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SACRAMENTO -- Attorney General Bill Lockyer today announced the release of a preliminary multi-state report that suggests standards to protect consumers from misleading advertising that uses the name and logo of nonprofit organizations to market commercial products.
Lockyer said California and other states are concerned about the emerging marketplace trend of nonprofit organizations, often health charities, that enter into exclusive licensing agreements with commercial sponsors to promote products such as over-the-counter drugs. The so-called Cause Marketing results in the name and logo of the nonprofit organization appearing in national advertising campaigns that may mislead consumers into believing the product is endorsed by the nonprofit, is better than a competing product, or a share of product sales will be donated to the charitable organization.
"This type of commercial/nonprofit advertising is becoming a big business," Lockyer said. "It's estimated that North American companies last year paid various charitable organizations $535 million for the use of nonprofit names in marketing. 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."
State and federal enforcement actions have been brought over such "Cause Marketing" agreements as McNeil Consumer Products Company using the name and logo of The Arthritis Foundation to promote its products called "Arthritis Foundation Pain Relievers," and SmithKline Beecham Consumer Healthcare using the name and logo of the American Cancer Society to promote its products to stop smoking.
Because of these concerns, Lockyer and the attorneys general of 15 other states developed the preliminary report, "What's In A Nonprofit's Name? Public Trust, Profit And The Potential For Public Deception." A final report of key principles will be issued after a May 24-25 meeting at which comments will be taken from businesses, nonprofit organizations and other groups.
The preliminary report identifies the following key principles:
* Both the commercial sponsor and nonprofit organization engaged in advertising a commercial product through use of the nonprofit's name or logo must satisfy all applicable legal standards, including compliance with consumer laws prohibiting false advertising, unfair and/or deceptive trade practices and consumer fraud.
* If an advertisement uses a nonprofit organization's name or logo, and the nonprofit has not in fact endorsed the advertised product, the advertisement must clearly and conspicuously disclose that the nonprofit organization has not endorsed or recommended the product.
* Advertisements for commercial products using the name or logo of a nonprofit organization must avoid making express or implied claims that the advertised product is superior to others in the same product category, unless the claim is true and substantiated, and the nonprofit has determined the advertised product to be superior to others in the same product category. If the nonprofit has not determined the advertised product to be superior, the advertisement must clearly and conspicuously disclose that fact.
* Advertisements for commercial products using the name or logo of a nonprofit must disclose clearly and conspicuously that the corporate sponsor has paid for the use of the nonprofit's name or logo when that is the case.
* Product advertisements arising from a commercial/nonprofit relationship shall not mislead, deceive or confuse the public about the effect of the consumer's purchase on charitable contributions by the commercial sponsor.
* Advertising partnerships between commercial and nonprofit entities should avoid exclusive product sponsorships. However, in the case where an exclusive relationship exists, product advertisements using the name or logo of a nonprofit should clearly and conspicuously disclose that fact.
The states working on the preliminary report are Arkansas, California, Connecticut, Florida, Illinois, Kentucky, Maryland, Minnesota, Missouri, New Jersey, New Mexico, New York, Pennsylvania, Texas, Vermont, and Wisconsin. The District of Columbia also is participating in the project.