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We Donate $1MM To Charity. Do You Really? The NAD is Watching.

Two recent “routine monitoring” determinations of the National Advertising Division of BBB National Programs may indicate a trend toward the NAD’s investigation into cause-related marketing initiatives.

On March 1, 2022, the NAD reported that it had reviewed:

(1) DoorDash’s website claim: “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 [email protected] ERG (Employee Resource Group) towards state and local organizations.”

and (2) Niantic’s website pledge to donate $5 million from its Pokémon GO Fest 2020 ticket sales to fund new projects from Black gaming and AR creators and $100,000 to the Marsha P. Johnson Institute.

In both cases, after reviewing the evidence provided by the companies, the NAD was able to confirm the claims were substantiated.

These decisions just happen to come at the onset of an onslaught of pledges and donations by myriad companies to help Ukraine. For instance, Pfizer pledged to donate all Russian profits to Ukrainian relief efforts; Google pledged $10 million; Facebook pledged $5 million; Snapchat pledged to deliver $15 million in aid; among others. And I’ve read that another significant number of brands/stores are donating a portion of their profits to related charities.

These recent efforts are part of a growing trend of companies’ cause marketing initiatives. On Giving Tuesday 2021 alone, donations of $2.7 billion were made with over 35 million adults in the U.S. participating. And while Giving Tuesday doesn’t fall again until November 29, 2022, the non-profit planning calendar for 2022 includes over 40 different dates dedicated to specific causes, from World Health Day to International Day Against Homophobia to National Nonprofit Day to International Literacy Day to World Suicide Prevention Day.

What does all of this mean? In a nutshell:

  1. A brand must align with a charity to stay competitive. Find a non-profit that fits your business, your products, and your consumers’ interests. For example, Huggies© has for years been associated with the National Diaper Bank Network to donate diapers for children in need.
  2. Consumers want to get involved. Do well by doing good is a time-tested marketing motto. Studies have shown that sales increase when a company engages in cause-marketing activities. But recent trends -- like the NAD’s routing monitoring of cause marketing advertising and California’s amendments to its charitable sales laws, AB 488 – indicate that regulators have taken notice.
  3. Be careful making knee-jerk reactions to immediate crises. Everyone wants to help out when a crisis arises, and unfortunately, we’ve recently had two big ones (COVID and Ukraine). But make sure your company is aware of, and follows, the charitable giving rules. It may be easy to announce donating a portion of sales to charity, but the commercial co-venture laws are not suspended when a national or worldwide emergency arises. Over 20 states regulate these programs, with requirements ranging from contracting with the charity, ad disclosures, recordkeeping and registration in 6 states.
  4. Be upfront and truthful. The recent NAD decisions confirm that your website and online disclosures of generous donation efforts are advertisements, that must be truthful, non-deceptive and supportable. This is particularly important for these types of “credence claims” where the consumer cannot verify the statements made, but must trust the seller. Now that the NAD has these advertisements on its radar, you need to double and triple check your claims.

It’s a pleasure to see that so many brands are dedicated to cause marketing. But don’t let your altruistic goals blind you from the laws regulating this activity.

Please contact Robert Laplaca to answer any questions or provide additional information about this post.

Contact Verrill at (855) 307 0700