The Charity Case

The Charity Case

The Charity Case

Moneybox
Commentary about business and finance.
May 4 1999 8:25 PM

The Charity Case

The only--and I mean only--good thing that Chainsaw Al Dunlap did when he was CEO of Sunbeam was sue the American Medical Association. In August 1997, Sunbeam announced that it had signed an exclusive deal for the AMA to endorse a host of its medical and home-care products. Almost instantly, a host of critics emerged both within and outside the AMA attacking it for lending its name to a commercial enterprise and arguing that the AMA's leadership had not been elected to place the organization's seal of approval on a particular brand of product.

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As a result, the AMA backtracked, saying that it had never intended to imply that it was actually endorsing Sunbeam's products and that all its seal meant was that the products worked well. It then announced that it was going to back out of the deal, lest people get the wrong idea. Dunlap, not surprisingly, found the whole state of affairs frustrating, and slapped a breach-of-contract lawsuit on the AMA, which the organization settled for $10 million.

What the affair pointed up is precisely what the New York Times spotlighted yesterday, namely the hypocrisy of nonprofit organizations that take millions from corporations in exchange for the use of their names in ads even as the charities insist that use of their names doesn't constitute an endorsement. By this logic, we shouldn't think Michael Jordan is endorsing Nikes, either. He's just saying that these are shoes that work well.

What the charities are doing is self-evidently deceitful, though it's possible that the charities are also self-deluded to a painful degree. If a consumer sees a Nicoderm ad featuring the ACS logo, he would have to be foolish to assume that the ACS wasn't endorsing the product. Why else would the logo be there?

The answer the nonprofits offer is that the logo is there as an endorsement of the general concept of non-smoking rather than of the particular product. But the ad isn't an ad for non-smoking. It's an ad for Nicoderm, and we read advertisements not as commentary on general concepts but as attempts to sell particular products. More important, many nonprofits enter into exclusive deals with companies. (If you're Nicoderm, after all, you don't want that ACS logo on other nicotine gums.) And exclusivity doesn't seem like the best choice if what you really want is to get a broad message--that is, don't smoke--to the public.

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There are two curious things about this whole debate. First, nonprofits can endorse products. There's no legal barrier against their doing so. And since they are effectively endorsing products, why not just go ahead and do it? The reason, as the AMA's contretemps with Sunbeam demonstrated, is that the members of many nonprofits don't want their organizations doing any endorsements. But, of course, they're happy to spend the money that the non-endorsing ads bring in. They should stop fooling themselves and decide which is more important: their honor or their budgets. (Why endorsing a product is somehow not honorable is another, more perplexing question.)

The other odd thing is that it's the companies that are being sued by state attorneys general for supposedly tricking consumers into believing that the nonprofits were endorsing their products. But the companies are acting on the reasonable presumption that if I pay you money to appear in my ad, you are agreeing that my product is worth buying. It's the nonprofits that are being deceptive here (although the companies are trying to profit from that deception, I suppose), and they're doing it apparently in order to protect their sense of virtue. They're the ones any regulatory effort should focus on. The truth is that it doesn't really matter--in a moral sense--whether the ACS endorses Nicoderm or not. But if it does endorse the product, it should own up to it, and if it doesn't, it shouldn't take any money from Nicoderm. And in this case, there's nothing left to say.