Selling Seals of Approval

How companies get charities to endorse their products.

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.”