PERPETUAL PROMOTION MACHINES: Exploring Potential Regulatory Implications for Permanent Cause Marketing Programs NAAG/NASCO NATIONAL CONFERENCE October 1, 2012 Silver Spring, Maryland Edward B. Chansky Greenberg Traurig LLP 3773 Howard Hughes Pkwy, Suite 400N Las Vegas, NV 89109 702-599-8016 chanskye@gtlaw.com

Ground Rules for Discussion All examples are real, but names have been removed to protect the innocent. Assume honest, truthful, non-misleading ads/offers. Don’t get diverted by fears of fraud. But consider in some cases limits on ability to disclose amount donated. Five choices in each case under current law: CCV Charity Professional Fundraiser/Solicitor Professional Fundraising Counsel Unregulated Technology/Service Provider

Dimensions to Consider Length – Is the offer temporary or permanent? Breadth – Is just one product covered, or all? Depth – Is the donation a small or large part of the deal? Handling the money Marketing to the charities to offer them pre- packaged fundraising opportunities for themselves.

Questions to Address What’s the right position from a policy standpoint? How to give guidance to honest, well-meaning business people who want to do good while doing well but who can’t figure out where they fit in the five available categories under current law: CCV Charity Professional Fundraiser/Solicitor Professional Fundraising Counsel Unregulated Technology/Service Provider

Examples Classic CCV: Short Time One Product Small portion of price Standard Definition: A party regularly and primarily engaged in commerce other than raising funds for charities who conducts a charitable sales promotion – i.e., offering goods or services based on a representation that the purchase/use of such goods or services will benefit a charitable organization or charitable purpose.

Classic Charity

One for One Model Premise: Buy an item (a bar of soap, a pair of shoes, a bottle of water, etc.), and the seller will donate a like item to charity. A particular charitable organization may or may not be designated, but usually is. Permanent All goods of seller covered Percentage is presumably big since donation = value of purchased item

Shop-to-Give Model Premise: Shop via a particular channel, and a clearly designated percentage of each transaction will be donated to a charity of your choosing (typically via a middleman charity such as Network For Good). Examples: Use a particular credit card Buy “daily deals” from local stores offered on a web site Purchase goods directly through a web site

Shop-to-Give Model, cont. Factors to Consider Who is donating? Did consumer have an option to keep the money as a rebate? Does that matter? Certainty? Some are set up as “affiliate marketers” where you buy from an independent online merchant (not the site operator); the merchant pays a commission of X% to the site for making the referral; and the site then makes the donation out of the commission . . . but only if the site gets paid by the merchant . . . . Threshold? Some sites won’t donate until at least $10 or more accumulates for a particular organization. Problem? What if unallocated funds get donated after 6 months?

Shop-to-Give, Cont. Targeting Charities? Sponsors often have “charity” in their name, and often market themselves heavily to schools and charities as fundraising opportunities for charities to get their supporters to use the site/service. Does that matter? How? Why? What impact on choice of category (if any)? Is the site “soliciting”? Advising/consulting on fundraising? Just providing technology? How much does it matter if it holds the money?

Peer-to-Peer Model Premise: Website offers consumer the ability to market something (vacation rentals, etc.) and designate a % of the revenue to go to charity of seller’s choosing. Site is not the seller, but creates the marketplace, handles the money, and earns a profit from each transaction. Is consumer #1 (seller) a CCV? Does that make sense? Which category fits best for the site operator (if any)? Why? What if the site has “charity” in its business name and markets itself heavily to non-profits as a fundraising vehicle for charities if those charities get their supporters to use the site?

Ad Revenue Model Premise: Website offers to give X% of its ad revenues (or profits) to a charity of your choosing in exchange for you playing video games or hosting your email through that site. Permanent offer Zero cost to consumer All goods/services covered % of revenue/profit can vary (do you care?) Consumer can see how much he/she generated for charity at month-end from usage, but not in real time or per transaction. Problem?

X% for Good Model Premise: Seller advertises that a designated X% of profits are always donated to charity. No particular organization. Just a general statement of company’s charitable inclination. A general cause might be named, such as “education” or “the environment,” but nothing more. Does it matter if the offer focuses on profits from a particular item vs. just a statement of overall corporate profit after taxes? Does it matter how high the percentage is? 1%? 5%? 50%? (Be patient, we’ll get to 100% later :-)

All Profits for Charity Model Premise: You get the point. Do the following variations matter? Ads focus on profit per transaction Ads focus on overall profit Offer is based on what an individual owner does with his/her profits, after taxes, rather than on what the company does Which of the 5 choices applies best, if any? What is the charitable entrepreneur best advised to do?

Questions? THANK YOU!