Electronic Retailer - October 2011 - 41

In one well-known example, the Georgia Attorney General investigated a Yoplait yogurt campaign designed to benefit the Breast Cancer Research Foundation where the company advertised that it would make a contribution for each lid collected without revealing the agreed-to maximum total donation of $100,000. This investigation concluded with General Mills, the company behind the Yoplait campaign, paying an additional $63,000 to the Breast Cancer Research Foundation, representing the amount that would have been donated through the lid collection efforts of Georgia consumers. Although it does not appear one was initiated in this case, Georgia, like several other states, includes a private right of action for persons injured as a result of a violation of its charitable solicitation statute and also expressly permits class-action lawsuits, adding another level of risk for a cause-related marketing campaign. As Lady Gaga discovered, claims of certain percentages going to charity often are closely scrutinized, by both government regulators and plaintiffs’ lawyers. Therefore, marketers entering into ventures with charities should take care to look at their claims from every possible angle to ensure that, in seeking to increase donations to a worthwhile charitable cause, consumers are not misled. Marketers also should review marketing materials and make appropriate disclosures concerning applicable timeframes for campaigns and any caps on charitable contributions related to those campaigns.

Relationships with Charitable Organizations
Because charities are themselves subject to legal and regulatory requirements different from those governing for-profit enterprises, marketers are opening themselves up to some unique legal and relationship risks by launching cause marketing campaigns. Accordingly, marketers also should perform due diligence on potential partners when entering into any new commercial venture, and cause-related marketing efforts should be no different. Marketers should also consider adopting tailored contractual protections in their cause-related marketing agreements and obtaining appropriate insurance coverage. Together, these two steps can significantly reduce the marketers’ legal exposure in the event its charitable organization partner is not in compliance with applicable state and federal laws. The rise in popularity of cause-related marketing allows consumers another way to demonstrate their support of and contribute to worthy causes while purchasing products or services. While there are certainly some risks involved for both marketers and their charitable partners, both parties can avoid trouble if they perform sufficient due diligence, negotiate strong agreements and secure appropriate indemnifications. By taking the proper precautions to manage risks in these novel relationships, marketers and charities can to steer clear of legal pitfalls and create a win-win-win situation for themselves and for consumers. Jeffrey D. Knowles is a partner at Venable LLP and chair of the firm’s Advertising, Marketing and New Media Group. Jonathan L. Pompan and Kristalyn J. Loson are attorneys in Venable’s Nonprofit Organizations and Associations Practice. Contact them at (202) 344-4000.
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Electronic Retailer - October 2011

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