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Post date: April 6 1999

Report Questions "commercialization" By Non-profit Groups

Attorney General Spitzer today released a preliminary report on concerns associated with partnerships between non-profit organizations and commercial sponsors. The report, compiled by 16 Attorneys General from across the nation, cites a potential for misleading consumers and undermining public confidence in charitable institutions.

"Commercial sponsors can provide charitable groups with needed financial assistance and help further community goals," Spitzer said. "At the same time, non-profit groups must be wary of relationships that can exploit the goodwill of consumers."

The report, entitled "What's In a Non-Profit Name? Public Trust, Profit and the Potential for Public Deception," addresses situations in which a non-profit organization sells the use of its name to the commercial sponsor, who then uses the name or logo in the advertising of products. In 1998, businesses paid over $535 million to non-profit groups for such advertising rights.

The trend has drawn increasing criticism from consumer advocates and state officials. For example, late last year, the attorneys general for 12 states, including New York, entered into an agreement with Smith Kline Beecham Consumer Healthcare (SBCH) arising out of a marketing relationship with the American Cancer Society.

According to the report, SBCH and the American Cancer Society entered into a licensing agreement to market smoking cessation products, Nicoderm CQ and Nicorette. SBCH is accused of misrepresentation in suggesting that Cancer Society endorsed the products as more effective than competing products.

This settlement prompted the American Cancer Society to reexamine its policies, and resulted in changes to guard against inappropriate use of its logo.

The report provides six basic advertising principles for commercial/nonprofit marketers to follow:

  1. Comply with laws that prohibit false advertising, deceptive trade practices and consumer fraud;
  2. Avoid misrepresentations of whether the non-profit has actually endorsed a product;
  3. Avoid making claims of superiority of the product, unless the non-profit has substantiated such claims;
  4. Disclose that the corporate sponsor has paid for the use of the non-profit name or logo;
  5. Prohibit misleading messages that lead consumers to believe their purchase will affect the corporate sponsor's charitable donation to the non-profit; and
  6. Avoid exclusive product sponsorships or, if used, disclose the relationship in advertisements.

The participating states in the report are as follows: Arkansas, California, Connecticut, Florida, Illinois, Kentucky, Maryland, Minnesota, Missouri, New Jersey, New York, New Mexico, Pennsylvania, Texas, Vermont, Wisconsin, and the District of Columbia.

In announcing this preliminary report, Spitzer expressed his appreciation for the cooperation of nonprofit organizations and stressed that he hopes to expand the dialogue to include commercial sponsors, governmental agencies, public interest groups, and academic experts.

"Our goal is to promote truthful advertising and ensured that consumers receive full, accurate information and disclosures needed to make informed purchasing decisions," he said.

Comments on the report from interested parties and the public are invited. A public forum to discuss the issues is scheduled for May 24-25 at the Attorney General's office in New York City. A final report will be issued after the comment period and the public forum.

Individuals interested in reviewing this report or who would like more information on the upcoming forum are encouraged to call the Attorney General's consumer hotline at (800) 771-7755 or visit his website at www.ag.ny.gov.

This issue is being handled by Shirley Sarna, Bureau Chief of the Consumer Frauds and Protection Bureau and by Shirley Stark, Assistant Attorney General.

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