Our firm has noticed a recent uptick in state charity regulators’ interest in regulating cause marketing activities. (For purposes of this post, I am primarily referring to promotions in which a for-profit company advertises that the sale or use of its good or services will benefit a charitable organization, which are regulated as “commercial co-ventures”).
A few years ago, we saw explosive growth and interest in cause marketing campaigns, and predicted that regulators would focus more on these promotions. However, there was no clear trend in increased regulation or oversight of these activities. We were particularly surprised when the State of Washington, one of only four states to require a for-profit entity engaged in a commercial co-venture to register with the state prior to conducting such promotions in the state, removed the registration requirement and all of its compliance requirements governing commercial co-ventures, effective July 2007 (due to what we heard was a serious lack of resources available to manage the compliance obligations).
In the last couple of years, however, we have seen at least three states take an active interest in regulating cause marketing promotions. In 2010, Mississippi quietly adopted new administrative rules governing commercial co-ventures– so quietly, in fact, that few stakeholders in the cause marketing community were even aware that the new rules existed until a year or so after they came into effect. The rules varied significantly from other states’ rules, and were impossible or impracticable for commercial co-venturers to comply with on numerous levels.
The New York Attorney General’s office has also shown a recent increased interest in cause marketing regulation. New York’s actions so far seem to favor increasing awareness of best practices in cause marketing rather than adding new statutory compliance burdens. New York’s latest public pronouncement on the issue coincided with Breast Cancer Awareness Month in October 2011. By encouraging consumers to scrutinize particular aspects of cause marketing disclosures, the AG’s office has implicitly advised for-profit co-venturers to clearly state in its advertisements: (1) the amount that the charity will benefit, ideally as a dollar amount or percentage of the purchase price, (2) whether there is a cap on the donation amount to be given, (3) whether consumer action is required to trigger the donation, and (4) whether the promotion has an expiration date.
Most recently, Vermont introduced a bill on February 1st to regulate commercial co-ventures for the first time. The new draft regulation is part of a broader consumer protection bill, Vermont House Bill 730, and focuses on consumer disclosure.
Our firm has been working closely with each of the states, directly or through nonprofit advocacy groups, to ensure that any legislation, rules, or recommendations issued governing cause marketing efforts provide meaningful protection for charitable beneficiaries as well as consumers, yet are not so burdensome that companies are dissuaded from engaging in such campaigns. In fact, we recently received good news from the State of Mississippi that the regulations governing commercial co-ventures have been revised to be more in line with other states’ compliance requirements. This change is due in part to our efforts to educate the State officials on the practicalities and realities of cause marketing, and the existing regulatory framework in place. Cause marketing opportunities provide significant unrestricted revenue for charities with little or no associated fundraising expense to the charity, and should therefore be encouraged within a reasonable regulatory framework.