Proposal Targets Deals by Firms and Charities

Attorneys general from California and 15 other states have proposed restrictions on deals between corporations and nonprofit groups that authorities say can mislead consumers.

The charities fear that the proposal could jeopardize revenue of up to $500 million annually.

At a conference in New York that ended Tuesday, authorities unveiled a plan that would ban exclusive partnerships between marketers and charitable groups. It would also require marketers to disclose in ads what they paid to use a nonprofit’s name or logo.

The deals have proliferated in recent years as nonprofits look to increase revenue and corporations try to distinguish their goods in a crowded marketplace.

But law enforcement officials are concerned the deals mislead consumers, and have already taken action against several partnerships, including one involving the American Cancer Society.

Charities at the hearing said that the proposed rules could close off an important source of funds that are used to benefit consumers.

William Dalton, chief counsel for the American Cancer Society, said revenue from marketing deals is used for research and other programs. “The monies raised by the American Cancer Society are used to save lives,” he said.

But Albert Shelden, California’s deputy attorney general, said: “We’re not interested in killing cause-marketing or ordering businesses away from supporting charitable causes. We want the relationships to be clear to the public.”

Among the key recommendations by the attorneys general:

* Product ads using the name or logo of a nonprofit should avoid claims of superiority, unless the claim is true and substantiated by the nonprofit.

* If the charity has not determined the advertised product to be superior, ads must clearly and conspicuously disclose that fact.

* If ads use a charity’s name or logo and the group has not endorsed the advertised product, ads must disclose that the nonprofit has not endorsed or recommended the product.

Although health-related deals have drawn the most scrutiny, marketers said that the rules have broad implications.

Paula Berezin, president of IEG Consulting, a Chicago firm that tracks corporate sponsorships, said the rules would eliminate existing relationships between United Airlines and the Chicago Symphony, and Wal-Mart and the Children’s Miracle Network.

“Applying these guidelines to non-health-related nonprofits will diminish and in many cases, do away with corporate-nonprofit partnerships,” Berezin said.

She said exclusive deals are critical because marketers don’t want to share the sponsorship spotlight with competitors. The proposal would prevent a pharmaceutical company’s becoming the exclusive sponsor of a Multiple Sclerosis bike tour, she said.

Disclosure requirements are burdensome and would also discourage corporate sponsors, she said.

Berezin argued that the rules should apply only to health and medical nonprofits, because consumers’ health may be at stake.

But representatives of health organizations asserted that they can police themselves. Myrl Weinberg, president of the National Health Council, an umbrella group whose members include the American Cancer Society and the American Heart Assn., said nonprofits channel marketing dollars into programs that benefit the public.

“These relationships benefit the public and serve a very real need by providing critically important health information, particularly for the over 100 million individuals who have chronic diseases and/or disabilities,” she said.

Her organization agreed that nonprofits should not allow their names or logos to appear on ads that compare competing products. But it strongly opposes the notion that organizations must determine the superiority of products.

“To do so would result in a waste of the organization’s limited funds that ought to be used to combat disease and provide public health education,” Weinberg said.

Health-related charities have come under fire in recent years because of corporate ties. Last year, SmithKline Beecham paid 12 states a $2.5-million settlement over its Nicoderm ads, which the states believed wrongly implied that the American Cancer Society was vouching for the smoking-cessation product. SmithKline and the cancer organization were described as “partners in helping you quit.” For the use of its name and logo, the cancer society, which does not endorse commercial products, received more than $1 million a year.

The American Medical Assn. also ran into trouble in 1997 after it announced an exclusive agreement with Sunbeam Corp., in which the company would pay the group royalties for using its name in marketing products such as blood pressure monitors, heating pads and humidifiers. After a public outcry, the group terminated the agreement, and it ended up paying Sunbeam $9.9 million in damages and expenses.

Some public interest groups said the attorneys general haven’t gone far enough. Michael Jacobson, executive director of the Center for Science in the Public Interest, a nonprofit consumer-advocacy organization that focuses on health and nutrition, believes nonprofits should also be required to disclose the corporations or trade associations that provide them with donations exceeding $1,000. Having that information would enable the public, policymakers and journalists to learn about potential conflicts of interest and take them into consideration when evaluating an organization’s agenda, Jacobson said.

“Over the past couple of decades, makers of alcoholic beverages, cigarettes, processed foods and others have cultivated friendships with nonprofit organizations by opening their purse strings,” he said. “The infusion of money into the nonprofit sector is, of course, welcome. But there may be a price to pay.”