Hungry for Answers to Charity Promises

Experts

Policy Counsel
Senior Director of Federal Policy and the Washington Office
Programs Director

Campaigns

We empower consumers through education and action about communication and media issues involving telephone, cable, Internet and wireless services and equipment.

When E-Commerce Sites Tout Charitable Donations Tie-in, It’s Hard to Know What to Believe

By Robertson Barrett

“HELP FEED A HUNGRY CHILD!” AmericasCalling.com trumpets in block letters above a photo of three grinning tots. While offering long-distance calling rates of 3.9 cents a minute, the site says the company will donate 2 percent of subscribers’ monthly bills to “No Hungry Children,” an organization it says is “committed” to helping feed impoverished children around the world.

“Every minute you talk,” the site explains, “not only will you enjoy the savings on your long distance, but you’ll be helping feed the hungry! Everybody wins, especially the kids!”

A Consumer Reports WebWatch investigation, however, suggests otherwise.

AmericasCalling.com and a site it links to, NoHungryChildren.org, are owned and operated by W. Craig & Company, a Phoenix, Ariz., online marketing firm. Each site links to a “charitable documentation package” that comprises letters to “charities that we donate to, as well as contacts that have been made aware of our intent.”

Of the nine charities listed in the letters, six of them — all established names such as Save the Children Federation and UNICEF — told Consumer Reports WebWatch they had no relationship with the business under any of its names and had never received any funds.

Another, Food for the Hungry of Scottsdale, had W. Craig & Company in its donor database since November, but had never received donations. The two other charities were unreachable at the addresses and phone numbers provided and were not listed with state agencies.

“Unfortunately, this is not illegal, but it’s a scam,” says Carrie Kinnear, executive director of St. Mary’s Food Bank, whose office is right across town in Phoenix. Kinnear never received the letter addressed to her on NoHungryChildren.org. “We generally have trouble with the small, boiler-room marketing firms.

“The best thing anyone can do in a case like this is call the charity and see if the claim is true.”

Kermit Brown, director of marketing for W. Craig & Company, did not return several phone calls from Consumer Reports WebWatch. But the company has apparently not been entirely silent about the enterprise.

A testimonial attributed to W. Craig & Company appears on the Web site of a marketing business called WebHitsDirect.Com: “Our company is making a fortune with WebHitsDirect.Com. … They are providing a non-stop supply of responsive traffic to our latest etail property NoHungryChildren.org that’s dedicated to feeding millions of hungry children all over the world. Thanks a million WebHitsDirect.Com!!”

The blurb is justified: Although it’s unclear how many visitors the site has attracted since it was incorporated last October, public traffic records from one Internet server show that AmericasCalling.com has received more than a million hits from Taiwan alone.

Donation Promises Drive Sales

AmericasCalling.com is engaging in “cause-related marketing,” a practice that has become standard among major U.S. corporations in the last two decades. Instead of announcing sponsorships of charitable organizations, cause-related marketers promise to donate part of the proceeds of each sale to a charity — as a direct way to drive sales.

Consumers, however, are rarely kept informed of whether any money is being dedicated for charitable causes.

“In almost all cause-marketing situations, historically, you’re going to have less than 10 percent going to the charity, and in most cases much less than 10 percent,” says Bennett Wiener, chief operating officer of the BBB Wise Giving Alliance, the major U.S. standards group for charity accountability. “And there is no federal or state law that says you have to disclose what this amount is.”

Cause-related marketing is usually verifiable when big business undertakes it. Ten years ago, when American Express promised to donate 3 cents for every credit-card transaction to its “Charge Against Hunger” campaign, consumers could be fairly sure the corporation would provide public accounting to back up its promises — and it did.

But when a small business promises to donate money based on sales, charity watchdogs say, it’s much harder to know whether to trust the pitch. And they say the explosion of small, cheap merchandising and marketing businesses on the Web compounds the issue.

“There’s been a lot of interest from small businesses, but we’ve always been uneasy with it because there aren’t a lot of controls over it,” says Tim Saasta, director of Charitable Choices, the federal government’s workplace charity fund drive. “There are certainly a lot more controls when charities do online processing and solicitations (directly), but not many states have rules about cause-related marketing online.”

Open-ended promises like AmericasCalling.com’s are particularly hard to trust without extensive disclosures, says Wiener.

This year, the BBB Wise Giving Alliance called on cause-related marketers to disclose to potential customers the duration of the campaigns and whether there is a minimum or maximum amount to be given to the charity, no matter how many products are sold.

Susan Grant, director of Internet Fraud Watch, says the consequences were most apparent after September 11, when many well intentioned, would-be online fundraisers were indistinguishable from scam artists.

“Some of the charitable efforts we heard about sounded like people had no idea what they were doing, and instead threw something up on their site saying they would donate part of the purchase price of things they were selling,” Grant says. “They themselves were not registered as charitable organizations, so consumers couldn’t tell if they were real.”

Look It Up

Watchdogs say there are several ways to check whether cause-related giving campaigns are legitimate. Most businesses with legitimate cause-related marketing programs should have reports (favorable or otherwise) in the national Better Business Bureau database (available at http://bbb.org), or Guidestar’s database (www.guidestar.org), which includes information on all IRS-registered 501(c) nonprofit organizations that may accept tax-deductible contributions.

“It usually just takes a couple of clicks to find information about both the business and the charity,” says Wiener.

Try it: Your money just might end up at an honest outfit like the Children’s Hunger Relief Fund, where they actually answer the phone.