Don't Let Your Commercial Co-Venture Stall

In September, the Federal Trade Commission (FTC), along with 22 agencies from 19 states, took legal action against Kars-R-Us.com, Inc., also known as Donate Car 2 Veterans and Donation2Charity.com, along with its operators Michael Irwin and Lisa Frank. Kars-R-Us, Irwin and Frank solicited donations of vehicles on behalf of the United Breast Cancer Foundation (UBCF) through various advertising. The ads claimed that the donations would help UBCF provide free or low-cost breast cancer screenings and "save lives."

Between 2017 and 2022, while $45 million dollars was in fact raised, less than 1% of the money went to actual breast cancer screenings. The funds were instead used to pay the company and compensate Irwin and Frank. As a result of these nefarious dealings, the FTC imposed a $3.88 million fine (partially suspended due to Kars' inability to pay), Irwin is permanently banned from fundraising and Frank must substantiated all future fundraising claims. Here's the full release from the FTC: https://www.ftc.gov/news-events/news/press-releases/2025/09/ftc-19-states-act-stop-deceptive-cancer-charity-fundraising-scheme
This is prime example of how NOT to conduct a commercial co-venture ("CCV"), which is heavily regulated at the state level.

But what exactly is a CCV? A CCV is a business arrangement where a for-profit company advertises that the purchase of a product or service will benefit a charitable organization. "For every pair of shoes sold, we'll donate $5 to ABC Foundation." Over 30 states have laws governing commercial co-ventures. These laws vary in complexity and enforcement. 9 states require formal registration for CCVs, including submitting contracts and financial reports. Some states require bonding, advertising disclosures, and post-campaign reporting.

Legal Requirements for Setting Up a Commercial Co-Venture
There should be a written agreement between the for profit entity and the charitable organization, outlining the terms of the promotion, the dates, percentage of each purchase to be donated, and how and when funds are transferred. There may be additional requirements depending on individual state laws. The involved parties should also maintain detailed records of sales, donations and communications between the for profit entity and the charitable organization.

All promotional and advertising materials must disclose all relevant details to the consumer including the name of the charitable organization, the percentage to be donated, and any limitations such as "up to a certain dollar amount". Failure to make these disclosures could result in hefty fines, cease and desist orders and of course, a PR nightmare. And while the Federal Trade Commission (FTC) doesn't directly regulate CCVs, it does enforce laws against deceptive advertising. Misleading claims about charitable donations can result in enforcement actions as in the Kars case. A properly structured CCV protects consumers from false advertising, charities from exploitation and businesses from legal liability. Further, regulators will go after not only companies, but those individuals who have directed and implemented the deceptive advertising.

Best Practices When it Comes to Implementing a Successful CCV
Consult with an attorney who is familiar with charitable solicitation and other relevant laws, partner with a reputable charity that is not only registered and in good standing, but understands the complexities of any CCV, be transparent with customers about how their purchases support the cause, and monitor state laws, as they can change quickly. Transparency is imperative in a CCV. Even if a specific donation percentage isn't promised, contributing a de-minimis amount may still be considered deceptive and unlawful.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.