Thinking of Partnering With a Charity? Keep in Mind the Following Compliance Regulations

A desire to give back isn’t enough, unfortunately

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If your business wants to team up with or support a cause or charity, think carefully about how you structure and advertise about that support.
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One thing seems crystal clear right now: there are few segments of society untouched by the havoc of Covid-19. This broad impact means there are countless causes in need of monetary and other support.

If your business wants to team up with or otherwise support a cause or charity, think carefully about how you structure and advertise about that support to help avoid regulator scrutiny on the charitable programs, something that commonly happens in the wake of crises.

Here are some common cause marketing structures and preliminary issues to consider for a few common types of charitable programs in these unique times:

Mentioning a charity’s name in advertising

Be sure to have proper written permission from the charity to use its name, logo or both. Consider whether an email or formal contract with additional responsibilities, rights grants, representations and warranties makes sense. Also, make sure your use is aligned with any brand usage guidelines the charity has. Check their website to see what is available.

Separately, sometimes mere use of a charity’s name or logo in advertising may trigger compliance obligations under state law, depending on what exactly you say. Think through the exact wording carefully, and consider the legal implications of driving people to your business’ website, the charity’s site, a third-party site or a fundraiser site that your business or someone else has set up for the charity. Examine carefully the terms and privacy policy that will apply to resulting transactions, and consider the value of the information and what your business might want to do with it.

Purchase-related donations

Be sure to understand the supply chain for the merchandise at issue or access to the services offered. Think through any potential limitations on quantity or access and how related risks can be addressed behind the scenes and in the consumer-facing terms and disclosures. Be sure to consider the quantity or access limitations when setting any minimum or maximum donation amounts. Also, be sure that you can effectively communicate those program conditions at the outset and again when any maximum is met or supplies change.

Relatedly, if the program began before crisis struck, determine if there are minimum donation commitments and how those are being addressed. Disclosures are very important for these programs, so be diligent to phrase the offer as understandable to the consumer (in terms of purchase price, for example). Think through how returns, taxes and other variables could impact the program and donation amount.

Check-out round-up/donation

Consider the implementation of this aspect during the online checkout process, how that differs from in-person retail and what terms need to be addressed in your related contracts or consumer-facing terms. Add flexibility in the planning stages to make sure that the program can be adapted as needed, given the changing restrictions on retail establishments, for example. Additional regulatory filings may be required if your business takes possession of the money to be donated, so consider alternative structures or addressing those compliance steps. Think carefully about the appropriate messaging, given the vast segments of society impacted by the current crisis.

Third-party crowdsourcing or other charity platforms

Consider pending regulatory actions against several platform operators, specifically, for example, by the California Attorney General’s office. Examine the platform terms relative to your program’s and business’ needs and plans. For example, how do their defined terms apply to your proposed program and the parties involved? And do the terms allow for needed or anticipated flexibility in program structure? Consider whether you will be able to provide the messaging and disclosures your business wants or needs from a marketing, compliance and public relations standpoint.

Likes for a donation

Exact wording of the offer may determine whether compliance obligations are required, so submit proposed wording for legal review by experienced counsel and be meticulously consistent with the messaging. Disclosures are also important. Consider where and how you will make the proper disclosures. Think through any maximums and limitation that may make sense to set given the proposed and potential user experience, and disclose those clearly. Carefully review the social platform’s terms (general terms, promotion-specific terms, etc.) to make sure your program entirely complies.

The spectrum of charitable promotion structures have varying compliance obligations and risks. In a nutshell, when a for-profit company sets up a fundraiser or says that use or purchase of goods or services will benefit a charity or charitable purpose, commercial co-venture compliance may be triggered in a number of states. The for-profit company doesn’t need to benefit monetarily; benefitting in goodwill alone is enough. Even merely advertising a charity’s name and directing to its own site for donations gives rise to legal issues in some areas.

Compliance obligations may include pre- and post-program filings as a commercial co-venture or trustee, having a written contract with the charity, making certain disclosures in ads, filing and maintaining an account and other records and making timely donations. Pre-program filings may be required as early as 15 days before launch (and 10 days after the charity contract is executed). Your approach may be dictated by the urgency of the message, budget and other factors. Be sure to contact legal counsel to walk through the options based on your business’ risk tolerance and goals.


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