In January 2023, we posted that California had passed a new law governing certain types of charitable campaigns. Although the law partially went into effect last year, the state delayed enforcing several provisions until the California Registry of Charities and Fundraisers could issue regulations. After more than a year of waiting (and maybe hoping this would go away), companies now have the regulations.

The most notable requirement is that companies will now be required to register as a “Charitable Fundraising Platform” with the state agency before running certain types of charitable campaigns if they are offered online and directed towards individuals in California. These include:

• Commercial Co-Ventures: Companies that advertise that the purchase of a product will benefit a charity will need to register as a Charitable Fundraising Platform if the donations benefit six or more charitable organizations per calendar year. If you stay under that number, the requirement won’t apply.
• Donation at Checkout: Companies that allow consumers to make a donation online – such as by rounding up the amount of purchase – will also be required to register. This applies regardless of the number of charitable organizations that will benefit from the donations in a calendar year. (Notably, this will not affect round-up programs that are common in supermarkets offline.)
• Free Action Programs: Although the term “free action” is not defined, companies that make donations based on “other activit[ies] performed by platform users” online will have to register. Presumably this includes campaigns in which, for example, companies promise to make donations if people like a social media post or share content. This requirement also applies, regardless of the number of charitable organizations that will benefit from the donations in a calendar year (which oddly results in more stringent requirements for free programs than for some that require a purchase).

The registration requirements become effective on June 12, 2024 and companies will be required to renew their registrations every year. The California Registry of Charities and Fundraisers advises that it will launch an Online Filing Service before that date. In addition to the registration requirements, companies that fall under the scope of the statute will have additional obligations, such as disclosing material terms in ads, delivering funds to charities within specific timeframes, and filing annual reports with the state.

While you think about these new regulations, keep in mind that laws in various other states may also apply to certain types of charitable campaigns. Check out this podcast for more details.

In 2022, Ferragni announced that she had partnered with Italian pastry company Balocco to create a limited edition pandoro – a traditional Italian Christmas dessert similar to a panettone – and launch a campaign to “support a research project for new therapeutic treatments for children suffering from Osteosarcoma and Ewing Sarcoma” at the Regina Margherita Hospital in Turin.

Last month, the Italian Competition Authority (or “AGCM”) announced that it had concluded that social media posts and press releases promoting the campaign misled consumers by suggesting that purchasing the limited-edition pandoro for around €9 – instead of the non-branded pandoro for around €4 – would result in a charitable donation. In reality, although Balocco had made a fixed donation to the hospital in 2022, proceeds of the sales did not benefit the hospital.

AGCM announced that it would fine Balocco €420,000 and Ferragni’s companies over €1 million over the misleading campaign. Ferragni announced that she is appealing the fine as disproportionate and unfair, but she also acknowledged that she had made “un errore di comunicazione” – a communication error – and promised to donate €1 million to the Regina Margherita Hospital.

This case unfolded in Italy, but the results could have been similar in the US. As we’ve noted before, charitable campaigns – including commercial co-ventures, in which companies suggest that the purchase of a product will benefit a charity – are highly-regulated, and companies can face regulatory scrutiny for getting things wrong. Make sure you ads are clear so that you avoid any communications errors.

Also remember the FTC has noted that anyone who plays a role in disseminating misleading messages could be held liable for those messages. For example, the FTC recently sent warning letters to two associations and their influencers reminding the recipients – including the influencers – that they are ​“on notice that engaging in conduct described therein could subject you to civil penalties of up to $50,120 per violation.”

As we discussed in this podcast, about half of the states regulate CCV campaigns. The regulations typically fall into one or more of the following categories: (a) requirements for agreements; (b) advertising disclosures; (c) financial accounting; and (d) registration with the states. A new California law that became effective this month will impose new requirements on “Charitable Fundraising Platforms,” which include certain CCV campaigns, but the most burdensome provisions have been delayed until next year.

Historically, California has not required companies that run CCV campaigns to register with the state as long as they: (a) have a signed agreement with the charity governing the campaign; (b) transfer the required funds to the charity on a rolling 90-day basis; and (c) provide the charity with an accounting with each payment to confirm that the company has complied with the representations it made to the public. The new law doesn’t change that.

However, under the new law, a company will have to register as a Charitable Fundraising Platform if: (a) the campaign is conducted at least in part online; (b) the campaign is directed towards individuals in California; and (c) the donations benefit six or more charitable organizations per calendar year. In addition to registration, companies would be required to complete specific reporting requirements at the end of every calendar year.

Although the Act became effective on January 1, 2023, California has delayed the registration and other reporting requirements until January 1, 2024, while it finalizes the regulations to implement the law. Note that some other provisions – including (a) a requirement to ensure a charity is in good standing, (b) a prohibition on misusing charitable funds, and (c) a requirement to make certain disclosures – are currently in effect.

We’ll keep you posted as things develop.

Whatever path a company takes, though, it must make sure that it actually does what it says. Although state regulators are usually the ones who pay most attention to these campaigns to ensure that companies comply with the law, two decisions issued by NAD this week signal that the self-regulatory body will also be monitoring these types of campaigns and holding companies accountable.

