“Cause marketing campaigns,” or “commercial co-ventures” (i.e., advertising campaigns in which a company indicates that the purchase or use of its products will result in a charitable contribution) have long been a popular fundraising tool for charities. Some state charity authorities regulate cause marketing campaigns with a variety of requirements; some states do not regulate the practice. While such campaigns have grown into a billion-dollar-a-year industry, the perception is that they often fail to provide consumers with sufficient information to enable them to understand how their purchases will actually benefit charity. New York Attorney General Eric T. Schneiderman recently issued a set of best practices, entitled “Five Best Practices for Transparent Cause Marketing,” which are designed to promote transparency in cause marketing campaigns. These were developed in and for the state of New York but, as described below, we can expect other states to consider and possibly adopt these best practices as well.
The best practices were developed after a year-long review of various “pink ribbon” campaigns and other similar marketing campaigns that purport to raise funds for breast-cancer charities. The New York Attorney General initiated the review process after shutting down two fraudulent breast-cancer charities in 2011. Campaigns conducted by more than 150 companies were examined as part of the extensive review process. The nation’s two largest breast-cancer charities, Susan G. Komen For the Cure and The Breast Cancer Research Foundation, have already announced that they will follow the new guidelines.
Although the Attorney General’s study focused on cause marketing campaigns designed to raise money for breast-cancer charities, the best practices are applicable to all cause marketing campaigns benefiting charities in New York. The New York Attorney General has urged all companies and charities engaging in such campaigns to officially adopt the practices. The guidelines are expected to have effects beyond New York, since charity regulators in other states may use them as a reference point in determining what constitutes unfair and deceptive marketing in their own states. Additionally, companies and charities engaged in multi-state or nationwide cause marketing campaigns are likely to adhere to New York’s more stringent disclosure guidelines for purposes of the entire campaign rather than creating multiple disclosures for specific states.
The “Five Best Practices for Transparent Cause Marketing” consist of the following practices, each of which is designed to promote transparency in cause marketing campaigns and ensure that consumers get important information about the campaigns and the companies fulfill their promises to charities.
• Clearly Describe the Promotion. Before purchasing a product, consumers should have key information about the promotion, such as: (1) the name of the charity receiving the donation; (2) any caps on the donation; (3) whether consumer action is required to cause the donation; and (4) the start and end dates of the campaign. Use of a “donation information” label containing all this information in a clear and uniform format is encouraged.
• Allow Consumers to Easily Determine Donation Amount. Companies should disclose a fixed dollar amount, such as 50 cents for every purchase, in advertisements, marketing and product packaging. Companies should avoid vague terms such as “a portion of the proceeds.”
• Be Transparent About What Is Not Apparent. Companies should disclose information that might not be obvious to consumers, such as: (1) contractual limits on campaigns; (2) whether the donation will be made in cash or in kind; (3) whether the purchase of a product with a ribbon, color, or logo will trigger a charitable donation or merely calls attention to the cause; and (4) whether a fixed amount will be donated to charity regardless of the number of products sold.
• Ensure Transparency in Social Media. Companies using social media for campaigns should prominently display the terms of the promotion as part of the online marketing, including the amount that will be donated to charity per action, the name of the charity, the dates of the campaign, and any minimum or maximum amount to be donated.
• Tell the Public How Much Was Raised. Both the company and the charity should clearly disclose the amount of the charitable donations raised through the campaign on their websites.
The Attorney General also provided specific guidance to the benefiting charities, most of which was already incorporated into the existing commercial co-venture law. This guidance includes having a written contract with the company (New York Code of Rules and Regulations, Article 7-A, § 173-a(1)); fulfilling any promises about specific use of the funds; ensuring proper use of the charity’s name and logo; getting financial reports of the campaign (New York Code of Rules and Regulations, Article 7-A. § 173-a(3)); and providing certain information about the arrangement with the company in the charity’s Form CHAR500 (New York Code of Rules and Regulations, Article 7-A. § 173-a(4)).