Chapter 17 - § 17.3 • STATE REGULATIONS AFFECTING SALES INVOLVING CHARITABLE SOLICITATIONS

• Jurisdiction: Colorado

§ 17.3 • STATE REGULATIONS AFFECTING SALES INVOLVING CHARITABLE SOLICITATIONS

§ 17.3.1—In General

If a nonprofit organization or its fundraiser solicits charitable contributions by selling goods, tickets, coupon books, or other items, state laws regulating sales will apply. These include laws governing deceptive trade practices, direct marketing, and other consumer protection acts.

§ 17.3.2—False Advertising

In General: Nonprofit Organizations and Their Fundraisers

The law governing deceptive trade practices prohibits an organization from making a representation containing false, deceptive, or misleading assertions, representations, or statements of fact. See generally C.R.S. § 6-1-105. That means that when engaging in charitable sales activities, a nonprofit organization may not make false, misleading, or deceptive statements regarding the item for sale. In addition, the law affects any representation that an item is being sold for a charitable purpose. The organization may not make false, misleading, or deceptive statements regarding the cause the proceeds will support. If the solicitation has the capacity to deceive the purchaser regarding the charitable purpose for which the proceeds will be used, it is deceptive advertising. See generally Simeon Mgmt. Corp. v. FTC, 579 F.2d 1137, 1146 (9th Cir. 1978); see also C.R.S. § 6-1-105(1)(e). Misrepresenting the portion of the payment to be used for the charitable purpose constitutes deceptive advertising as well. C.R.S. § 6-1-105(1)(e). Oral misrepresentations are covered under the Colorado Consumer Protection Act. See generally C.R.S. §§ 6-1-101, et seq.

EXAMPLE: Suppose a person soliciting in Durango says, "Your purchase will help handicapped children here in town." If the proceeds go to help handicapped children in California, the solicitation is deceptive.

As noted in § 17.2.5, Colorado requires that a commercial co-venturer selling goods or services on behalf of an organization disclose the amount of the proceeds to be donated to that organization. C.R.S. § 6-16-110(2).

Misrepresentations by Professional Fundraisers

In recent years, the U.S. Department of Justice has charged professional fundraisers with many forms of false advertising violations. See § 17.2.7. The making of false, deceptive, or misleading statements in a charitable solicitation sale is reportedly one of the most frequent violations of law seen by state enforcement agencies dealing with charitable fundraising.

Examples include...