Selling Seals of Approval
Walk into any
home-improvement megastore, find their wall o' carbon-monoxide detectors, and
you'll notice that only one product carries the American Lung Association seal
on its box--American Sensors. Does this mean American Sensors' CO detectors are
the best? Better than those made by First Alert, Nighthawk, or others? Not
exactly. American Sensors ranked fourth in tests conducted by Consumer
Reports last year. Three of its models were deemed "not acceptable" by the
magazine, thanks to a design flaw--since fixed--that could have short-circuited
the device.
What the seal really tells
you is that charities have found a new way to fatten their budgets--by
exclusive contracts with private companies. The American Cancer Society
recently sold its logo to the Florida Department of Citrus for $1 million a
year. It gets another million annually from SmithKline Beecham, which puts the
ACS logo on its Nicoderm-brand nicotine patches. Not to be outdone, the makers
of Nicotrol, a competing patch product, recently inked a two-year deal with the
ALA for $2.5 million.
The deals
are exclusive, but they're not endorsements. The charities don't test the
products or ensure that the highest-quality ones get their logos.
Charities say they need the money. Competition from
thousands of other nonprofits makes fund raising difficult. The ACS says its
surveys show that the public supports such contracts, so long as they raise
plenty of money for the charity and don't conflict with its basic mission.
But
getting in bed with corporate America carries sizable risks. Charities "selling
their halos"--as some have put it--risk damaging their reputations as sources
of independent information. And in some cases they seem to be skating close to
the edge of propriety, if not the law.
Take, for example, the sticky problem of the
charities benefiting from what appears to be false advertising. Companies
wouldn't pony up the bucks for a charity's logo if they didn't think it gave
them a competitive edge. Why would they think that it would? "Because at least
some consumers are going to be misled into thinking this is a special thing. I
think it's flat-out misleading," says Robert Lawry, director of the Center for
Professional Ethics at Case Western Reserve University.
Two deals have already
fallen through because government officials concluded the same thing.
The American Heart
Association dropped its HeartGuide Seal program in 1990, after federal
regulatory agencies complained it would mislead consumers. The program, started
in 1988, endorsed, in exchange for a sizable fee, food products that met
certain standards. The U.S. Department of Agriculture refused to let the AHA
put its seal on any products it regulated.
Last
year, McNeil Consumer Products agreed to pay nearly $2 million to settle a
complaint filed by 19 state attorneys general with regard to its Arthritis
Foundation-brand aspirin. Ads for the pills claimed the drugs were somehow
"new"--although they were just plain old aspirin. The ads said the Arthritis
Foundation "helped create" the pills, though it didn't. McNeil dropped the
product after the attorneys general complained, even though a company spokesman
says it "exited the business because it wasn't achieving its goals." McNeil, he
added, still donates more than $1 million annually to the AF.
Companies admit that the logos help sales, thanks to the
appearance of an endorsement where none exists. "It definitely helps us sell
our products," says Peter Paris, a spokesman for SmithKline Beecham, maker of
Nicoderm, "because it provides the consumer with a more credible resource
behind this particular product." Well, not behind it per se. The charities,
Paris adds, "don't endorse the product at all."
American
Sensors has seen its detector sales skyrocket from under $1 million in 1993 to
well over $60 million today. Did the ALA logo help? "I certainly think it
helped sales of our detectors," says Mike Lupynec, the company's president and
CEO.
So how do the charities respond? They say they
try to make clear on the label that it reflects a "partnership," not a product
endorsement. But they admit that at least some consumers are being misled by
the logo.
"Is there an implied
endorsement? The answer to that has to be 'yes.' There is no way around it,"
said American Cancer Society Vice President Steve Dickinson.
"That's a
gray area," says John Kirkwood, who is with the ALA of Metropolitan Chicago.
"If you're standing there looking at the shelf, you might say, 'Hmm, maybe I'll
buy the product with the logo as opposed to the one that doesn't have any.'
That's a reality." Kirkwood was instrumental in putting the ALA-American
Sensors deal together. He later served on American Sensors' board, but insists
there was no quid pro quo.
Another land mine: Can charities that cut lucrative deals
with product makers be counted on to provide accurate information about health
and safety issues related to those products? Heightened fear about CO
poisonings in the home might help sell detectors, but only 400 people a year
die this way, according to the National Safety Council. Nearly five times as
many die of suffocation each year at home. And CO deaths were falling steadily
long before home detectors hit the market. Is the ALA going to tell you about
that? Nicotine patches work only about 20 percent of the time. True, they often
help hard-core smokers quit when other systems have failed. But the most
effective way to quit is to save your money and go cold turkey. Are the health
charities going to advertise this fact?
Getting too cozy with
corporate interests carries other risks as well.
The
American Lung Association, for instance, has been attacked in the past for at
least giving the appearance of lobbying on behalf of corporate interests that
have opened their checkbooks.
Back in 1994, the ALA and some of its state
affiliates started bashing the cement-kiln industry, which was trying to get
permits to burn toxic waste. The ALA complained that the practice was hazardous
to people's health. Fair enough. But it happens that at the same time, the
charity was getting grants totaling more than $150,000 from the Association for
Responsible Thermal Treatment, which represented the kiln industry's direct
competitor in the waste-incineration business.
When
officials from the Cement Kiln Recycling Coalition asked about this at a
meeting, ALA officials said that state chapters, which are relatively
autonomous, ran the campaigns. But one ALA official added that the charity
would be happy to take money from the kiln industry, too, provided the grants
came with no strings attached. In January 1995, the kiln industry filed a
complaint with the Internal Revenue Service, charging that the ALA was being
paid to lobby on behalf of a commercial interest, a violation of its nonprofit
tax status.
And, in late 1994, the national ALA took out an ad in the
Pittsburgh Post-Gazette promoting a centralized auto-emissions test
program called E-Check--which used testing equipment made by Arizona-based
Envirotest Systems Corp.--over another kind of testing regime. The
advertisement generated a flood of phone calls to the ALA's Western
Pennsylvania chapter from outraged donors, said the state chapter's executive
director.
It turns out that Envirotest
had also been a generous donor to the national ALA, giving a total of more than
$100,000 to the charity between '94 and '95, according to tax filings.
Given these risks, why pursue
these relationships? Some charities plead poverty. "You've got something like
18,000 new nonprofits in the past 10 years," says the ALA's Kirkwood. "And
they're all competing for the same dollar." But budgets for the big charities
have seen healthy gains in recent years. The ALA's national office saw its
total revenues climb almost 30 percent in the four years before it signed its
deal with American Sensors, according to the charity's tax filings. American
Cancer Society revenues have climbed almost 40 percent so far in this
decade.
More likely, it's reluctance
on the part of companies to part with money without seeing any direct benefit.
"Nonprofits can't count on corporations to give millions of dollars just
because they want to be good citizens," says Paris, who once worked at the ALA.
"Now everything has to be linked to a stronger benefit."