In one case, NAD requested substantiation from DoorDash for its claims that: “We are donating $1 million, with $500,000 going to Black Lives Matter and $500,000 to create a fund to be directed by the Black@DoorDash ERG (Employee Resource Group) towards state and local organizations.” Based on documentation provided by DoorDash that included invoices and acknowledgement letters, NAD determined that the challenged advertising claim was substantiated.

In the other case, NAD requested substantiation from Niantic for various claims, including that it would donate a minimum of $5 million from proceeds from Pokémon GO Fest 2020 ticket sales, half of which would be used to fund new projects from Black gaming and AR creators, and half of which would go to nonprofit organizations that help local communities rebuild. Based on evidence provided by Niantic, NAD determined that the challenged advertising claims were substantiated.

These cases don’t break new ground and simply highlight the importance of making good on your promises. But as companies continue charitable marketing campaigns – something we expect to see more of, in light of Russia’s invasion of Ukraine – it’s important to keep in mind that there are various entities who will hold you accountable. Make sure to keep good records of your activities so that you can quickly address any inquiries.

(Speaking of Russia, make sure you check out the ongoing guidance being published by our Export and Sanctions Team at Kelley Drye.)

Below are a few resources for companies looking to enter into new commercial co-ventures or rekindle previous relationships:

• Ad Law Access Podcast – Cause Marketing – Commercial Co-Ventures: What You Need to Know Before Getting Started – Advertising and Marketing and Consumer Product Safety practice groups chair Christie Grymes Thompson covered the commercial co-venture in an episode of the Ad Law Access Podcast.
• Advertising and Privacy Law Resource Center– We created a Commercial Co-Ventures section under Advertising and Marketing Standards section with checklists and information for you to use.
• Tailored CLE Session – If your company would like to go deeper on CCVs, we may be able to provide a CLE webinar session to you and your team. Please contact [email protected] for more details.

• California Consumer Privacy Act (CCPA) CCPA was far and away the most popular topic of 2019 and, as mentioned in one of our last posts of the year, “businesses and privacy professionals would do well to catch their breath over the holiday season. Next year is going to need focus and investment to reach the [CCPA] finish line (which, yes, will continue to move because this is privacy law, after all).​” Here are a few CCPA related posts you may want to read if you haven’t already:
  • Broad Range of Implementation Worries Surfaces at CCPA Rulemaking Hearing in LA December 5

• • Be Careful What You Say About the CCPA November 12

• • CCPA Update: California Attorney General Issues Draft Privacy Rules October 11

• • CCPA Update: Legislature Amends the CCPA to Exclude Employee Data, B2B Communications for One Year September 15

• The FTC’s Powers Under Section 13(b) The continuing questions over the extent of the FTC’s enforcement authority to obtain monetary relief under Section 13(b) were a popular topic with Ad Law Access readers. So popular that we created a Section 13(b) sub-blog:
  • Direct Seller Stands Its Ground: Neora Seeks Declaratory Judgment Against the FTC, Challenging the Agency’s Section 13(b) Authority November 5
  • Business As Usual? FTC Practice in the Wake of Shire ViroPharma and Credit Bureau Center October 22
  • A Potential New Fight Over FTC’s 13(b) Authority May 19

Other posts that resonated with readers:

• FTC Releases New Guide for Influencers November 9
• CBD and False Advertising: Lessons Learned From The Food Court August 9
• Nevada and Maine Advance Legislation Addressing the “Sale” of Personal Data June 4
• FDA and FTC Issue Joint Warning Letters to Three Online CBD Marketers April 2
• FTC to Use 6(b) Authority to Examine Tech Companies’ Data Practices March 22
• Taking Stock of the TCPA in 2019: What is an “Autodialer”? March 4
• The Direct Selling Self-Regulatory Council: What it Means for Multi-Level Marketers January 10

AD LAW ACCESS PODCAST

2019 also saw the launch of the Ad Law Access podcast. Top episodes included:

• CCPA Update: Legislature Amends the CCPA to Exclude Employee Data, B2B Communications for One Year
• Privacy Update: The Terms of the Facebook Settlement; CCPA Amendments Advance in Calif. Senate
• Cause Marketing - Commercial Co-Ventures: What You Need to Know Before Getting Started (12:30)
• CCPA Update (Amendments, Draft Regulations, and Classification issues) (12:00)
• Texting 101 - The Hot Button Issues to Consider When Running a Texting Campaign (11:25)
• Challenging Competitors' Claims
• Making it in the USA – When Product Origin and Origin Marketing Claims Matter (13:00)
• Influencers Gone Wrong (10:30)
• Influencers and Endorsers: Understanding the Upfront Legal Requirements (9:10)

Advertising and Marketing and Consumer Product Safety practice groups chair Christie Grymes Thompson covers a specific type of cause marketing - the commercial co-venture (CCV) - in the latest episode of the Ad Law Access Podcast, Cause Marketing - Commercial Co-Ventures: What You Need to Know Before Getting Started.

Commercial coventures are typically when a company teams up with a charity to offer a product or service or to sponsor an event, and consumer's purchase or participation in the event triggers a donation to the charity. Christie discusses the statutes that apply to co-venturers and what you need to know to get started.

You can find the Ad Law Access podcast through your favorite streaming service (Apple Podcasts, Spotify, Google Podcasts, Stitcher, SoundCloud, and others).