March 27, 2012

Cause Marketing -- Cause for Concern

Consumer Advertising Law Blog

"Cause marketing" enables commercial enterprises to do well by doing good: enhancing brand affinity by associating the enterprise with support for a worthy charitable cause, such as finding a cure for breast cancer or eradicating illiteracy. As virtuous as these alliances may be, however, recent activity of the New York Attorney General reminds that they are not without potential pitfalls.

The New York Attorney General has been particularly concerned with preventing fraud in connection with breast cancer charities. In 2011, the Attorney General sued one such purported charity and obtained guilty pleas from the founders of another, based on allegations that they were essentially phony charities that existed to benefit their founders. More recently, the Attorney General has sent questionnaires to at least 40 charities and 130 companies asking for detailed information about activities where the sale of goods or services is advertised to benefit breast cancer causes. The Attorney General has explained that the purpose of this effort is to "help ensure that cause marketing campaigns provide the benefit that's expected.

In short, with these initiatives, a consumer protection spotlight is beginning to shine in the direction of cause marketing. How brightly remains to be seen, but certainly the elements are there from a legal standpoint to warrant careful attention. Charitable entities are special creatures of statute with particular obligations. Under ordinary principles of derivative liability such as agency, joint venture, and aiding and abetting, commercial enterprises that associate with charitable entities to promote common objectives in a marketing campaign may have some exposure of their own. In addition, many states, including California, New York, and Colorado have charitable solicitation laws that define at least some obligations of commercial co-venturers who affiliate with non-profits in cause-marketing campaigns. Even absent such special provisions, cause-marketing, as a form of advertising, can be subject to any number of consumer protection statutes and common law duties more commonly associated with purely commercial activity. Finally, where regulators and the law enforcement community begin to tread, the plaintiffs' bar is often not far behind. If there are torts or other forms of liability lurking, they are likely to be mass torts with arguably substantial aggregate financial stakes. Thus, they may precipitate private class actions.

None of this is cause to abandon cause-marketing, any more than similar considerations are cause to abandon commercial advertising. Rather, it is cause to take a careful look at the particulars of any campaign to be sure it can withstand the greater external scrutiny that may be coming, and to act in a prophylactic manner in that regard. This includes ensuring compliance with applicable state and federal laws; doing due diligence as to the bona fides of the charitable partner; taking reasonable steps to ensure and be able to show that representations made in the course of the campaign, including but not limited to how donations will be spent, are truthful and fully performed; and insisting on appropriate accountability from the charitable partner.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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