The New York Attorney General ("NY AG") released a much-anticipated report on "pink ribbon" campaigns, last week. The report, entitled Five Best Practices for Transparent Cause Marketing (the "Best Practices"), available here, originated from last year's NY AG initiative focused on breast cancer charities (widely covered by Venable; see links below). Although the NY AG initiative was specific to breast cancer charities, the Best Practices are broadly applicable to all cause-marketing efforts and will likely set a new bar by which the activities of companies and charities involved in these types of campaigns will be measured.
Background of Initiative
In October 2011, the NY AG celebrated National Breast Cancer
Awareness Month by sending comprehensive questionnaires to at least
40 charities and over 130 companies asking for detailed information
on promotions during which the sale of a product or service is
advertised to benefit a charitable cause, in this case, breast
cancer awareness. These types of promotional efforts that create
goodwill for the company and generate income for a charity are
commonly known as "cause-marketing" efforts and are
classified as "commercial co-ventures" under New York
law.1
As cause-marketing efforts have grown in popularity, some have to
come to question whether consumers are made aware of the relevant
information in such promotions and whether the charities are
actually receiving the benefits that consumers believe are
promised. The NY AG likely had these critiques in mind when it sent
out its questionnaire. The questionnaire, which consisted of 19
questions, some with subparts, dove into questions of compliance
with the New York Charitable Solicitation Act, such as asking
whether the company had a written contract with the charity in
place and whether an accounting had been provided to the charity.
The questionnaire also comprehensively inquired into the way in
which the campaign was advertised to consumers, requesting copies
of each "product label, advertisement, announcement, message
or other marketing material."
Release of Best Practices
After a year of analyzing responses to the questionnaire on
"pink ribbon" and other similar campaigns, on October 18,
2012, the NY AG held a press conference and released the Best
Practices. The Best Practices appear to be intended as far-reaching
reforms to the way in which some cause-marketing promotions are
currently conducted.
The Best Practices go beyond the general "avoid deceptive
fundraising practices" standard and offer recommended
practices for specific types and forms of cause marketing –
from social media free-action programs to one-to-one in-kind
donation programs – used by many charitable organizations.
This report is by far one of the most significant, if not the most
significant, proactive forms of guidance any state Attorney General
has ever issued in the area of cause marketing. An overview of the
themes found in the specific recommendations of the Best Practices
is below.
Expanded Disclosure Requirements
While many states' current regulations for cause marketing
require that certain disclosures be given "on all
advertising," the NY AG's Best Practices fill in the
details and leave little to the discretion of the reasonable
person. The list of items for disclosure is noticeably longer than
any other state regulations currently require. Specifically, the
Best Practices call for the following to be disclosed:
- the specific dollar amount per purchase that will go to the charity;
- the name of the charity;
- the charitable mission if not readily apparent from the name of the charity;
- whether consumer action is required for the charitable donation to be made; and
- the start and end dates of the campaigns.
By comparison, currently most other state statutes expressly
require disclosure of (i) the name of the charity, (ii) the amount
or percentage per unit that will be donated to the charity, and,
sometimes (iii) the dates of the campaign.
Additionally, the Best Practices state that the expanded
disclosures should be given on "advertisements, websites, and
product packaging;" should be in "clear and prominent
format and size;" and should be located "in close
proximity" to the text of the advertisement. Depending upon
the nature and structure of the campaign, adhering to this guidance
may be challenging without additional examples from the NY
AG.
Suggestion of "Donation Information" Label
The Best Practices take disclosures a step further in suggesting
that each product in the promotion and website used to advertise
the promotion showcase a "Donor Information" label which
would be similar to a nutrition label on food items and would
identify for donors key information about the campaign in a
standardized format. While an innovative suggestion, it remains to
be seen how proposed information labels and disclosures would be
implemented in various advertising formats where space is often at
a premium.
Attention to Social Media Campaigns
The Best Practices also push the bounds of current regulation by
extending disclosure requirements to certain social media
campaigns. While social media advertisements which encourage the
purchase of a product or service with the promise of a donation to
charity are covered under traditional regulation of cause
marketing, free-action programs – such as liking a Facebook
page or submitting contact information on a company website to
trigger a donation – are not normally covered by the
regulatory definition of a "commercial co-venturer." This
is because such promotions do not involve the element of a purchase
or use of the company's product or service as a prerequisite to
the company's donation. As the specific disclosure requirements
for commercial co-venturers do not apply to such campaigns, they
are usually subject to the more general standard of avoiding
"unfair and deceptive" advertising.
The Best Practices state, however, that "companies and
charities should be no less vigilant about transparency in social
media cause-marketing campaigns than they are in traditional
product-based campaigns." This is one of the first times that
a regulator has recognized free-action programs in social media to
be under the umbrella of cause marketing. The Best Practices go on
to recommend that social media cause-marketing programs disclose,
at a minimum:
- the amount donated per action;
- the name of the charity that is benefitting;
- the dates of the campaign; and
- the minimum and maximum to be donated.
The Best Practices also recommend implementing a real-time
tracking system to cut off the social media campaign when the
maximum donation amount is reached or otherwise alert consumers
that their action will no longer result in a donation, something
that also has not been seen as a requirement in regulatory
guidance. For companies and charities used to conducting social
media campaigns on a more informal basis, complying with the
suggested disclosures will take some careful planning.
Enforcement
In issuing its Best Practices, the NY AG took a unique approach
to ensuring that the guidelines are followed, at least in pink
ribbon promotions. At the time of the press release, the NY AG
announced that the nation's two largest breast cancer charities
– Susan G. Komen for the Cure and the Breast Cancer Research
Foundation – had both signed off on, and voluntarily agreed
to follow, the NY AG Best Practices in all of their cause-marketing
endeavors. This effectively means that a large number of companies
that want to hold a pink ribbon promotion also will be playing by
these new rules.
And while they have not been directly adopted into law, the
guidelines contained in the Best Practices could be used by the NY
AG and other state regulators to inform such regulators'
enforcement of general prohibitions against unfair and deceptive
marketing as found in state mini-FTC Acts. If used as benchmarks
for advertising standards, the Best Practices could have
far-reaching effects on the ways in which charities and companies
conduct cause-marketing campaigns.
Conclusion
Overall, the Best Practices reinforce the general legal principles
that have always applied to companies and charities conducting
cause-marketing campaigns, but provide additional specific and
concrete examples of disclosures to consider. A decision to
disregard these standards could lead to a greater risk of
investigation and enforcement. For companies considering
cause-marketing campaigns, the new breadth of recommended
disclosures in the Best Practices may take some planning and
creative coordination to ensure compliant campaigns. Ultimately, it
is possible and perhaps even likely that the Best Practices will
provide a new norm as cause-marketing campaigns continue to
generate goodwill for companies and increase revenue for charitable
causes.
Footnotes
1 New York Executive Law 7-A, Section 171-a(6) defines a "commercial co-venturer" as, "any person who for profit is regularly and primarily engaged in trade or commerce other than in connection with the raising of funds or any other thing of value for a charitable organization and who advertises that the purchase or use of goods, services, entertainment, or any other thing of value will benefit a charitable organization.
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