As hundreds of pink products attest, cause marketing is big business in this country. However, nonprofit and for-profit firms looking to take advantage of multi-jurisdictional fundraising and charitable sales promotions need to know that 40 states have laws regulating charitable solicitations. They generally define and regulate “commercial co-venturers,” “fundraising counsel,” “professional fund-raisers/paid solicitors,” “solicitations” and “contributions”. The specific terminology varies from state to state, but these are the terms that are most common.
Commercial co-venturer
Generally, a commercial co-venturer is a person regularly and primarily engaged in commerce (other than in connection with raising funds for charities) who conducts a “charitable sales promotion.” Co-venturers are typically for-profit companies. Approximately twenty-one jurisdictions regulate commercial co-venturerers.
While definitions vary from state to state, in general, a “charitable sales promotion” is an advertising or sales campaign conducted by a charitable co-venturer, which represents that the purchase or use of goods or services offered by the commercial co-venturer will benefit a charitable organization or purpose.
Some states have broader definitions. For example, Massachusetts includes in its definition of a commercial co-venturer “any person who promotes the sale of any good or service which is advertised in conjunction with the name of any charity.”
In general, the legal requirements imposed by these statutes include:
- The requirements of a written contract between the charitable organization and the commercial co-venturer. Sometimes the state requires that certain provisions be included in the contract (e.g., a description of the goods or services to be offered to the public, the geographic area of the promotion, the beginning and ending dates, the manner in which the charitable organization’s name will be used, provisions for final accounting by the commercial co-venturer, and the date and manner in which the charitable organization will receive its benefit).
- The charitable organization must file a copy of the contract prior to the charitable sales promotion (Note: the charity, not the commercial co-venturer, frequently must file the contract).
- Several states require registration and bonding of the commercial co-venturer. These include Alabama, Maine, and Massachusetts.
- The commercial co-venturer must keep a copy of its final accounting.
- Some states require disclosure statements to be included in the advertising.
Approximately twelve states require advertisements to disclose the expected portion of the sales price, percentage of gross proceeds, or other consideration the charity is to receive as a result of the sales promotion. It is important to note that many states require this disclosure on a per-unit basis. For example, “$1.00 per box” or “5% of the purchase price” rather than a disclosure of the overall contribution to charity as a result of the charitable sales promotion.
Failure to comply has real world consequences. In a 1999 promotion, Yoplait did not reveal on the outside of the lid its maximum donation, which was then $100,000. That prompted an investigation by the Georgia attorney general’s office, which found that 9.4 million lids were returned during the three-month promotion, which promised to pay 50 cents a lid.
Which states are the states that have laws about commercial co-ventures as you have discussed in this post?
Also, could you help me find information for Idaho’s laws about commercial co-ventures?
We don’t list the states as they tend to change from time to time and we don’t have time to constantly update the post. We review these laws periodically, but have to review and update our research every time we have a new project. Last time I checked, the breakdown was as follows:
Alabama Yes (Attorney General)
Arkansas No
California No*
Colorado No
Connecticut No
Florida No
Georgia No
Hawaii No
Louisiana No
Maine Yes (Department of Professional and Financial Regulation)
Massachusetts Yes (Division of public charities, Office of the Attorney General)
New Hampshire No
New Jersey No
New York No
North Carolina Yes, filed by the charitable organization
Ohio No
Oregon No
South Carolina No
Tennessee No
Utah No
Hi,
Do you know if Michigan has CCV laws? I have seen product using the following advertising language: “a portion of the proceed go to” which is very vague, is that legal in Michigan?
We live in Michigan an my husband is a songwriter and we want to donate all the revenue from the sale of a song minus expenses to charity. We feel we want to do good but that we could get in legal troubles doing that. It is difficult to declare the exact amount we are going to donate per unit because each vendor takes a different percentage of the sale price and each vendor sales the song at a different price, we have no control over that. We do not have any idea how many units we are going to sale so we cannot disclose the total max amount we are going to donate. We have spent a significant amount in producing the song and we would like to minus that cost and donate just our profit. Any help on how to set/word this? We are based in Michigan but the songs are distributed nationwide by online vendors? Thank you for any help.
I am not an expert on Michigan law but my most recent research on this, which was compiled about a year ago, indicates that Michigan does not regulate co-ventures. I would consult with a Michigan lawyer to be sure.
Thanks for this very informative post.
Quick question:
Do you know if there are any Federal laws or requirements, tax or otherwise, that commercial co-venturers must abide by?
There are numerous federal laws everyone must abide by but I am unaware of any specific federal regulation of co-ventures.
Hey Ellis,
My company reddiamondcard.com which is located in South Carolina will be selling discount cards and donating $5 for every card to a local charity. I just want to make sure I’m not breaking any laws so according to your email, I don’t have to file anything? I actually never thought of this until I stumbled against your article. I am shocked that they are even regulations on this as I don’t even have to make a donation to sell my cards and am not even marketing it, I just want to do some good by making a donation. Please advise
Thanks
If you aren’t using the fact of the donation to induce consumers to purchase the card, then you likely don’t have to file anything. You need to check South Carolina law to be sure however.