The use of partnerships between commercial entities and nonprofit organizations to market commercial products using the names and logos of the nonprofit organizations is a growing trend. It’s worth an estimated one-half billion dollars in the USA that raises significant legal and policy concerns for American nonprofit regulators, and their concerns may well be a bell-weather for both the corporate and nonprofit partners in Canadian sponsorships. Most under the gun are a number of leading health charities, which are being aggressively courted of late by a growing phalanx of product and service marketers which can win huge amounts by wringing the right endorsements out of the right charities.
The Attorneys General of sixteen American states and the District of Columbia Corporation Counsel, after consulting with a number of participants in, and observers of such arrangements, produced a preliminary report in April, What’s In a Nonprofit’s Name? Public Trust, Profit and the Potential for Public Deception, as a first step towards a final report that will inform interested parties and the public about the consumer law standards and policy considerations that may or should be applicable.
Based on their review to date, the Attorneys General believe that commercial-nonprofit product advertisements often communicate the false and misleading messages that the products have been endorsed by the nonprofit partner in the relationship, and that the products involved are superior to other competing products. They also worry that some of the promotions may further mislead the public about the effect consumers’ purchases may have on the level of charitable contributions the commercial sponsor will make.
These joint advertising campaigns using a respected nonprofit’s name and logo, the Attorneys General point out, often fail to provide important information consumers need in order to make informed choices, including the facts that the commercial sponsor has paid the nonprofit for use of its name and logo and, as is often the case, that the relationship between the corporate sponsor and the nonprofit is exclusive in nature.
In the recent past, the Attorneys General add, the false or misleading nature of these campaigns has led to not only state and federal law-enforcement actions but also private litigation, such as that between the American Medical Association and Sunbeam. Their hope in producing the preliminary report, with its summary of American consumer law obligations involved in commercial/nonprofit relationships, was to eliminate the need for future enforcement actions. In the process, they developed a set of key principles for public protection in this area:
1. Satisfy all legal standards
Both the commercial sponsor and the nonprofit organization engaged in advertising a commercial product through use of the nonprofit’s name or logo must satisfy all applicable legal standards, including compliance with consumer laws prohibiting false advertising, unfair and/or deceptive trade practices, and consumer fraud.
2. Don’t mislead on endorsements
Advertisements for commercial products must not misrepresent that the nonprofit organization has endorsed the advertised product. If such an advertisement uses a nonprofit organization’s name or logo, and the nonprofit has not in fact endorsed the advertised product, the advertisement must clearly and conspicuously disclose that the nonprofit organization has not endorsed or recommended the product.
3. Don’t make claims that are unproven
Advertisements for commercial products using the name or logo of a nonprofit organization must avoid making express or implied claims that the advertised product is superior to others in the same product category, unless the claim is true and substantiated, and the nonprofit has determined the advertised product to be superior to others in the same product category. If the nonprofit has not determined the advertised product to be superior, the advertisement must clearly and conspicuously disclose that fact.
4. Clarify the nature of the relationship
Advertisements for commercial products using the name or logo of a nonprofit must disclose clearly and conspicuously that the corporate sponsor has paid for the use of the nonprofit’s name or logo when that is the case.
5.Don’t mislead about future donations
Product advertisements arising from a commercial/nonprofit relationship shall not mislead, deceive, or confuse the public about the effect of the consumer’s purchase on charitable contributions by the commercial sponsor.
6. Don’t do exclusive deals, but if you do, say so
Advertising sponsorships between commercial and nonprofit entities should avoid exclusive product sponsorships. However, in the case where an exclusive relationship exists, product advertisements using the name or logo of a nonprofit should clearly and conspicuously disclose that fact.
