In November 2011, it was widely reported that the New York
Attorney General (the "NY AG") had opened an
investigation into the cause-related marketing efforts of
"pink ribbon" charities. As part of its examination, the
NY AG sent comprehensive questionnaires to at least 40 charities
and 130 companies asking for detailed information specific to
activities in which the sale of a product or service is advertised
to benefit a charitable cause. Venable has since obtained a
redacted copy of a typical questionnaire sent to companies involved
in cause-related marketing related to breast cancer. These efforts
are also referred to as commercial co-ventures under New York
law.
A review of the questions (redacted questionnaire available here) asked by the NY AG provides a framework
for many of the issues that any charity or marketer should consider
prior to entering into a cause-related marketing campaign and can
help prepare a marketer or charity to respond to similar inquiry by
a state regulator.
Overview of Questions in NY AG Questionnaire
Overall, the questionnaire for commercial entities consists of
19 questions, some with subparts. In addition to requiring written
responses, several of the questions ask for documentation to be
attached, such as contracts and preexisting marketing materials.
The instructions provide that a separate questionnaire must be
completed for each cause-related marketing campaign conducted by
"the company and/or any of its subsidiaries, divisions or
brands" since October 1, 2009. These questions make clear that
the inquiry is not only related to the marketing of commercial
co-ventures, but also go to the heart of best practices in
charitable solicitation and partnerships with charities.
Predictably, many of the questions in the NY AG questionnaire track
New York law on commercial co-ventures. For example, the
questionnaire asks whether a written contract is in place with the
charity, a requirement under New York law and in many other states.
The questionnaire also asks for a listing of all charities, along
with the charity's EIN, that have received a contribution or
other benefit under the campaign. The NY AG could presumably use
this information to cross-reference whether each charity is itself
properly registered to conduct charitable solicitation. Further,
the questionnaire asks whether an accounting has been provided to
the charity, showing amounts due in connection with the campaign.
Under New York law, an accounting is required at the end of each
campaign detailing the number of items sold, the amount of each
sale, and the amount to be paid to the charity.
In addition, the questionnaire drills down to the details about the
marketing efforts of the campaign, asking for a copy of each
"product label, advertisement, announcement, message or other
marketing material" used to promote the campaign and requiring
that the methods used to promote the campaign be identified,
including, among others, television, print media, email, Twitter,
Facebook, or in-store advertising. These questions recognize that
successful cause-related marketing efforts often will be advertised
through different mediums and by different parties, all of which
must be in compliance with the relevant state statute.
The questionnaire also hits on items for disclosure in a
cause-related marketing campaign. For example, the questionnaire
asks whether there were any minimum or maximum guarantees regarding
the corporation's donation to the charity. Minimum and maximum
guarantees are often of interest to state regulators. Another item
on the questionnaire asks whether additional action was required
for the charity to receive the benefit promised to the charity,
such as the consumer taking an action online or mailing in a
receipt. Again, if the campaign involves additional action for the
benefit to be received by the charity, marketers should consider
evaluating whether this has been made clear to the reasonable
consumer.
The questionnaire also focuses on the procedures in place for when
the campaign is discontinued. Disposal of excess products and
relabeling are issues that many marketers and charities might not
discuss in the initial planning stages of the campaign, but which
arise in many cause-related marketing efforts. Although most state
charitable solicitation laws do not contain provisions specific to
procedures that must be in place at the end of the campaign, if
products with expired co-venture labeling are sold after the period
of the campaign, this could be deemed to be deceptive advertising
if a reasonable consumer believed that a charitable benefit would
result from the purchase.
Finally, the NY AG questionnaire contains questions related to
specifics of accounting procedures involved in the commercial
co-venture. The questionnaire asks if a representation has been
made to the public that a percentage of the proceeds will be given
to a charity, and, if so, how profits or proceeds are measured.
Although most state laws require only that the amount or percentage
of profits or proceeds to be donated are stated in a contract, it
is important that the method of calculation and whether such
calculation will be made from gross or net income be discussed
between the parties.
Conclusion
The recent initiative by the NY AG highlights the increasing focus of state regulators on charitable solicitation in general and cause-related marketing campaigns in particular. As demonstrated by the questionnaire from this initiative, there are many issues which must be discussed when partnering with a charity in a marketing effort. A review of the NY AG questionnaire provides a good starting point for cause-related marketing compliance planning, and along with a consultation of the relevant state laws, can help ensure a successful campaign.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.