On December 19, 2007, Sen. Robert Menendez (D-NJ) introduced legislation to regulate embedded giving, a practice whereby retailers promise to donate a portion of the purchase price to one or more charities.  The problem with embedded giving as highlighted by an article by Stephanie Strom in The New York Times (December 16, 2007):

Some programs fail to disclose what part of a transaction will go to charity, others fail to name the charity that will benefit, and in most cases, consumers have no way of knowing if their money actually went to charity and how much was raised overall.

Sometimes charities do not even know they are supposed to be receiving donations….

Menendez’s website states that the Protecting the Spirit of Giving Act would do the following:

• Require retailers to notify a charity if they intend to use the charity’s name or logo to sell or market a product or donate proceeds from a product;
• Ensure that charities consent to their name or logo being used to market a product;

• Provide consumers with additional information about how their money will benefit a designated charity, including the portion of the item’s price that will be passed on to the charity and if there is any maximum amount that a retailer will be providing a charity.

One big issue with the legislation:  it doesn’t account for the role of the states in regulating charitable giving.  Should the feds have jurisdiction in this area?  Should the legislation preempt existing state laws?

Read Jack Siegel’s critical take on the legislation ("[it] certainly didn’t yield a particularly thoughtful or well-crafted bill") at Charity Governance here.

Note also that there are licensing issues where the retailer (the "commercial co-venturer" or CCV) is using the charity’s name or logo in any sales promotion.  The Intellectual Property Law Blog (published by alma mater Sheppard, Mullin, Richter & Hampton LLP) describes applicable California commercial co-venture laws as follows:

Sections 17510 through 17510.95 of the California Bus. & Prof. Code requires the CCV to: (i) have a written contract with the charity; (ii) specifically disclose to the public the name and address of the charity and the precise amount that the charity will receive; (iii) pay the charity the amount disclosed on the promotion statement within 90 days after the representations commence and every 90 days thereafter; and (iv) provide an accounting of all such sales with every 90 day payment to the charity. CCVs may also be required to officially register as a CCV with the California Attorney General’s Office.

Read the full post, Using Charity Names in Sales Campaigns, here.

Click here for the California Commercial Coventurer Annual Registration Form.