As of January 1, 2023, commercial co-venturing and other types of cause marketing activities in the state of California are going to get a bit more complicated.
Back in October 2021, Governor Newsom signed into law Assembly Bill 488, which amends The Supervision of Trustees and Fundraisers for Charitable Purposes Act (“Act”). The law is CA’s effort to regulate online platforms that solicit for, or allow others to solicit for, charities. On its face, it seems reasonable enough and you must be wondering what this has to do with your company and its cause marketing activities, right? As with most everything in advertising law, the devil is in the details.
The law creates two new regulated classes – “charitable fundraising platforms” and “platform charities.” This post will focus on charitable fundraising platforms. California defines a “charitable fundraising platform” as “any person, corporation, unincorporated association or other legal entity that uses the internet to provide an internet website, service, or other platform to persons in this state, and performs, permits, or otherwise enables acts of solicitation to occur, which includes the following and any similar activity…” then it lists the activities.
A company will be deemed a “charitable fundraising platform” in California if it:
“(A) Lists or references by name one or more recipient charitable organizations to receive donations or grants of recommended donations made by donors who use the platform.
(B) Permits persons who use the platform to solicit donations for or recommend donations to be granted to one or more recipient charitable organizations through peer-to-peer charitable fundraising.
(C) Permits persons who use the platform to select one or more recipient charitable organizations to receive donations or grants of recommended donations made by a platform, platform charity, or other third party person, based on purchases made or other activity performed by persons who use the platform.
(D) Lists or references by name one or more recipient charitable organizations to receive donations or grants of recommended donations made by the platform based on purchases made or other activity performed by persons who use the platform.
(E) Provides to charitable organizations a customizable internet-based website, software as a service, or other platform that allows charitable organizations to solicit or receive donations on or through the platform, including through peer-to-peer charitable fundraising. The customizable platform provided by the charitable fundraising platform does not include the charitable organization’s own platform, but may integrate with the charitable organization’s platform.”
Under these definitions, a company conducting round-up and donation-at-checkout program on an e-commerce site, as well as a commercial co-venture campaign (e.g., purchase this product or comment on our post and $1 will be donated to CHARITY), if conducted if at least part online and with more than six (6) different charities in a year, would be considered a “charitable fundraising platform.”
Similarly, a company that allows consumers who make a purchase or complete an activity on its website to direct the company to make a donation to a charity they select from a list provided on the site, could also now be deemed a charitable fundraising platform (it does not fall within the donor-advised fund exemption). Therefore, with the inclusion of these activities in the definition of a “charitable fundraising platform,” companies engaged in common types of cause marketing may have to change their compliance practices, at least in California, to meet a new set of requirements.
So what does mean to be a “charitable fundraising platform” in California and what are those new requirements? The answer is still somewhat TBD because the regulations are still being finalized . However, based on the latest draft of the regulations, in addition to making all the requisite disclosures in its advertising for the charitable campaign and meeting other requirements, a company would need to register with the Attorney General, pay an annual $625 registration fee, and complete specific reporting requirements at the end of every calendar year.
The takeaway, of course, is companies should start thinking about their current charity-related activities to determine if they could be considered a charitable fundraising platform in California in the new year. Once the regulations have been finalized and published, we will update you accordingly. One hopes that the new requirements will not diminish companies’ appetite for undertaking commercial activities that benefit charities.