2015 Lane Reports

Cause-Related Marketing: the Opportunities and the Pitfalls

The Lane Report, July 2015
Wednesday, July 1, 2015 10:00 am
by Cori A. Mathis

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“Buy our product and a portion of the proceeds will go to charity!”

Such cause-related marketing, linking the sale of a company’s product or service with the promise to make a donation to a charitable cause, is popular with consumers who want to see their money put to good use, valued by charities seeking to diversify their sources of revenue, and embraced by for-profit companies eager to bolster sales and build their brands.

Cause-related marketing triggers issues under Federal and state laws governing false or misleading advertising, state commercial co-venture laws, and Better Business Bureau Standards. A cause-related marketing campaign made headlines when Yoplait advertised that it would donate 50 cents to the Breast Cancer Research Foundation for each lid that was returned during the promotional period. However, Yoplait did not disclose on the outside of the lid that its maximum donation was $100,000. The Georgia Attorney General’s office investigated and, as a result, General Mills (the company behind the campaign) agreed to donate additional funds to the Foundation.

False or misleading advertising

The Federal Trade Commission generally prohibits advertisements that are false or tend to mislead or deceive and states may impose additional disclosure requirements. Generally, a commercial co-venturer should provide clear, complete, and truthful information to consumers about their cause-related marketing campaigns. Advertising should clearly disclose, at a minimum, the name, address, and telephone number of the charity, the dollar amount per unit or the percentage of the retail price per unit that will be donated to the charity, any guaranteed minimum or maximum donations, and the duration of the campaign.

Commercial Co-venture Laws

State regulators have taken a keen interest in protecting the charity that is to receive a portion of proceeds from a cause-related marketing campaign and the consumers that want to know where their money is going. More than half of the states have enacted laws that regulate charitable solicitations made by commercial co-venturers and the laws vary from state to state.  When conducting a national campaign, all of the states’ regulations must be considered.

Generally, the states have defined a commercial co-venturer as a company who for profit or other consideration is regularly and primarily engaged in commerce other than in connection with soliciting for a charitable organization and who conducts a charitable sales promotion.  Several states require commercial co-venturers to register with the attorney general before starting a cause-related marketing campaign and to file annual activity reports. A few states require commercial co-venturers to post a bond when registering in order to ensure that it makes a full accounting and payment of all charitable funds that come into its possession. Some states require specific provisions in contracts between commercial co-venturers and charities for cause-related marketing campaigns and filing of those contracts with the state.

In Illinois, if a company will hold property of a value in excess of $4,000 for or solicited for any charitable purpose, it is required by the Charitable Trusts Act to register with the Illinois Attorney General and file an annual financial report. Information required for registration includes the name, address and contact person for both the commercial co-venturer and the charity, a description of the campaign, and the commercial co-venturer’s organizational documents. Failure to register in Illinois is subject to “injunction, to removal, to account, and to appropriate other relief before a court of competent jurisdiction exercising chancery jurisdiction. The court may impose a civil penalty of not less than $500 and not more than $1,000.

Better Business Bureau Standards

The BBB Standards for Charity Accountability includes a standard - number 19 - that relates to commercial co-venturers. The standard states that advertising regarding charities should clearly disclose how the charity benefits from the cause-related marketing and such promotions should disclose, at the point of solicitation:

  1. the actual or anticipated portion of the purchase price that will benefit the charity (e.g., 5 cents will be contributed to abc charity for every xyz company product sold),
  2. the duration of the campaign (e.g., the month of October), and
  3. any maximum or guaranteed minimum contribution amount (e.g., up to a maximum of $200,000).

Charities violating BBB standards won’t receive their charity accreditations.

We at The Law Offices of Marc J. Lane can help your company or charity navigate through the legal issues surrounding cause-related marketing. For further information, please contact Marc Lane in confidence via email at mlane@marcjlane.com or via telephone at 312/800-372-1040.

Cori A. Mathis is a Principal with The Law Offices of Marc J. Lane, a Professional Corporation.  Ms. Mathis is a graduate of De Paul University College of Law (J.D.) and the University of Illinois (B.A.S.).

The Law Offices of Marc J. Lane, A Professional Corporation
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Chicago, Illinois 60601-2701
(312) 372-1040
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Websites: www.MarcJLane.com

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