United States: Syncing Marketing And Legal: Compliance Considerations For Cause-Related Marketing

Doing good doesn't get old. But marketing leaders know that effective promotion of a company's charitable giving requires a subtle combination of bedrock advertising principles with a few twists. It's often here that marketing and legal meet at the eleventh hour before a campaign goes live. Understanding the bounds of federal, state, and local laws that regulate charitable fundraising before these efforts launch helps marketing teams to be more efficient.

Knowing what type of giving campaign is in play is critical for understanding what regulatory requirements apply. While options abound, some perennial favorites include:

CCV Campaigns. If your company advertises that the purchase or use of a product or service will benefit a charitable organization or purpose, this charitable sales promotion may classify your company as a commercial coventurer (CCV). Though corollary rules apply, like states' Unfair and Deceptive Acts and Practices statutes, charitable sales promotions are most directly regulated by states' charitable solicitation laws. These laws generally require a company that acts as a CCV to obtain the charity's consent before the promotion starts and often require specific terms to be included in those agreements. A handful of states also require pre-promotion filings and bonds, as well as post-promotion reporting. State fundraising laws and industry best practices, like the Better Business Bureau Wise Giving Alliance Standards for Charity Accountability, prescribe the details to be included in marketing materials for these promotions.

Customer Donation Programs. A customer giving campaign, such as point-of-sale contributions or roundup-the-change promotions, is often referred to as a customer donation program. State fundraising rules, industry developments, and even takeaways from regulatory settlements may apply. When conducting a volunteer customer donation program, a company should retain no portion of the funds raised, receive no payment from the charity to conduct the program, ensure all customer contributions are timely transferred to the charity, and otherwise act consistently with rules applicable to charitable trustees. This includes making conspicuous (in other circles, "unavoidable and prominent") disclosures of material terms like those affecting how, when, and to whom the contributions will be given. These are among the basic terms that should be included in an agreement with the benefiting charity. Although these campaigns typically raise minimal regulatory concerns, beginning next year, companies should also review whether California's law applicable to "charitable fundraising platforms" will require filings in connection with a customer donation program, particularly one with an online component.

Sweepstakes. Offering a prize in exchange for suggested charitable donations could be considered a sweepstakes or a contest, depending on how the winner is determined. Where the prize will be awarded randomly, the sponsor should ensure the entry donation is advertised as "suggested," while also clearly providing a free, alternative method of entry for the sweepstakes. In addition to preparing comprehensive rules that are readily available to all eligible participants, certain material terms must be disclosed in marketing materials, and a company may need to register and post bond for consumer-facing promotions where the prize(s) exceed a certain value. Beyond federal and state lottery law considerations, a company should meet states' charitable solicitation laws, too. Companies that are not in the "business of fundraising"—nor wish to fall into this regulated space—should ensure that all funds raised through the sweepstakes are retained by the charity. By contract, the parties should make clear no commission or fee will be retained by the company in exchange for this promotion.

By knowing how a campaign will be viewed under applicable law, and what this means from a compliance standpoint, your marketing team will be well equipped to launch a corporate giving campaign quickly, efficiently, and effectively when inspiration strikes.