U.S. Senator Seeks to Regulate Corporate-Charity Promotions

January 02, 2008

U.S. Senator Seeks to Regulate Corporate-Charity Promotions

A U.S. Senator is attempting to regulate charitable promotions by companies that promise to give part of the proceeds from a purchase to a particular charity.

But some observers say a bill he proposed to oversee these promotions has been poorly researched and steps on the toes of state regulators.

Sen. Robert Menendez, a New Jersey Democrat, last month proposed a bill that would require companies to reach agreements with charities on how their names will be used and how much money they will receive before using it in promotions, and to inform consumers how much money will go to charity.

The Federal Trade Commission would be told to enforce the agreements.

“Charity should never be used solely as a sales pitch,” Mr. Menendez said in announcing the bill. “When consumers open their wallets, they should have the comfort of knowing that their good intentions will be protected and that their donations will benefit the intended cause.”

The bill has earned praise from some charity leaders, who say that poorly constructed marketing arrangements hurt the credibility of other, more legitimate efforts.

But Jack Siegel, a Chicago lawyer and the author of the blog Charity Governance, questions whether such a law is needed.

“If Senator Menendez thought federal regulation was in order, he should have first undertaken a comprehensive survey of state requirements,” Mr. Siegel writes. “We see no evidence that he undertook such a study. From such efforts, he should have drafted a comprehensive regulatory solution, and then eliminated what is essentially duplicative state compliance burden.”

Others, however, say such regulation is needed as corporate-charity marketing deals becomes more commonplace.

Kandy Ferree, president of the National AIDS Fund, which has engaged in several marketing promotions with companies, says it’s a good idea to require companies and charities to inform customers how much money will go to charity, and to make sure charities have agreed to let their names be used in a promotion.

“It’s very important for anyone who participates in a campaign to understand what part of the money goes to charity,” Ms. Ferree says. “It’s absolutely critical that any company that wants to work with a charity inform the charity about their intent and develop a formal agreement. Our name is as important to us as any corporation’s name is to their business.”

What do you think? Should the federal government oversee marketing agreements between charities and businesses? Or can state regulators effectively govern these arrangements? Click on the comments link below this post to share your thoughts.

— Peter Panepento and Elizabeth Schwinn

Comments

all the bill does is require the merchant to ask the wildlife fund’s permission to use their name and to tell the consumer how much is actually going to the wildlife fund. for the most part, we are talking about non-itemizers here, and if the only way you can get people to pretend to give for some purpose outside themselves is to sell them something, so be it. the merchant sells another t-shirt, and the wildlife fund gets a nickel, and somewhere one less tree frog dies.

— r Jan 3, 12:29 PM #
I’m all for local control vs. federal rule on many issues but here, it doesn’t make sense. If we were talking only about small businesses linking with local non-profits, state law could govern. But that’s certainly not the case. Which state’s laws would govern a situation if, for instance, a regional clothing chain decided to give a portion of its profits to a national charity? I think federal law needs to guide this one. Still, it wouldn’t hurt to call someplace like the Nat’l Conference of State Legislatures to see what the states are up to before crafting federal legislation.

— Connie Jan 3, 02:31 PM #

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