Today cause marketers will have reason to celebrate in Maine, as Maine’s repeal of its commercial co-venture laws will be effective. Earlier this summer, the Maine legislature passed the “Act to Streamline the Charitable Solicitations Act” (yes, the “Act Act,” although we will refer to it as the “Act”). Along with streamlining requirements for charities soliciting contributions, the Act also repealed all of Maine’s requirements for commercial co-ventures, or persons or companies that “conduct a sale, performance, event, or collection and sale of donated goods that is advertised in conjunction with the name of a charitable organization.” The most common form of this type of promotion, also referred to as cause marketing, involves advertising that a percentage or dollar amount of a consumer’s purchase of a good or service will benefit a charity. Cause marketing is particularly popular in the month of October when it seems entire aisles of products turn pink for Breast Cancer Awareness Month.
Maine’s repeal is significant considering that Maine had previously been one of the more onerous states for cause marketers requiring that the company conducting the promotion register with the state prior to the promotion, obtain a $25,000 bond, and submit a $250 application fee. Cause marketers also had to submit financial reports with Maine-specific information on the number of products sold and the resulting donation to charity after the campaign’s conclusion and submit yearly renewals of their registration paperwork and bonds if they wanted to continue to conduct commercial co-ventures in Maine. All of these requirements have now been repealed.
While this is a welcome development in Maine, four other states—Alabama, Illinois, Massachusetts, and, in some cases, California—still have commercial co-venture registration requirements on the books, and it does not appear these states will be repealing their laws anytime soon. A number of other states currently require that the commercial co-venture file an agreement with the charity containing certain mandatory provisions with the state prior to the promotion. Many other states also mandate certain disclosures to be made in advertising the cause marketing promotion.
States often use the rationale that the commercial co-venture laws are aimed protecting both the consumer and the charity by ensuring that when an advertiser uses a charitable appeal to entice a consumer to buy a product, he advertiser holds true to its promise of what will be given to charity. Interestingly, unscrupulous advertisers did not seem to be a problem in Maine; the director of the Department of Professional and Financial Regulation (the division that regulates charitable solicitation in Maine) stated in testimony that the Department had never received a complaint against a commercial co-venturer the entire time the law was on the books. Recommending the repeal of the commercial co-venture registration requirement, the Department took the position that ensuring charitable promises are kept is a matter of contract law that can be resolved privately between the commercial co-venture and the charity.
Even with the repeal of the requirements specific to commercial co-ventures in Maine, charitable promotions will still be covered by the Maine Unfair Trade Practices Act, which generally prohibits unfair or deceptive advertising. Additionally, although no longer legally required, it is recommended as a best practice that companies continue to enter into an agreement with the charity when conducting promotions to confirm that parties’ understanding of terms such as the amount to be donated, the action that will trigger the donation, each party’s use the other’s intellectual property, and any minimum or maximum donations involved in the campaign.
While it will indeed be a happy day in Maine for cause marketers, it will remain to be seen whether other states will eventually follow suit easing requirements for companies wanting to give back through charitable promotions.