16 Attorneys General Voice Concern Over Charity-Business Ad Deals

The attorneys general of 16 states have jointly issued a statement expressing serious legal and other concerns about marketing deals between companies and charities.

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Summary of Report by Attorneys General on Charity-Business Marketing Deals

In so doing, the state officials made clear they plan to press for significant changes in the way such deals are structured and publicized.

The statement of concern was included in a report, based on a year’s worth of research and interviews. The report spells out potential legal problems with marketing deals that permit companies to use a charity’s name and logo in advertisements or on product packaging, in exchange for a fee. The attorneys general said they were particularly troubled by problems that have arisen with deals involving over-the-counter medications.

Such advertising arrangements, the attorneys general say, “often communicate the false and misleading messages that the products have been endorsed by the non-profit partner in the commercial-non-profit relationship and that such products are superior to other competing products.”

To combat those misconceptions, the attorneys general have made six recommendations for how future charity marketing deals with companies should be structured. Among them:

* Advertisements for commercial products that use a charity’s name or logo “must clearly and conspicuously disclose that the non-profit organization has not endorsed or recommended the product,” unless a formal endorsement has been made.

* Such ads “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.” If the non-profit group has not evaluated a product to determine that it is indeed superior to other similar ones, the report says, the ads should prominently state that fact.

* Such ads must also “clearly and conspicuously” say that a company has paid for the use of a charity’s name or logo when that is the case.

* Non-profit groups “should avoid exclusive product sponsorships.” In cases where exclusive deals have been made, the report says the advertisements should make prominent mention of that fact.

Few existing charity marketing deals would meet every standard recommended by the attorneys general. But the state regulators say they believe such changes are necessary to raise the legal and ethical standards of such deals.

Barbara W. Tuerkheimer, an assistant attorney general in Wisconsin who led the drafting of the report, said: “We are concerned about whether, and the extent to which, non-profit organizations will be able to maintain their independence, integrity, and high public trust, both in fact and in appearance, should the trend of these alliances continue in the marketplace.”

In addition to Wisconsin, 15 other states — Arkansas, California, Connecticut, Florida, Illinois, Kentucky, Maryland, Minnesota, Missouri, New Jersey, New Mexico, New York, Pennsylvania, Texas, and Vermont — have endorsed the report, as has the District of Columbia.

The attorneys general said they hoped their recommendations would prevent the kinds of federal, state, and private lawsuits that have become common in recent years.

The report cites as an example a highly publicized 1996 case in which attorneys general in 19 states charged that advertising by McNeil Consumer Products Company — the maker of Tylenol — and the Arthritis Foundation contained misleading information when they touted a “new” pain reliever for people suffering from arthritis. The ingredients used in the Arthritis Foundation line of pain relievers, which no longer exist, were the same as those used for years in other brands.

The company and charity denied any wrongdoing in the case, and McNeil ended up paying nearly $2-million to settle the lawsuit.

Reactions to the report so far have been mixed. Many charities say they welcome additional guidance, and they support many of the recommendations. But some non-profit organizations worry that the call for additional disclosures may prove impractical and could end up doing more harm than good.

The American Cancer Society, which has licensed the use of its name and logo for anti-smoking products and Florida citrus, says it supports most of the report’s recommendations, including the prohibition against negotiating exclusive deals.

About two years ago, the cancer society dropped its exclusive arrangement with SmithKline Beecham to use the charity’s logo on smoking-cessation products. Steve Dickinson, a spokesman for the American Cancer Society, says the charity made the change out of concern that an exclusive deal could weaken the organization’s credentials as an impartial source of cancer-related information.

Even without the promise of exclusivity, SmithKline Beecham has continued its deal with the American Cancer Society. The company pays the charity $1.5-million a year in exchange for rights to display the charity’s logo on the NicoDerm CQ anti-smoking patch and on Nicorette gum, alongside the phrase: “Partners in helping you quit.” Mr. Dickinson estimates that the cancer society also receives about $5-million worth of marketing benefits from the deal because the advertisements help raise the charity’s profile with the public.

But Mr. Dickinson says he does not support all of the disclosure requirements outlined in the states’ report. For example, he thinks adding an explicit statement on the SmithKline Beecham products and ads saying that the cancer society has not endorsed them would prove counterproductive.

“We have research that tells us that too much legal, negative-sounding disclaimer language actually has the net effect of confusing people,” says Mr. Dickinson. “If the balance gets tipped too far in terms of the percentage of disclaimer language required, I think it has the opposite effect of not educating anyone.”

Mr. Dickinson says he worries that the report’s recommendations, if followed in their entirety, “might even dissuade advertising altogether.” He adds: “I don’t think it will be practical to do it.”

Michael P. Jensen, president of SponsorVision, a consulting company in Tacoma, Wash., that helps arrange marketing deals between charities and companies, also differs with the attorneys general on some of the recommendations.

Exclusive arrangements, for example, are “very legitimate sponsorship tactics,” he says. Even without a formal promise of exclusivity, says Mr. Jensen, charities tend to seek out deals that involve only one brand of a particular product.

“Why would someone want to do a deal with Bayer and Advil?” he asks. “The odds are you’re going to get a lot more dollars if you offer an exclusive arrangement.”

Some observers found the report confusing. Scott Allison, a senior vice-president of the Gable Group, in California, says the report seems to blur the line between licensing deals, such as the agreement between the American Cancer Society and SmithKline Beecham, and so-called cause-related marketing deals, in which a company agrees to give a contribution to a charity based on sales.

Mr. Allison says charity licensing deals with over-the-counter drug companies do need scrutiny and monitoring to insure that the public fully understands the arrangements. “But if Coca-Cola were to come out and say, for every Coca-Cola purchased in May, we’re going to donate a nickel to the March of Dimes, I don’t see any problem at all,” says Mr. Allison. “There’s nothing misleading about that, there’s nothing of an endorsement there.”

The report by the attorneys general does not carry the weight of law or regulation. But Ms. Tuerkheimer of the Wisconsin attorney general’s office says she hopes the report will prompt charities and companies to re-evaluate their future partnerships.

She says that all of the non-profit organizations the attorneys general spoke with in conducting research for the report “were extremely helpful, cooperative, concerned, and anxious to ‘do the right thing.’”

Charity and company representatives, as well as anyone else interested in commenting on the report, will have the chance to tell the attorneys general their views at a public hearing that has tentatively been scheduled for May 24 and 25 in New York City. A final report, incorporating those comments, will be published after that.

To order a free copy of the report, “What’s in a Nonprofit’s Name? Public Trust, Profit and the Potential for Public Deception,” contact Barbara W. Tuerkheimer, Assistant Attorney General, State of Wisconsin Department of Justice, P.O. Box 7857, Madison, Wis. 53707; e-mail tuerkheimerbw@doj.state.wi.us.

The full report is also available on several World-Wide Web sites maintained by state attorneys general, including New York’s at http://oag.state.ny.us/press/reports/nonprofit/executive_summary.html.