While most fundraisers are aware of the power of marketing, it’s easy to forget that the laws surrounding charitable fundraising activities – including marketing – are also evolving say Andrew Lind and Lornagh Howarth.
Marketing is a useful tool to promote you or your organisation’s latest fundraising drive or event. As you are undoubtedly aware, charities and nonprofits can effectively leverage social media to attract greater donations than ever before.
While most fundraisers are aware of the power of marketing, it’s easy to forget that the laws surrounding charitable fundraising activities – including marketing – are also evolving.
To help you remain compliant, we’ve put together a list of three key things you need to consider under the Australian Consumer Law when marketing your fundraising event.
1 Get familiar with the Australian Consumer Law
The Australian Consumer Law Review – Interim Report was released by the Australian Government through Consumer Affairs Australia and New Zealand in October 2016. The report concluded that the Australian Consumer Law (ACL) applies to almost all fundraising activities in Australia, with the exception of receiving unsolicited donations.
This means that fundraising activities, including fundraising marketing, are likely to be subject to laws surrounding misleading or deceptive conduct, unconscionable conduct and false or misleading representations.
Bookmark these: essential areas of consumer law to understand
As a starting point we recommend that charities and NFPs become familiar with the following sections of the ACL, in particular:
- Section 18: Misleading or Deceptive Conduct
- Section 21: Unconscionable Conduct
- Section 29: False or Misleading Representations.
All of these sections deal with dishonest behaviour. As a fundraiser, it is your obligation to ensure you are familiar with these provisions so as to not inadvertently breach them.
2 The importance of disclosure: What percentage of donations will make it to the designated cause?
When marketing for fundraising campaigns, it is important to be accurate and honest with your representations about what percentage of funds received will make it to the advertised cause. Namely, you need to ensure you do not over exaggerate the portion of funds which will be received by the advertised charitable object.
A recent Victorian case highlights the importance of this. In March 2017, the Director of Consumer Affairs Victoria brought an action against Belle Gibson for misrepresentations she made about the profits from books sales which she advertised would be donated to particular charities.
Aside from the Court finding that Gibson had made false representations about having brain cancer, Gibson also made representations on a number of occasions that “a large part of everything” the company earned would be “donated to charities and organisations which support global health and wellbeing, protect the environment and provide education to those who otherwise wouldn’t have the opportunity”.
Gibson fell far short of this, donating only $10,000 of the $420,000 received. The court held that Gibson had misled consumers into purchasing her book for the purpose of raising funds for particular charities by falsely stating a large proportion of funds received would be donated to charitable causes.
If your organisation will only apply a portion of funds received to a particular charitable cause (after applying some of the funds to administrative and operational costs) we recommend exercising caution when marketing the fundraiser. Be sure to not make misrepresentations. If only 50% of profits will make it to the advertised destination, do not advertise that 100% will do so instead.
If you or your organisation misrepresents the portion of funds that will eventually make it to your charitable object, you might be breaching the ACL.
3 If you say you’re giving a portion of profits to charity – make sure they get there
The criticism in Gibson’s case was that the funds received did not make it to the charities which Gibson had advertised they would. When fundraising, it is a charity or nonprofit's responsibility to ensure that the received donations actually go the cause which the charity or nonprofit advertised it would. Falling short of this might result in accusations of misleading or deceptive conduct, unconscionable conduct or the making of a false or misleading representation.
What remedies are available to charities that breach the ACL? If a nonprofit or charity does intentionally, carelessly or inadvertently breach the ACL the repercussions could cause financial as well as reputational damage.
Breaches under the ACL can result in a number of penalties, including but not limited to:
- substantiation notices, which generally involve having statement-makers substantiate their representations
- public warning notices being issued against the organisation
- injunctions against the organisation
- damages when any person has knowingly participated in particular conduct
- orders to redress loss or damage suffered by non-party consumers
- pecuniary penalties (including fines)
- adverse publicity orders
- disqualification orders.
Any one of these orders could severely impact your organisation.
It is critical that every charity or nonprofit engaging in fundraising avoids falling into marketing traps. The key to this is, firstly, becoming familiar with the law, particularly the ACL, and secondly, engaging in transparent advertising and marketing and following through on those promises.
This article was derived and edited for publication from Fundraising Regulation 101 and written by Lornagh Howarth and Andrew Lind of Corney & Lind Lawyers. If you’d like to find out more about compliance with state and territory based fundraising legislation take a look at its recent paper, Fundraising Regulation 101. Consider adding your voice to the #fixfundraising campaign.