For many years now, the arrival of October, which has been dubbed “Breast Cancer Awareness Month,” has been accompanied by an onslaught of pink products being sold to benefit various breast cancer charities. This practice of selling products or services to benefit a charity (often referred to as a “commercial co-venture”) has become increasingly popular among business owners—in addition to the philanthropic goal of donating to a worthy cause, the use of the charity’s name will also often result in an increase in sales for the company. Because these partnerships involve claims made to consumers regarding the recipient, and use, of the funds, many states have begun to regulate commercial co-ventures to ensure that accurate information is provided to consumers and that the money is ultimately used in the manner advertised.
Unfortunately, there is little uniformity among the regulations of the various states. For example, some states require a written contract with the charity specifying exactly how the donation will be calculated. In some cases, this contract must be filed with the state. Other requirements may include registration with the state and furnishing financial statements to the charity and/or the state. In each case, the regulations across the states differ with regard to whose responsibility (either the for-profit company or the non-profit company) it is to ensure that these requirements are satisfied. Adding to the complexity is the fact that many sales involve the internet and interstate commerce, so commercial co-venturers may unintentionally, and unknowingly, subject themselves to the regulations of multiple states.
Entering into a commercial co-venture is a noble, but complicated, endeavor. If you are considering entering into a commercial co-venture, you should take steps to ensure that you are complying with all applicable laws. Some best practices include:
- entering into a written agreement that grants a license to use the charity’s name in connection with sales;
- including an honest disclaimer of the amount being donated (including any minimums or maximums) in advertisements and on the product;
- keeping a detailed accounting of sales during the promotion; and
- consulting with a lawyer to confirm all state-specific requirements are met.
Elizabeth M. Stamoulis