Jul
21
2010

An Overview of Commercial Co-Venture Laws

A “co-venturer” is a for-profit entity which promotes its products or services by representing that the purchase or use of such products or services will benefit a charitable cause (e.g., a for-profit makes a statement advertising that a portion of the proceeds from the sale of this product will be donated to charity). Since consumers are not given an option of whether or not to donate to the charity,  Approximately twenty-five (25) states have enacted specific laws which govern these so-called “commercial co-ventures” (or “cause-related marketing” programs). While the laws governing commercial co-ventures vary by state, in general, the state regulatory authorities are concerned with protecting consumers from fraudulent or deceptive advertising.

Thus, state laws generally require that the co-venturer (1) enter into written contracts with the charitable organization that will benefit from the promotion; (2) keep accurate records during the promotion; (3) include certain disclosures in all advertisements relating to the promotion (including amount or percentage per unit of goods purchased that will benefit the charitable organization); and (4) certain statutes require that the co-venturer or the charity register with the state, provide a bond and file annual reports. Notwithstanding the fact that certain states do not impose disclosure requirements in advertisements, all state regulatory authorities recommend that, as a good business practice, such disclosures be made. Disclosure may be made via signage, flyers, or other notice of general application. In addition, it is also good business practice to satisfy the contract and record-keeping requirements outlined above even if the promotion is conducted in a state without a co-venture statute.

Some well-known commercial co-venture arrangements include Geoffrey Beene (net profits benefit charitable causes), Newman’s Own Dressing (all profits are donated to charity), and Stephenie Meyer’s latest book: The Short Second Life of Bree Tanner: An Eclipse Novella ($1 is donated to the American Red Cross).  It is important to note that in the commercial co-venture context, consumers may not take a charitable deduction–the commercial co-venturer does–which may not seem fair.  For example, when my wife spent $7.54 plus tax to purchase Stephenie Meyer’s new book and Stephenie Meyer gave $1 to the American Red Cross, Stephenie Meyer got to take a $1 charitable deduction, my wife got to read another tale in the Twilight series she loves,  but all I got was a bill for the book and three more days of my wife’s dissatisfaction with my abs.

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