United States: Charitable Solicitation And Commercial Co-Venturer Red Flags: Insights For Charities And Marketers From The NY Attorney General

Last Updated: March 6 2012
Article by Kristalyn J. Loson and Jonathan L. Pompan

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Kristalyn J. Loson
 
In association with
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.