Officials Urge Limits on Use of Nonprofit Logos

A coalition of state attorneys general Tuesday issued preliminary recommendations that could dramatically alter the way such nonprofit organizations as the American Heart Assn. and the American Cancer Society allow companies to use their logos to sell a range of products from cereal to smoking-cessation programs.

The marketing arrangements have proliferated in recent years as nonprofits scramble to find new revenue sources and manufacturers try to differentiate their products in consumers’ eyes.

The guidelines being proposed by attorneys general in California and 15 other states would require nonprofit agencies to spell out what the use of a logo means--including whether the product has been endorsed, if it has been tested for efficacy or if a payment is being made in exchange for the use of the logo.

Deals involving nonprofit agencies and private companies have come under scrutiny in recent years from state and federal regulators who worry that consumers don’t understand the mechanics of business deals involving trusted nonprofit groups that ally themselves with for-profit businesses.

The most explosive example surfaced in 1997 when American Medical Assn. paid Sunbeam Corp. $9.9 million to pull out of a product-endorsement deal with Sunbeam after many AMA members blasted the arrangement as unethical. Earlier, Johnson & Johnson and the Arthritis Foundation paid $2 million to end a federal and state charge that they deceptively marketed a line of over-the-counter pain relievers that incorporated the foundation’s name.

“It’s estimated that North American companies last year paid various charitable organizations $535 million for the use of nonprofit names in marketing,” said state Atty. Gen. Bill Lockyer. “We are looking at standards to protect consumers from false or misleading advertising when a nonprofit group’s logo appears next to a commercial product.”

Preliminary standards unveiled Tuesday will be discussed during a May meeting with representatives of nonprofit organizations, their for-profit partners and other parties.

“We share the concern for adequate disclosure of what these arrangements entail,” said David Livingston, executive vice president and corporate counsel for Dallas-based American Heart Assn., which has several corporate partners. “But how that’s done could be a point of difference.”

“We agree that standards and criteria ought to be set, because the last thing that a nonprofit wants is for there to be any public misunderstanding of what a business partnership means,” said Steve Dickinson, a New York-based spokesman for American Cancer Society, which has allowed a handful of corporations to use its logo in exchange for cash. “But what’s unclear, and what we might disagree on, is the [attorneys general’s] scope of what needs to be done.”

Marketing industry observers say the use of nonprofit organizations’ reputations clearly helps to move products.

“Consumers who see an American Dental Assn.’s seal of approval on a tube of Crest are going to say, ‘Gee whiz, they tested it and it performs to standards,’ ” said Mike Kamins, a USC business school professor who studies advertising. “It’s like Consumer Reports saying it’s a good product.”

Kamins, however, questions whether consumers are likely to read fine print included in advertisements and packaging. And he questions whether companies that make consumer goods are going to continue striking deals with nonprofit partners if they’re forced to add lengthy disclaimers about their arrangements.

Some observers maintain that nonprofit organizations are being shortsighted when they allow corporations to use their trusted names and marks for financial support.

“We believe that our name is our most important asset,” said Harry Snyder, senior advocate with Consumers Union, which publishes Consumer Reports. “We vigorously pursue anyone who attempts to use it, we don’t authorize anyone to use it and we don’t sell it. . . . But when you see the International Olympic committee selling the Olympic rings, you have to ask yourself, ‘What’s sacred anymore?’ ”

Spokesmen for nonprofit organizations maintain that their business relationships generate advertising and marketing opportunities that they never could afford on their own. And they argue that most consumers understand how the deals operate.