Continues to Expand

The opinion arrives at a time of growing FARA enforcement. DOJ continues to prosecute record numbers of foreign influence cases under both FARA and its cousin, 18 U.S.C. § 951.¹ Last month, DOJ unveiled charges against Chinese nationals for operating a Chinese government police station in Manhattan as part of a transnational scheme to repress speech critical of the PRC government, while rapper and former member of the hip hop group the Fugees Pras Michel was convicted of criminal FARA violations. In a few weeks, DOJ is scheduled to file its opening brief in the D.C. Circuit in its FARA lawsuit against Stephen Wynn—in which it will litigate whether, absent a legislative fix, DOJ can compel retroactive registration for civil violations of FARA. And looming in the background are forthcoming changes to FARA's implementing regulations arising from DOJ's Advanced Notice of Proposed Rulemaking from December 2021.

Together, these developments suggest that FARA enforcement will continue apace, even as the scope of the statute undergoes potentially dramatic shifts.

Footnote

1. 18 U.S.C. § 951 prohibits anyone from acting "in the United States as an agent of a foreign government without prior notification to the Attorney General," unless an exception applies.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.